Banks finalise inter-creditor agreement to fast-track NPA resolution

With a view to fast track NPA resolution, bankers on Thursday finalized the inter-creditor agreement (ICA) framework that envisages effective communication among lenders.

The ICA mechanism is expected to be enforced this month itself.

The non-performing assets (NPAs) in the banking sector crossed Rs 9 trillion at end-December 2017 and the RBI has warned of further worsening of the situation.

The agreement, a part of Project Sashakt, will be taken to boards of respective banks and would be cleared in a couple of days, said PNB non-executive chairman Sunil Mehta after the meeting.

The meeting called by Indian Banks Association was also attended by Finance Minister Piyush Goyal, who had accepted the report of the Sunil Mehta Committee earlier this week.

Mehta said the inter-creditor agreement is a participatory process.

It makes sure that it is effective, good communication amongst banks and if anyone has a difference, then they will resolve it among themselves, he said.

The inter-creditor agreement is a framework under which a consortium of lenders would take up NPA cases.

The framework will authorize the lead bank to implement a resolution plan in 180 days and the leader would then prepare a resolution plan including impaneling turnaround specialists and other industry experts for operation turnaround of the assets within RBI’s stipulated time-frame of 180 days.

Regarding the setting of Asset Management Companies under the Project Sashakt, Mehta said the matter is being looked into and next step will be discussed in the future.

Under project Sashakt, independent asset management companies (AMCs) and steering committees would be set up for faster resolution of bad loans in the banking system.

The project is based on the recommendations of Sunil Mehta committee.

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