- To resolve Non Performing Assets (NPAs), Banks and financial institutions (FIs) including SBI and LIC, on July 23, 2018 entered into an Inter-Creditor Agreement (ICA) to fast track the resolution of stressed assets, under “Sashakt” scheme.
- The agreement was framed under the aegis of the Indian Banks’ Association and follows the recommendations of the Sunil Mehta Committee on stressed asset resolution.
- This agreement will cover cases of stressed assets worth at least Rs 50 crore under consortium lending.
- The lender with the highest exposure to a stressed borrower will be authorised to formulate the resolution plan which will be presented to all lenders for their approval.
- The lead lender of the consortium will draw up a resolution plan for stressed assets. Once a resolution plan is approved by the majority…, it shall be binding on all the lenders that are a party to the ICA
- The ICA is being signed by 22 public sector banks, including India Post Payments Bank, 19 private sector banks and 32 foreign banks. Besides, 12 major FIs and intermediaries, like LIC, HUDCO, PFC and REC, are also signatories to the pact.
- As per the Union Finance Minister Piyush Goyal, the move as a ‘huge step forward’ in addressing the banking industry’s problems.
- The new agreement was signed after the RBI, in its February 12 circular, dismantled all the existing resolution mechanisms and directed lenders to start resolution for the asset even if the default was by one day. The RBI had also mandated that if the resolution plan was not finalised within 180 days, the account had to be referred for bankruptcy proceedings.
