Interim Finance Minister Piyush Goyal on Monday said that the government had accepted a new resolution scheme called 'Sashakt', led by bankers to deal with India's growing problem of bad loans in the public sector banks (PSBs). The plan also involves setting up an asset management company (AMC) or asset reconstruction company (ARC) structure to deal with the non-performing assets (NPAs) over Rs 500 crore. It was also mentioned that there would be no forbearance by the Reserve Bank of India or immediate government involvement in the scheme.

• a resolution plan would be arrived at by the individual bank with 90 days of detecting a stress for loans under Rs 50 crore
• In case of non-performing assets between Rs 50 and 500 crore, the resolution plan should be devised by the lead lender within 180 days.
• an AMC structure will be created for NPAs worth more than Rs 500 crore

Multiple AMCs are expected to be created with an infusion of equity from banks, foreign funds and infrastructure funds. Alternative investment funds (AIF) will help fund these AMCs in buying stressed assets, which will be lead by industry experts and specialists in turning around the NPAs and repay security receipts within 60 days in full. Banks can also invest in these AIFs so as to tap into the assets later. The ARCs can help AMCs to operate and turn the assets around or auction the assets through a transparent process.

In the last week, RBI in its Financial Stability Report said that the gross NPAs of commercial banks could rise from 11.6 percent in March 2018 to 12.2 percent in March 2019.