Inter-creditor agreement is crucial for bad loan resolution, says Union Bank of India

The Reserve Bank of India's (RBI) new circular on bad loans is a positive move but before that inter-creditor agreement has to be done, which will make it easier to resolve any account, said Rajkiran Rai, managing director and CEO of Union Bank of India. RBI eased the ‘one-day default’ rule and replaced it with a 30-day grace period as it has unveiled new norms for resolution of stressed assets.

“It is a good move but before that we need to get that inter-creditor agreement done because the inter-creditor agreement has to be signed by 100 percent of the creditors. So once that is done, then it is much easier to resolve any account because then the 75 percent by value and 60 percent by number will come in. So getting inter-creditor agreement will be very crucial in any resolution plan,” he said.

Sharing his opinion on accelerated provisioning on non-performing accounts (NPAs), he added, “The accelerated provisions will come only in Q4 because we have these 30-day plus 180-days, so the accelerated provision, if you are not able to resolve, will only come in Q4 but before that when we look at these accounts, if you are not getting into a resolution plan, I think banks will be better off taking all these accounts to the National Company Law Tribunal (NCLT) quickly because we are handling these accounts since Q4 of 2017 after that Feb12 circular so we are pretty aware of every account now. So we will be able to take a better call now.”