Bad Bank In India Latest Updates : Bad Bank in India will be formed soon .Canara Bank will be sponsor of Bad Banks . The bad bank will not involve in core function of Banking . Bad Bank will not do any lending and will not accept deposits too. It will not deal directly with general public . Bad Bank will help to make commercial banks including public sector and private sector banks to clear their balance sheets and resolve bad loans. The process of taking over bad loans will be below the book value of the loan. Bad bank will try to recover as much as possible from those bad loans. A bad bank helps banks to segregate their good assets from the bad ones which make it easier to raise capital through equity or debt.
The requirement of bad bank : Rising NPA of Indian Banks is main reason for formation of bad banks in india . The lockdown imposed due to pandemic to curb covid spread has slashed the income of the businesses and individuals. It affected borrowers ability to repay loans which caused a hike in non-performing assets of banks. Moreover big corporate houses are defaulted in repayment of loans .
IBA proposed concept of Bad Bank In India previous year. Finance Minister in Budget Speech announced for Bad Bank Formation . Previous month i.e. in May 2021 IBA requested Canara Bank to participate in Bad Bank as a sponsor . Canara Bank Board approved to be part of bad bank as a sponsor . Now Canara bank sought RBI approval for the same .
Bad Bank In India Latest Updates :Bad bank will be formed under public private partnership . SBI , IDBI , BOI , BOB etc bank will take 10 % stake in bad bank but sponsor canara bank will hold 12 % stake in bad bank . Banks already identified big NPAs to shift to Bad Bank . NPA of 500 crore and above will shift to bad bank . Watch this video for latest updates :
Bank privatisation is also on hold because once bad bank will start NPA of bank will transfer to Bad Bank and banks will attract good buyer . Watch this video for full details :