Project Sashakt - Sunil Mehta Committee Report

Why in news ?
A high-level committee headed by Sunil Mehta on "Restructuring stressed assets and creating more value for public sector banks (PSBs)" has submitted its report to Finance Minsiter Pitush Goyal.

What is "Project Sashakt"

The committee contains "no" recommendation for creation of a "Bad Bank" and suggest a transparent market-based solution with a focus on asset turnaround to ensure job protection and creation. According to report "Project Sashakt" is to ensure the operational turnaround of the banks and stressed companies so that the asset value is retained.

Five-pronged resolution processes suggested by the committee will bring in credible long term capital to limit the burden on the domestic banking sector while preventing similar build-up of non-performing loans in the future using robust governance and credit architecture.

Five-pronged resolution suggested by the commmitee:
The committee has classified small, medium and large assets range from 0-50 Crores Rupee, 50-500 Crore Rupee and 500 crore and more respectively, resolutions suggested by committee are applicable to all small, medium and large assets.

These resolutions covering both performing and non-performing assets are also applicable to any asset whose resolution is still pending and assets already before the National Company Law Tribunal (NCLT).

1) Small and medium-sized enterprises(SME) resolution approach.

According to report, for SME resolution a steering committee will be created by banks for formulating and validating the schemes, with a provision for additional funds. The resolution of these assets will be done by a single bank having the liberty to customise it. The resolution should be completed in 90 days.

2) Bank-led resolution approach

A bank led resolution is suggested by the committee for medium assets ranging from 50-500 crore rupees to be achieved in 180 days. The resolution plan has to be approved by lenders holding at least 66 per cent of the debt.

Indian Banks Association (IBA) has to appoint a steering committee to validate the process within 30 days. Through this route, multiple banks and lenders involvement can create an issue in arriving to at a consensus.

3) AMC/AIF led resolution approach

An asset management company (AMC) will be created to deal with large loans involving 500 crores and more. Alternative investment fund (AIF) will be responsible to raise funds from institutional investors, AIF can also bid for assets in National Company Law Tribunal (NCLT). The lead bank can discover price discovery through the open auction route. Security receipts have to be redeemed within 60 days