M K Verma
Mumbai (Maharashtra) : SBI, ICICI, IDBI and others have recently approached RBI for formation of BAD BANK, a new way to hide their NPA . The asset reconstruction company (ARC), which came into existence (after SARFESI ACT 2002) to take over the Bad Assets of the Bank, cleaned the balance sheet of the big banks to make them look healthy rather than reviving sick units or selling the acquired assets.
The total Assets under management (AUM) of bad loan aggregators in India had crossed Rs 1 lakh crore in fiscal ended March 2019. However, the buying of bad assets has slowed. This is due to the challenge faced by ARCs in providing higher cash margin (increased from 5% to 15% by RBI in Dec,2019) to be furnished before taking over the bad assets resulting in a large dip in buying bad loans from 25% to 7%.
Is the move by large lenders only to shift the large bad corporate loan which is haunting their balance sheet? Should the lenders devote time to enthuse the spirit of credit creation so that lending can be smooth for sectors across board or should they concentrate in cleaning their own old long drawn bad loans?
This whole exercise is not going to help the post COVID-19 revival of MSME and industries at large rather only the Banks in particular will be benefited.
( The writer is Director, Moneyy Maxx Finance Services Pvt. Ltd.)