Panel of IBA experts to review loan overhaul proposals

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The banks will jointly set up an expert panel to review loan restructuring proposals involving amounts of ₹500 crore and above to protect officials from further scrutiny by investigative agencies, people with knowledge of the situation have said. question.

The committee, which will be set up by the Association of Indian Banks, will include financial services experts and prominent figures in the industry, they said. It will proceed to the validation of the restructuring process without interfering in the commercial judgment of the lenders.

For loans below ₹500 crore, individual banks can set up their own similar committees, said a senior banker who did not want to be identified.

“The idea is to improve comfort and confidence for lenders in high value restructuring cases,” he said.

To check critical processes

For loans below ₹500 crore, individual banks can set up their own similar committees, said a senior banker who did not want to be identified. “The idea is to improve comfort and confidence for lenders in high value restructuring cases,” he said.

The banks are of the view that the proposed expert panel will also facilitate faster resolution as it will validate that all due procedures have been followed when restructuring loan accounts.

“He will review key areas such as compliance with Reserve Bank of India (RBI) guidelines, financial viability study and signing of inter-creditor agreement on time,” another executive briefed said. developments.

This initiative will ensure that there are no failures and that all critical processes have been followed, the official said.

In the case of a syndicate of loans, the most exposed bank could approach the committee. While the initial idea was to have a structure under the industry regulator, the RBI suggested an industry-led initiative subject to existing regulations on resolving stressed assets.

The gross non-performing asset ratio (GNPA) of all listed commercial banks fell to a six-year low in FY22, helped by recoveries and technical write-offs.

In its annual report for FY22, the RBI had asked lenders to be alert to the credit behavior of restructured advances and the possibility of increased slippage in sectors relatively more exposed to the pandemic.

“Ensure that further slippages are stopped and banks’ balance sheets are strengthened to avoid a future build-up of stress,” the report noted.

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