Bad bank among options on the table: DEA Secy

The RBI has been asking us, and we ourselves also feel that we need to recapitalise.

Published: 19th December 2020 03:14 AM  |   Last Updated: 19th December 2020 11:32 AM   |  A+A-

By Express News Service

NEW DELHI:  The government is exploring all options, including setting up a bad bank, in order to improve the health of the country’s banking sector, Economic Affairs Secretary Tarun Bajaj said on Friday. “We are looking at various options, including the option you mentioned (of bad bank), and it is still in the works...

The RBI has been asking us, and we ourselves also feel that we need to recapitalise. We have recapitalised to a large extent and this year too, we have kept some money for recapitalisation so that commitment is there...,” he said.

Bajaj was responding to a query during an event on whether the government would consider setting up a bad bank as a one-time measure to reduce the Non-Performing Assets burden of public sector banks.
The topic of a bad bank, one which would accumulate the bad debt of normal lenders, has been the subject of controversy for some time now, with many questioning the efficacy of such a measure.

In June, Chief Economic Adviser K V Subramanian had said that a bad bank may not be a potent option to address the NPA problem. Subramanian had also said that when a bank sells bad loans, it has to take a haircut because actual amount that can be expected from the bad asset is lower.

“So, when the bank has to sell that loan to a new institution, it has to take haircut... that will impact profit and loss, and that is one of the key aspects affecting selling of loans. So, creating a new structure may not be as potent in addressing the problem,” he had said.


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp