Project Sashakt

Mains Paper 3 : Indian Economy |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Project Sashakt

Mains level : Curbing NPAs


News

  • RBI made it mandatory for lenders to enter into an Inter-Creditor Agreement (ICA) during the review of the borrower account within 30 days from date of first default to any lender.
  • ICA allows banks to decide resolution strategy outside the IBC and it will help lenders to accelerate process to resolve stressed assets.

New Framework under Sashakt

  • The Sashakt ICA can be modified to incorporate the requirements of New Framework and serve as the Master Inter-Creditor Agreement for resolution of all stressed asset.
  • Under the new framework, it is a mandatory requirement for lenders to enter into an Inter-Creditor Agreement (ICA) during the review of the borrower account within 30 days from date of first default to any lender.
  • The New Framework further lays down some parameters to be included in the ICA including decision-making by lenders holding 75% (by value of total outstanding facilities) and 60% by number and protection of dissenting lenders.
  • The ICA is required to be executed by all lenders covered under the New Framework and asset reconstruction companies.

What is Project Sashakt?

  • Project Sashakt was proposed by a panel led by PNB chairman Sunil Mehta to help consolidate stressed assets.
  • Bad loans of up to ₹ 50 crore will be managed at the bank level, with a deadline of 90 days.
  • For bad loans of ₹ 50-500 crore, banks will enter an inter-creditor agreement, authorizing the lead bank to implement a resolution plan in 180 days, or refer the asset to NCLT.
  • For loans above ₹ 500 crore, the panel recom­mended an independent AMC, supported by institutional funding through the AIF.

Working

  • According to the committee, banks will have to set up an AMC under which there will be multiple sector-specific AIFs.
  • These funds will invest in the stressed assets bought by existing (Asset Reconstruction Companies) ARCs, such as ARCIL.
  • The ARCs will use the Alternative Investment Funds (AIFs) to redeem security receipts issued to banks against the bad loans.
  • Other AMC-AIFs and ARCs will be allowed to bid for these assets, and match the pricing offered by ARCIL or the national AMC.
  • The AMC will be responsible for the operational turnaround of the asset.

Who will own the stressed asset?

  • The ARC after buying the asset from lenders will transfer ownership to the AIF.
  • The new owner, the AMC-AIF, will hold a stake of at least 76%.
NPA Crisis
  • Subscribe

    Do not miss important study material

Leave a Reply

Please Login to comment
  Subscribe  
Notify of