asset should not have a high likelihood of ending up in stress soon after restructuring. therefore, bank debt forgiveness may have to be high enough and its converted equity stake low enough so that new investors can come in with a controlling stake and have incentives to turn the asset around. 5. banks can then choose among the feasible plans. coordination problems can be reduced by employing rbi ’ s central repository for information on large credits ( crlic ) and requiring that all plans with 2 / 3rd approval by outstanding bank credit can proceed. the selected plan would simply be crammed down on any dissenting creditors. 6. haircuts taken by banks under a feasible plan would be required by government ruling as being acceptable by the vigilance authorities. sustainable debt would be upgraded to standard status for all involved banks. the promoters, however, would have no choice as to what restructuring plan is accepted, and may potentially get replaced and / or diluted, as per the preference of and depending on the price at which the new managing investors come in. 7. at expiration of the timeline, each exposure that is not resolved will be subject to a steep sector - based haircut for the bank consortium, possibly close to 100 %. the promoter will automatically have to leave. these assets would be put into our new insolvency and bankruptcy code regime. alternately, they could be put up for sale to arcs and private equity investors who can turn around the assets, levering them up with fresh finance, if necessary. if designed right, only the worst assets should end up in this scenario. however, the possibility of ending up here would serve as a credible off - equilibrium threat so that banks, even the most exposed ones, cannot hold up the restructuring. there are ways to arrange and concentrate the management of these assets into a single or few private asset management companies ( pamcs ), at the outset or right after restructuring plans are approved. these companies would resemble a large private - equity fund run by a team of professional asset managers. besides bringing in their own capital, they could raise financing from investors against equity stakes in individual assets or in the fund as a whole, i. e., in the portfolio of assets. the portfolio approach might help investors diversify risks on individual assets, improve valuations, and attract greater capital. bank creditors can set up an oversight committee to ensure cash flows are flowing in and out of the asset restructuring company as per the security rights agreed in the restructuring plans. let me

, digitally - savvy talent pool into these banks. 4. tough prompt corrective action : undercapitalized banks could be shown some tough love and be subjected to corrective action. such action should entail no further growth in deposit base and lending. this will also restore some market discipline in deposit migration, away from the weakest public sector banks that have price to book equity ( p / b ) ratios of around 0. 5 or lower, to healthier public sector banks ( p / b ratios around 1 ) and private sector banks ( p / b ratios of 1. 5 to 4. 5 ). the market has given its verdict as to where the growth potential in our banking sector lies and deposit growth should be allowed to reflect that. 5. divestments : undertaking these measures would improve overall banking sector health and market - to - book valuations, creating an opportune time for the government to divest some of its ownership of the restructured banks. this would also reduce the overall amount the government needs to inject. there are many details to work out. but i hope this provides a start. it is going to require being balanced and creative, holistic and uncompromising, in achieving the end goal. piece by piece approach with all discretion given to banks simply hasn ’ t worked. time is of the essence if we are to restore corporate investment and job creation. sustainable progress in an economy cannot occur when a set of players is allowed to hold up the efficient allocation of capital. their owning a smaller share of assets can help unlock economic value ; their hogging of these assets will only lead to further value - erosion. i hope we can work together and collectively make the right choice. thank you for your kind attention. 6 / 6 bis central bankers'speeches