Sashakt Scheme is a new resolution scheme proposed by Sunil Mehta Committee (Non-Executive Chairman of PNB) to tackle the mounting bad loan problem of Indian public sector banks. As per March 31, 2018, about 11.6 per cent of total loans forwarding by these banks are in Non Performing Assets category.
The Sunil Mehta Committee has proposed a five-pronged approach to tackle the bad loan problem. These are highlighted in the figure given below:
Independent asset management companies and steering committees will be set up for faster resolution of bad loans in the banking system. The government has accepted a five-pronged plan of the Sunil Mehta-panel. The panel under the chairmanship of PNB non-executive chairman Sunil Mehta has recommended an asset management company and alternative investment fund-led resolution approach to deal with NPA cases of more than Rs 500 crore. The committee has also suggested an asset trading platform for both performing and non-performing assets. The panel did not recommend the setting of a bad bank named as PARA (Public Sector Assets Rehabilitation Agency) to deal with bad loan issues of the banks.
Banks think of this Sashakt Scheme as a clearer and quicker tool to deal with bad loans as compared to Insolvency and Bankruptcy Code 2016, in which time period for resolution may be extended up to 270 days. As per this scheme, banks have entered into inter creditors agreement. The Inter creditors agreement permits the lead lender to formulate the resolution plan and all decisions will be guided by majority lenders, which have 66 per cent share in aggregate exposure.
RBI on February 12, 2018, had issued a circular mandating banks to start the resolution process under Insolvency and Bankruptcy Code for all large accounts that are overdue even by a single day from September 1, 2018. Now, this Sashakt Scheme will help the banks for faster resolution of bad loans on the different levels to avoid further deteriorating of the problem.