The committee, which will be set up by the Indian Banks’ Association, will comprise financial services experts and persons of eminence from the industry, they said. It will conduct process validation of the restructuring without interfering in the commercial judgment of the lenders.
For loans below ₹500 crore, individual banks can set up similar committees of their own, said a senior banker who did not want to be identified.
“The idea is to enhance the comfort and confidence of lenders in large value restructuring cases,” he said.
To Check Critical Processes
For loans below ₹500 crore, individual banks can set up similar committees of their own, said a senior banker who did not want to be identified. “The idea is to enhance the comfort and confidence of lenders in large value restructuring cases,” he said.
Banks are of the view that the proposed expert committee will also facilitate faster resolution as it will validate that all due processes have been followed while restructuring loan accounts.
“It will look at key areas such as compliance with Reserve Bank of India (RBI) guidelines, financial viability study, and that the inter-creditors agreement was signed within timelines,” said another executive aware of the developments.
This initiative will ensure that there are no lapses and that all critical processes were followed, the official said.
In the case of consortium lending, the bank with the highest exposure could approach the committee. While the initial idea was to have a structure under the sector regulator, the RBI suggested an industry-led initiative subject to existing regulations on the resolution of stressed assets.
The gross non-performing assets (GNPA) ratio of all scheduled commercial banks dropped to the lowest in six years in FY22, helped by recoveries and technical write-offs.
In its annual report for FY22, the RBI had asked lenders to be watchful of the credit behaviour of restructured advances and the possibility of increased slippage in sectors with relatively greater exposure to the pandemic.
“Care needs to be taken to ensure that fresh slippages are arrested, and banks’ balance sheets are strengthened to avoid future build-up of stress,” the report had noted.