Indian banks want government to fund ‘bad bank'

They are pitching for an asset reconstruction company to buy NPLs.

Indian lenders want the government to grant up to $2b for a “bad bank” at a time when their debt is expected to double in size due to the pandemic, reports Reuters.

According to sources, the banks have proposed that the government set up an asset reconstruction company (ARC) to initially buy non-performing loans (NPLs) worth up to $13.3b (INR1t).

The ARC would pay the lenders at least 15% of the present net value of the loans it buys in cash, whilst the remaining would be paid in the form of security receipts.

Indian banks are already struggling with a bad debt pile of $123b (INR9.35t), equivalent to about 9.1% of their total assets, as of 30 September 2019.

Here’s more from Reuters.

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