Here is what you need to know about the concept of bad bank as propounded by the Reserve Bank of India and its implications.
· RBI governor, Shaktikanta Das, has agreed to consider the idea of a bad bank if the government was planning something similar to take on bad debts.
· The idea of setting up a bad bank was part of the proposals submitted by the CII as part of its pre-budget memorandum to the government. Even the government’s Economic Affairs Secretary Tarun Bajaj had suggested they were exploring such options.
· Essentially, what a bad bank does is to bundle up all the bad assets of financial institutions at a discounted price. This is then sold to investors.
· This sale is done along with putting an elaborate turnaround plan in place. This would be a central body to hold all the bad assets as a portfolio at discounted prices.
The proposal is that the government and the RBI would set up a national level asset reconstruction company in which the government will infuse capital of Rs.10,000 crore.
Here is what you need to know about the concept of bad bank as propounded by the Reserve Bank of India and its implications.
· RBI governor, Shaktikanta Das, has agreed to consider the idea of a bad bank if the government was planning something similar to take on bad debts.
· The idea of setting up a bad bank was part of the proposals submitted by the CII as part of its pre-budget memorandum to the government. Even the government’s Economic Affairs Secretary Tarun Bajaj had suggested they were exploring such options.
· Essentially, what a bad bank does is to bundle up all the bad assets of financial institutions at a discounted price. This is then sold to investors.
· This sale is done along with putting an elaborate turnaround plan in place. This would be a central body to hold all the bad assets as a portfolio at discounted prices.
The proposal is that the government and the RBI would set up a national level asset reconstruction company in which the government will infuse capital of Rs.10,000 crore.