Government, Banks Unveil Strategy To Revive Stressed Assets Outside IBC


New Delhi: While cleaning up their books to enable further lending, the Central government and banks on Monday unveiled a new strategy to revive stressed assets outside the Insolvency and Bankruptcy Code (IBC), including through asset management companies (AMCs) and investment funds that are expected to help lenders generate better value.

The plan includes a thrust for loans of up to Rs 50 crore given to small and medium enterprises as well as mid-segment loans of up to Rs 500 crore. A special focus will be on loans of over Rs 500 crore, where the plan is to use independent AMCs, which could be set up by banks and other investors to manage assets acquired by the asset reconstruction companies (ARCs) to nurse them back to health and generate value when the market improves.

A second element of this plan is to rope in alternate investment funds (AIFs) that will provide capital support to the ARCs and the AMCs to acquire the entire loan from all banks as opposed to the current practice where a handful of lenders sell the stressed assets to ARCs. The proposed structure, which may kick off soon, is expected to help banks generate cash instead of securities with five-six year maturity that are currently issued by ARCs, Piyush Goyal, who is officiating as finance minister, said at a late-evening press conference.

A committee of bankers, that included PNB chairman Sunil Mehta, SBI chief Rajnish Kumar and Bank of Baroda managing director P S Jayakumar, submitted the report on resolution of stressed assets on Monday.

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