Big Banks like State Bank of India, ICICI Bank and other large lenders have come together to revive the idea of a BAD BANK proposal due to the slowdown in the economy under the current COVID 19 threat, which otherwise would be adding on to the already burdened Bankers with more sticky loans.
- The idea is that
- the proposed BAD BANK would function like a large asset reconstruction company for the entire banking system and would hold a major portion of Non-Performing Assets (NPAs)
- it would give the lenders a chance to improve their balance sheets and to focus on core banking activities.
- State Bank of India, discussed the idea with other large banks, and sought their in-principle approval on the issue.
- With this in mine, the banks propose to approach the Government for an initial contribution of Rs. 10,000 to Rs. 15,000 crore for creating a new entity named BAD BANK which in turn is expected to function like an Asset Reconstruction Company.