More than 20 Indian lender signed a pact aimed at faster resolution of bad loans, officials said, while more could join by the end of the week in what is the latest bid to cut record levels of soured assets in Asia's economy.
A government-appointed panel this month proposed the so-called inter-creditor aggreement among other measures after criticism that at times smaller lenders in lending consortium were creating roadblocks for speedier resolution.
The agreement gives a bigger say to the lead lender in a consortium and allows a resolution plan to be approved if 66% of the banks in the group agree to it. Dissenting lenders have the option to sell their stressed loans to a company at a discount, or buy out loans to that entity from all other lenders at a premium.
"The objective is to use this inter-creditor agreement for faster faciliation of the stressed assets resolution," said Sunil Mehta, the non-executive chairman of the second state-run lender, Punjab National Bank, who also headed the panel.
"One of the major issues was a consensus among lending banks on what should have been a common resolution plan."
Lender State Bank of India was among banks which signed the agreement.
India's banks had 12.5% of their total loans categorised as non-performing or restructured at the end of March, according to central bank data.
The central bank in February this year withdrew half a dozen loan restructuring schemes and tightened rules to steer more companies to bankruptcy court.
Re-dessiminated by The Asian Banker from Timesofindia.com