Goyal meets heads of banks on NPAs

Finance Minister Piyush Goyal on Thursday met heads of banks and discussed discuss an inter-creditor structure suggested by the lenders for early resolution of bad loans and stressed assets.

The inter-creditor structure is basically for assets between Rs 50 crore and Rs 500 crore for which the resolution plan will be bank-driven.

Under this structure, the lead bank will implement the plan in 180 days.

The lead bank will prepare a plan and may involve turnaround specialists and industry experts in its implementation. If 66% of the lenders approve a plan, it could be worked out, akin to a similar threshold for insolvency proceedings under the Insolvency and Bankrutpcy Code.

In case the lead bank fails to complete the resolution process in 180 days, the asset would be referred to the National Company Law Tribunal for insolvency proceedings.

The meeting of the finance minister with private and public sector bankers formalised the inter-creditor agreement structure as suggested in the five-pronged 'Project Sashakat', sources said.

The meeting was organised by Indian Banks Association (IBA) for the inter creditor agreement framework under which the consortium would take up NPA cases.

The banks will now discuss the newly formed structure with their Boards before preparing a ready draft by the end of this month.

Goyal had ealier this week approved setting up of asset management companies and steering committees for faster resolution of bad loans. It had also turned down the idea of Bad Bank suggested by Chief Economic Advisor Arvind Subramanian.

The asset management company-led resolution approach would use five-pronged strategy to deal with NPA cases of more than Rs 500 crore.

The asset management companies will be raising fund from institutional investors.

In case these high-value assets are to be sold, the price discovery will be done through open auction by the lead bank. The asset management companies could steer the turnaround themselves or engage external parties.