With an intention of fast-tracking NPA resolution, bankers have finalized the inter-creditor agreement (ICA) framework that envisages effective communication among lenders and are working on details of an asset management company as part of a five-pronged mechanism they have identified to resolve the issue of mounting non-performing assets (NPAs) under Project Sashakt. The ICA mechanism is expected to be enforced this month itself. The non-performing assets (NPAs) in the banking sector crossed Rs 9 lakh crore at the end of December 2017 and the RBI has warned of further worsening of the situation.
Under Project Sashakt, financial institutions will enter into an inter-creditor agreement to authorise the lead bank to implement a resolution plan in 180 days. The agreement is the bedrock of the bank-led resolution approach (BLRA) for loans between Rs 50-500 crore. This inter-creditor agreement will be a legal document and enforceable in any court of law.
Punjab National Bank chairman Sunil Mehta, who headed a committee of bankers that drew up the NPA resolution strategy, has said “It makes sure that there is effective, good communication amongst banks and if anyone has a difference, then they will resolve it among themselves”. Regarding setting of Asset Management Companies under the Project Sashakt, Mehta said that the matter is being looked into and next step will be discussed in the future.