Bad bank News

Finance Minister Nirmala Sitharaman had announced the setting up of a `bad bank` in her Budget speech last year. A bad bank is a corporate firm that is set up to absorb the illiquid and risky assets held by banks. As of now, a total of 38 accounts aggregating Rs 82,845 crore have been identified for transfer to NARCL.

The proposed bad bank or NARCL will pay up to 15 per cent of the agreed value for the loans in cash. The remaining 85 per cent would be government-guaranteed security receipts. The government guarantee would be invoked if there is loss against the threshold value.

Amid a debate on need for a 'bad bank' to tackle mounting NPAs, eminent banker Deepak Parekh has said "it is time to bite the bullet" but cautioned against any such move being seen as a government bailout using the taxpayers' money.

The rate of rise in bank's non- performing assets has slowed down in the March quarter and the steel sector has started showing signs of improvement, Finance Minister Arun Jaitley said on Wednesday.

The government needs to bail out large corporate borrowers at times in a capitalist system though it may lead to charges of cronyism, Chief Economic Adviser Arvind Subramanian has said, while supporting the idea of a 'national bad bank'.

Setting up of a 'bad bank' can accelerate the resolution of stressed assets in the banking sector but that would also require a credible capital infusion plan by the government, Fitch Ratings said on Friday.

The government is looking at a proposal to set up a bank or a company to deal with the burgeoning bad loans of state-owned banks, even as the views on the issue are "vertically divided".