GET Stock QuotesNews18 APP
News18 English
Powered by cricketnext logo
3-min read

Around 24 Banks Sign on New NPA Resolution Framework

The framework is part of the Project Sashakt (or the report on bad bank submitted early this month), drafter by the Sunil Mehta (non-executive chairman of PNB) committee earlier this month.


Updated:July 23, 2018, 8:30 PM IST
Around 24 Banks Sign on New NPA Resolution Framework
Image for representation. (PTI)
Mumbai: Nearly two dozen lenders, led mostly by state-run banks, on Monday signed the inter-credior agreement (ICA) framework to speed up the resolution of stressed assets which are under Rs 500 crore bracket.

The framework is part of the Project Sashakt (or the report on bad bank submitted early this month), drafted by the Sunil Mehta (non-executive chairman of PNB) committee earlier this month. The other two members of the three member panel included SBI chief Rajnish Kumar and BoB head PS Jayakumar.

The inter-credior agreement will serve as a platform for banks and financial institutions, which are fighting a toxic mount of bad loans that is sniffing at 12 per cent of the system now, to come together and take concerted efforts towards resolving dud loans under Rs 500 crore.

It will also enable lenders to move expeditiously and protects the interest of all the lenders.

"Today, we've got the inter-creditor agreement executed. Most banks have already got their board approvals, and other are in the process of getting the same. The objective is to use this framework for faster resolution of stressed assets," Mehta told reporters on Monday.

He said 18 public sector banks led by the State Bank, three private sector banks and the Exim Bank signed the framework. Other lenders will also sign the agreement after getting their board approvals, he added.

"By end-July, this agreement will get operational and we are hopeful that by and large by this will be signed by all banks," Mehta said, adding so far, no foreign banks has signed the agreement as they have to get board approvals.

"In the case of foreign banks they have to go to their head offices for approvals. It is a tedious process for them to fully understand the regulations on this matter. I am quite confident that they will be able to get approvals," he said.

Mehta said the objective is to resolve stressed assets fast, and will primarily focus on NPAs in the Rs 50 crore-500 crore bracket as well as in the Rs 500-2,000 crore ticket size, which will be dealt separately though.

As of March 2018, there were close to Rs 3.10 trillion worth of bad loans in the Rs 50 crore-500 crore category and Rs 2.10 trillion under Rs 50 crore ticket size.

The framework will deal seperately with stressed assets of over Rs 2,000 crore, Mehta added.

He said the agreement in letter and spirit is in conformity with the February 12, 2018 RBI circular but the ICA framework will be a master agreement applicable on all stressed assets going forward.

Under the framework, the lead lender shall be authorised to formulate the resolution plan, which shall be presented to the other lenders for their approval.

The decision making shall be by way of approval of majority lenders, that is, the lenders with 66 per cent share in the aggregate exposure. Once a resolution plan is approved by the majority, it shall be binding on all the lenders that are a party to the inter-creditor agreement.

The framework also has a provision for dissenting lenders, which gives them an option to buy the asset or if they want they can sell it at a 15 per cent discount.

"From here on,responsibility that goes to the lead banks to be able to find a resolution plan that is going to be supported and is going to be the most appropriate resolution which is required for the stressed assets," Mehta said.

Talking about the proposed AMC/alternative investment fund, Mehta said discussions are on with different funds which have shown interest in participating in the fund.

"There has been conversations with some institutions which are willing to take the lead on that," he said without giving any further information.
Read full article
Next Story
Next Story

Also Watch

Most Active
Company Price Change %Gain
Yes Bank 180.35 3.23
PC Jeweller 83.80 6.68
Reliance 1,112.20 0.47
Infosys 706.05 1.19
HDFC 1,904.10 -1.95
Company Price Change %Gain
Yes Bank 180.35 3.23
PC Jeweller 83.55 6.64
Jet Airways 259.95 3.22
Indiabulls Hsg 792.80 2.40
IOC 141.45 3.10
Top Gainers
Company Price Change %Gain
Bharti Airtel 319.25 5.33
Yes Bank 180.35 3.23
BPCL 345.30 3.11
IOC 141.25 2.80
ONGC 146.85 2.48
Company Price Change %Gain
Bharti Airtel 318.80 5.32
Yes Bank 180.35 3.23
ONGC 146.95 2.58
NTPC 143.65 1.84
Asian Paints 1,340.05 1.51
Top Losers
Company Price Change %Gain
HDFC 1,904.10 -1.95
HCL Tech 961.20 -1.72
JSW Steel 293.10 -1.66
Wipro 333.10 -1.64
Titan Company 931.50 -1.34
Company Price Change %Gain
HDFC 1,904.15 -1.95
Wipro 333.10 -1.67
Larsen 1,411.55 -0.95
Adani Ports 368.95 -0.65
Sun Pharma 419.75 -0.57

Live TV

Countdown To Elections Results
  • 01 d
  • 12 h
  • 38 m
  • 09 s
To Assembly Elections 2018 Results