Financial Institutions Current Affairs

Banks, FIs ink inter-creditor agreement for faster NPA resolution

Banks and Financial Institutions (FIs) have signed Inter-Creditor Agreement (ICA) aimed at faster resolution of stressed assets of Rs. 50 crore or more which are under consortium lending. It has been signed by 22 public sector banks, 19 private sector banks and 32 foreign banks and 12 major financial intermediaries like LIC, HUDCO etc.

Inter-Creditor Agreement (ICA)

ICA Framework is part of project ‘Sashak’. Under it, lead lender (having highest exposure) will be authorised to formulate resolution plan for operation turnaround of assets which will be presented to lenders for their approval. It will be applicable to all corporate borrowers who have availed loans and financial assistance for amount of Rs. 50 crore or more under consortium lending or multiple banking arrangements. Each resolution plan will be submitted by lead lender to Overseeing Committee.

The decision making under ICA framework will be by way of approval of majority lenders i.e. lenders with 66% share in aggregate exposure. Once resolution plan is approved by majority lenders, it will be binding on all lenders that are party to ICA. The plan formulated under ICA will be in compliance with RBI norms and all other applicable laws and guidelines. Banks opposing resolution plan will have option to sell their stressed loans to company at discount or buy out loans to that entity from all other lenders at premium.

Significance of ICA framework

The ICA framework aims for faster facilitation of the stressed assets resolution. It gives a bigger say to lead lender in consortium and allows resolution plan to be approved if 66% of the banks in the group agree to it. It authorises lead bank to implement resolution plan in 180 days and leader would then prepare resolution plan. If any lender dissents, the lead lender will have the right but not the obligation to arrange for buy-out of the facilities of the dissenting lenders at a value that is equal to 85 per cent of the lower of liquidation value or resolution value. The dissenting lenders can exercise such right of buy-out in respect of the entire facilities held by other relevant lenders.

Background

According to RBI, India’s banks had 12.5% of their total loans categorised as non-performing or restructured at the end of March 2018. But RBI in February 2018 had withdrawn half dozen loan restructuring schemes and tightened rules to steer more companies to bankruptcy courts. It had issued revised framework for resolution of stressed assets.

Besides, after recommendations of Government formed Sunil Mehta Committee, Inter-creditor Agreement was prepared under aegis of Indian Banks’ Association (IBA) to serve as platform for banks and FIs to come together and take joint and concerted actions towards resolution of stressed accounts.

Month: Categories: Banking Current Affairs 2018

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Women Entrepreneurs Platform: NITI Aayog signs SoI with Financial Institutions & Social Organisations

NITI Aayog’s Women Entrepreneurs Platform (WEP) has signed five separate Statement of Intent (SoIs) with Financial Institutions & Social Organisations to create opportunities and support women entrepreneurs. These organisations are Shri Mahila Sewa Sahakari Bank Limited, Indiabulls Housing Finance Limited, SREI Infrastructure Finance Limited, Sreemanta Sankar Mission and the Self Employed Women’s Association (SEWA).

Women Entrepreneurs Platform (WEP)

WEP was launched by NITI Aayog on the occasion of International Women’s day (March 8, 2018). Its objective to b build vibrant ecosystem for women across country to help realise their entrepreneurial aspirations, scale-up innovative initiatives and chalk-out sustainable, long-term strategies for their businesses.

It also aims to power vibrant entrepreneurial ecosystem through an enabling network of industry collaborations, partnerships, mentors and peer-to-peer connect. It also seeks to address bottlenecks faced by both aspiring and established women entrepreneurs by streamlining information across government and private sector schemes and initiatives with informative, interactive website as a dedicated resource and knowledge base.

WEP aspires to substantially increase number of women entrepreneurs to create and empower dynamic new India by opening up avenues of growth and opportunity for women entrepreneurs. These aspirations of women entrepreneurs are manifested in three pillars on which WEP is built: Ichha Shakti: Motivating aspiring entrepreneurs to start their enterprise; Gyaan Shakti: Providing knowledge and ecosystem support to women entrepreneurs to help them foster entrepreneurship; Karma Shakti: Providing hands-on support to entrepreneurs in setting-up and scaling up businesses.

The WEP platform operates within broader framework of industry collaborations and partnerships, which cut across sectors in economy. It will provide unique services such as credit evaluation of women-led startups by CRISIL and potential equity investments through an Rs. 10 crore fund established by DICE Districts

Month: Categories: India Current Affairs 2018

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