Resolution of Stressed Assets under Sashakt Project: An Assessment

In June 2018, a bankers committee, chaired by Mr Sunil Mehta, was set up by the Government to assess the feasibility of creation of a bad bank to address the issues related to resolution of stressed assets of public sector banks (PSBs). The recommendations of the committee are completely compliant with extant regulations because this is driven by market based solution by creating Asset Management Company(AMC) to develop a platform for trading assets, both stressed and standard assets. There are several constraints in setting up the AMC due to several practical difficulties. Therefore, the Government has recently introduced Sashakt project for resolution of stressed assets of PSBs Under the project, banks are asked to enter into an Inter Creditor Agreement (ICA) which shall serve as a platform for banks and financial institutions to come together and take joint and concerted actions towards resolution of stressed. But its success depends upon how effectively the ICA operates. Towards this end, the paper reviews the background, recent development, concerns of the Sashakt project and offers suggestions to strengthen working of the ICA.