Government want to create ‘bad banks’ to deal with stressed assets of public sector banks

public sector banks
Government want to create 'bad banks' to deal with stressed assets of public sector banks

The government want to create ‘bad banks’ to deal with stressed assets of public sector banks. The Indian government has set up a group of experts for exploring mechanisms for the purpose of resolving the increasing bad debt issues in the financial sector of the country. The main concept behind this is to take over the burden of heavy loans of public sector banks by the government and helping them to pay their debt.

The asset management company will be headed by the chairman of Punjab National Bank, Sunil Mehta who will be given the responsibility to look after the asset management company as well as new asset reconstruction company.

As per the financial report of this year, all the public sector banks are burdened by more than $141 billion, i.e., 9.5 trillion rupees which have been resulted into bad loans in the March quarter.

Sunil Mehta said, “This group will consider whether such an arrangement will be good for the banking system and if such a suggestion is considered advisable it will also consider the modalities by which such an asset reconstruction committee as well as asset management company should be set up.”

Interim Finance Minister, Piyush Goyal said that the central government is helping with all sort of efforts to the state-run as well as the rural banks for strengthening their operations after their severe loss. He further said that the centre will also be helping all the twenty-one public sector banks for paying their debts.

He added, “The government and the Reserve Bank of India would make all efforts to bring state banks into a good shape so that they could once again become an engine of economic growth.”

Goyal further promised to fill all the vacancies within thirty days by saying, “there is also a proposal that banks may consider oversight committees comprising retired judges, vigilance officials as well as regulators and bring in some expertise to help faster decision making in Indian banks.”

Talking about the allegations on the well known private sector bank named ICICI Bank, Goyal said, “It is a good bank. It has very robust processes and there is no cause for concern for any of the stakeholders of ICICI Bank.”

ICICI Bank is the country’s third-biggest lender by the asset. However, the allegations on Chanda Kochhar, Chief Executive of the bank had destroyed the code of conduct of the bank.

Goyal said that the investigation is going on. Its external and internal enquiry committees would look after the allegations.

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