India’s Bad Bank to go live- received all necessary approvals

Bad Bank has received all necessary approvals to start operation, said SBI Chairman Dinesh Khara.

By Team Tech Outlook Published on January 28, 2022, 16:40 IST

January 28, the Chairman of SBI, India’s largest lending bank said that – the Bad Bank has received all necessary approvals to commence operation.

Bad Bank was announced by Union Finance Minister Nirmala Sitharaman in Union Budget 2021-2022. The Bad Bank is made to take over the bad assets of banks. The structure follows that NARCL will acquire and aggregate identified NPA accounts from banks while IDRCL must handle the debt resolution process.

Bad Bank is a corporate entity that detaches risky assets held by banks to other separate entity. It is made to buy Non-performing assets of banks.

Public sector Banks will have a majority stake in the National Asset Reconstruction Company Limited (NARCL), on the other hand, private banks will have a significant stake in India Debt Resolution Company Limited (IDRCL), Dinesh Khara said, as per sources. The NARCL-IDRCL structure is the bad bank of India, that came to the announcement in the last Union Budget.

In the first phases, around 15 cases worth Rs 50,000 crore will be transferred to the bad bank this year, Khara said. Around Rs 2 lakh crore worth of bad assets is planned to transfer to the Bad Bank(or Asset Management Company). Total 38 accounts with around Rs 83,000 crore outstanding were identified for transfer but some of these accounts have been resolved already, Dinesh Khara said, as per sources.

This unique public-private partnership will ultimately de-stress banks over risky assets. There will be a faster asset resolution process in the banking sector with the establishment of Bad Bank, said Dinesh Khara- as per sources reported.