Finance Minister Piyush Goyal unveiled 'Project Sashakt', a five-prong strategy to deal with non-performing assets.
Sashakt aims to strengthen the credit capacity, credit culture and credit portfolio of public sector banks.
Explaining the project, Goyal shed light on the guiding principles of an Asset Management Company resolution approach, under which an independent AMC would be set up to focus on asset turn around, job creation and protection.
He further noted that the independent body would be aligned with Insolvency and Bankruptcy Code (IBC) process and IBC laws.
"The committee has set a five-prong strategy towards resolution of stressed assets. 'SASHAKT' stands for strengthening and the whole objective was to strengthen the credit capacity, credit culture and portfolio of public sector banks," he said at a press conference here on Monday.
The AMC will be set up by state-run banks for resolution of loans above Rs 500 crore.
Goyal clarified that no proposal was put forth to create a bad bank to deal with the rising NPAs, adding that independent AMCs and steering committees would be set up for faster resolution of bad loans in the banking system.
"The government will not interfere in the resolution process; it would entirely be led by banks," he added.
The committee of bankers, led by Sunil Mehta, the chairman of Punjab National Bank. also recommended an alternative investment fund (AIF)-based resolution approach for loans above Rs. 500 crores, under which an AIF would raise funds from institutional investors. Banks, too, will have an option to participate, if they wish to participate in the upside.
Considering the importance of the small and medium enterprises (SME) sector, the committee recommended that banks should create a focused vertical for management of stressed assets for priority resolution of SMEs with loans up to Rs. 50 crore.
For loans ranging between Rs 50 to 500 crores, a Bank Led Resolution Approach (BLRA) has been recommended, wherein financial institutions will enter into an inter-creditor agreement to authorise the lead bank to implement a resolution plan in 180 days.
The lead bank would then prepare a resolution plan including empanelling turnaround specialists, and other industry experts for an operational turnaround of the asset.
In case the lead bank is unable to complete the resolution process within 180 days, the asset would go to the National Company Law Tribunal (NCLT).
Goyal noted that recommendations made were entirely compliant with extant regulations, to ensure operational turnaround to retain the value of assets created for national benefit.
He further said suggestions were also made to prevent job losses from foreclosures and create additional jobs by reviving businesses.
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