Public sector banks bad credit resolution plan

NEW DELHI: The alternative investment fund proposed by state-run banks under the five-pronged resolution plan will be made to raise funds from domestic investors and sovereign wealth funds, said Sunil Mehta, chairman of Punjab National Bank. Mehta headed a committee that drew up a detailed plan for resolution of stressed badets.

Under the structure proposed to the government, the badet management fund would allow to retain 24% in the badets which it takes for resolution, Mehta told AND explaining some of the points of the plan. Finance Minister Piyush Goyal on Monday said the government had accepted the proposals. The initiative has been dubbed 'Project Sashakt'. Banks will consolidate their loans and approach the proposed badet management company for a faster and transparent resolution of loans, Mehta told ET.

"The lead bank in these cases, through inter creditor agreement, will be allowed to consolidate the badet spread across different lenders and invite bids through open auction," he said. The proposed AMC can also provide for such loans.

Mehta said the AMC would follow all the rules under the Bankruptcy Code. "So, the AMC will have the controlling stake, and it will look to turn the badet and it will have a team of sectoral specialists and resolution professionals," he added. "The promoter economic ownership will fall below 24 percent," said Mehta. This is expected to be a good alternative for the AMC.

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