A committee under Sunil Mehta was set up to give recommendation on formation of an Asset Reconstruction Company for quicker resolution on stressed assets.

Committee has submitted report to Finance Minister. It recommended 5 point plan to fight stressed assets called Project ‘Sashakt’

1. Outlining on SME resolution approach-loans up to 50 crores, resolution to be completed by 90 days.

2. Bank led resolution approach-loans between 50cr to 500cr,resolution plan within 180 days. In case the lead bank is unable to complete the resolution process within 180 days, the asset would be resolved through Bankruptcy Code.

3. AMC(asset management company) led resolution approach for loans over 500crores.Set up by state run banks. They will also set up alternate investment funds to raise money and back this asset management company.

4. NCLT(National Company Law Tribunal) led resolution approach

5. Asset trading platform for both performing and non-performing assets.

NPA – An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. A ‘non-performing asset’ (NPA) was defined as a credit facility in respect of which the interest and/ or instalment of principal has remained ‘past due’ for a specified period of time.

Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained non-performing and the realizability of the dues:

• Sub-standard Assets- which was classified as NPA for a period not exceeding 12 months.
• Doubtful Assets- which remained sub-standard for a period exceeding 12 months.
• oss Assets- A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly.