Senior bankers on Thursday agreed to adopt an inter-creditor agreement for consortium lending, under which the lead bank will be entrusted with the job of preparing a time-bound resolution plan for mid-sized bad loans.
The agreement calls for a consensus among at least 66% of creditors for a resolution plan for bad assets worth between Rs 50 crore and Rs 500 crore to be approved, in sync with a similar threshold for resolution plans under the Insolvency and Bankruptcy Code. In case there is no resolution in 180 days, the stressed asset will be referred to the National Company Law Tribunal.
Interim finance minister Piyush Goyal attended the meeting for some time.
“We have finalised inter-creditor agreement. Now, banks will take the final agreement to their respective boards. And we should conclude the process in the next two days…. It will go live this month,” Punjab National Bank non-executive chairman Sunil Mehta said after a meeting. “There were large banks, small banks, private sector banks; banks of all sizes were there….This is a legal document and these are enforceable in any court of law.”
Mid-sized loans worth as much as Rs 3 lakh crore could potentially come under this arrangement.
A bankers’ panel, led by Mehta, had mooted the idea, among others, in a report titled Project Sashakt. It was submitted to the finance ministry on Monday.
On setting up an asset management company to resolve bad loans worth over Rs 500 crore each with state-run banks, as proposed by the panel, Mehta said the committee is already working on it and “the next step will be discussed in the future”. There are at least 200 such stressed asset account involving another Rs 3 lakh crore.
Mehta said giving the responsibility to the respective lead banks that have the largest exposure in those stressed assets to come out with a resolution plan will reduce delays in decision making. In case of any difference, the voting will take place.
The RBI has warned that the gross NPA ratio of banks will rise to 12.2% by March 2019 from 11.6% at the end of March 2018, primarily because PSBs are saddled with massive stressed assets. In a scenario of severe stress, the gross NPA ratio may worsen to 13.3% by March next year and for PSBs, it may surge to 17.3%.
