Why in News?
- Public Sector Banks (PSBs) may now use provisions of Project Sashakt to deal with economically unviable projects where lenders could still initiate corporate insolvency proceedings if there is no other mode of resolution within 180 Days
- Under the aegis of Project Sashakt, 35 banks have signed an inter-creditor agreement (ICA), which provides the framework to resolve assets through a bank-led resolution approach (BLRA).
- Under the agreement, if the lead bank is unable to implement a resolution plan in 180 days, the assets will then move to the National Company Law Tribunal (NCLT) Process
- The Supreme Court, in its judgement held the Reserve Bank of India (RBI) directions issued on the treatment of defaults as ‘ultra vires,’ or not valid in respect to the existing legal framework
- In its ‘Resolution of Stressed Assets–Revised Framework’, the RBI had called on lenders to identify assets “immediately on default,” beginning with loans on which any amount was due from one to 30 Days
What is Project Sashakt?
- Project Sashakt was proposed by a panel led by PNB chairman Sunil
- Bad loans of up to ₹ 50 crore will be managed at the bank level, with a deadline of 90
- For bad loans of ₹ 50-500 crore, banks will enter an inter-creditor agreement, authorizing the lead bank to implement a resolution plan in 180 days, or refer the asset to
- For loans above ₹ 500 crore, the panel recom•mended an independent asset management company (AMC), supported by institutional funding through the alternative investment fund (AIF).
- The idea is to help consolidate stressed