Not so 'Sashakt'

New scheme for NPA resolution detracts from the IBC

The government has approved a new scheme to address India's enormous bad loans problem. The scheme, known as “Sashakt”, will divide stressed assets into three classes depending on their size. Non-performing assets (NPAs) of up to Rs 500 million will be managed by focused verticals within banks, which will ensure resolution within 90 days. For NPAs of Rs 500 million-Rs 5 billion, banks will enter into an inter-creditor agreement, authorising the lead bank to implement a resolution plan within 180 days. Those above Rs 5 billion will be dealt with by independent asset management companies (AMCs). It is possible that,