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Explainer: What is 'Project Sashakt,' that is expected to solve the troubles in India's banking sector

Explainer: What is 'Project Sashakt,' that is expected to solve the troubles in India's banking sector

Explainer: What is 'Project Sashakt,' that is expected to solve the troubles in India's banking sector
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By CNBC-TV18 Jul 6, 2018 11:50 AM IST (Published)

‘Project Sashakt,’ which was unveiled this week by interim finance minister Piyush Goyal is expected to be a solution for the problem of bad loans faced by banks.

‘Project Sashakt,’ which was unveiled this week by interim finance minister Piyush Goyal is expected to be a solution for the problem of bad loans faced by banks. The recommendations put forward is expected to provide a definite strategy for financial institutions to tackle NPAs (nonperforming assets).

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The idea of setting up a committee to give a recommendation on how to resolve the issue of stressed assets came after NPAs and bad loans seriously affected the Indian banking sector. This, in turn, led to the setting up of a committee, whose report on Resolution of ‘Stressed Assets Project’ is popularly called Sashakt.
Objectives
The main objective of the project is to create a resolution process that doesn’t adversely impact the financial structures in the country. The recommendations make a point in being completely compliant to the existing regulations. They also want to ensure that no job loss is created and also that no additional financial stress due to the creation of bad banks should occur.
The project also aims to turn the assets and institutions in such a way that they become an asset to the economy through robust governance and credit architecture.
Recommendations
The committee has recommended a five-pronged approach to tackle the issues.
This includes Small and medium-sized enterprises (SME) Resolution approach (assets with exposure of up to Rs 50 crore), bank-led resolution approach (Rs 50 crore to Rs 500 crore), asset management company (AMC) or alternative investment funds (AIF) led resolution approach ( assets worth over Rs 500 crore), National Company Law Tribunal (NCLT) or Insolvency and Bankruptcy Code (IBC) process for large assets already under NCLT and Asset Trading Platform for both performing and nonperforming assets.
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