Govt, banks devise new plan to revive stressed assets

The Government of India and banks, on Monday, came up with a new strategy to revive stressed assets outside the Insolvency and Bankruptcy Code (IBC).

The Government of India and banks, on Monday, came up with a new strategy to revive stressed assets outside the Insolvency and Bankruptcy Code (IBC).
 
It includes mechanisms like asset management companies (AMCs) and investment funds to help banks create better value, besides cleaning up their books to enable further lending.
 
Under the plan, about Rs 50 crore will be given to small and medium enterprises and Rs 500 crore in the mid-segment loans, said a TOI report. 
 
A special focus will be on loans of over Rs 500 crore, and the plan is to use independent AMCs.
 
These AMCs could be created by banks and other investors to manage assets acquired by the asset reconstruction companies (ARCs) to nurse them back to health and generate value when the market improves.
 
In another report, State Bank of India (SBI) is working on a major debt restructuring and takeover plan for stressed power assets.
 
The move is aimed at upgrading valuations and attract new owners with incentives and also a quick resolution process.
 
According to an ET report, the lender will hold a meeting with all power plant lenders in Mumbai on Wednesday.
 
The discussion will be around creating a proposal that has a direct bearing on loans adding up to Rs 1.77 lakh crore in 75,000 MW stressed capacity. 
 
The country's largest bank has also appealed to the power ministry to waive transmission penalties and grant early regulatory approvals to help new promoters, a senior government official told ET.
 
The bank is of the view that the debt of the stressed assets be rated by credit rating agencies. The plants will then be valued as per ratings at a sustainable debt portion, a banking official said. 
 
The gross non-performing assets (NPAs) was Rs 8.99 lakh crore as of December 2017. Around 85 per cent of these bad loans were with the state-owned banks.
 
The Reserve Bank of India has already warned that the bad loans could rise further over the coming quarters. The gross NPA ratio of scheduled commercial banks could rise to 12.2 per cent by March 2019 from 11.6 per cent in March 2018, said the RBI.
 
Source: Media reports

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