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India has witnessed evolution in the banking industry since its
inception when the Reserve Bank of India was established in 1935.
With the growing awareness post demonetization, there has been
increased diversion of the people towards the banking sector, which
focuses on a number of functions including acceptance of funds in
the form of fixed deposits or liquidated funds, granting of loans,
agent for fund transfer and additional facilities like locker
operation to safeguard the valuables of the clients.
With the increase in the banking practices, the industry faces
challenges hampering its growth. Non-performing assets (hereinafter
referred to as "NPA") pose a threat to the development of
banks. An NPA is a loan or advance for which the payment remains
outstanding for a period of 90 days. Recent times have witnessed
quite an increase in the NPA cases resulting in great losses to the
banks.
With a view to strengthen the credit capacity, credit culture
and credit portfolio of public sector banks, the Government of
India brought forward 'Project Sashakt' proposed by a panel
led by PNB chairman Sunil Mehta. The said project has the below
stated strategy to deal with nonperforming assets:
Bad loans of up to INR 50 crore (USD
6975000 approx.) will be managed at the bank level, with a deadline
of 90 days.
In case of bad loans of INR 50-500
crore (USD 6975000 – 69750000 approx.), banks will enter an
inter-creditor agreement, authorizing the lead bank to implement a
resolution plan in 180 days, or refer the asset to National Company
Law Tribunal (hereinafter referred to as "NCLT").
For loans above INR 500 crore (USD
6975000 approx.), an independent Asset Management Company
(hereinafter referred to as "AMC"), supported by
institutional funding through the Alternative Investment Fund
(hereinafter referred to as "AIF").
Presently, the bad loans of the 38 listed banks collectively
crossed INR 10.17 lakh crore in the March quarter, and the RBI
expects the Gross NPA (hereinafter referred to as "GNPA")
ratio of scheduled commercial banks to rise further. With the aid
of this project, the Government aims to create a more stable and
efficient mode to prevent the accumulation of NPA.
For further information please contact at S.S Rana &
Co. email: info@ssrana.in or
call at (+91- 11 4012 3000). Our website can be accessed at
www.ssrana.in
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