New Delhi, Jun 20: Public sector banks (PSBs), in a meeting with Finance Minister Piyush Goyal, have decided to chalk out a road map for supporting the credit needs of “genuine” companies.
The banks would take up the credit needs of “genuine, deserving, well-performing and good companies” in two stages, Goyal said.
In the first stage, the PSBs will conduct a focused study on the credit needs of around 4,500 companies, with borrowings in the range of Rs 2 billion to Rs 20 billion. In the second stage, the credit needs of companies with borrowings of up to Rs 2 billion — mostly micro, small and medium enterprises (MSMEs) — will be covered.
“One of the thoughts before the PSBs is to support MSMEs along with genuine and good companies that need working capital finance or loans on investments in fixed assets and have faced difficulties in the past. Banks will work as a team to arrive at a decision to support business,” Goyal said.
The finance minister held a meeting with the top executives of 18 PSBs, including chief executives and non-executive chairpersons, Department of Financial Services Secretary Rajiv Kumar and other officials. The meeting deliberated on the issue of merging PSBs.
The PSBs also decided to take steps to smoothen the process of sanctioning loans through a consortium and multiple banking arrangements. In one such move, a decision taken by 66 per cent of the banks within a consortium will be binding on all the lenders. This is in line with the recent amendments carried out in the Insolvency and Bankruptcy Code through an Ordinance.
The voting percentage was reduced from 75 per cent to 66 per cent for the committee of creditors to approve special plans, such as those relating to insolvency resolution.
A model inter-creditor agreement will soon be formulated to lay down ground rules, which will have to be followed by all the banks within a consortium.
This will be done following consultations with the Indian Banks’ Association and the boards of respective banks.