in the South Asian nation that a bad bank, which is scheduled to be launch by the end of this month, may help reduce this rising bad-loan pile, although some experts claim that it is a long path ahead. According to a report issued by BloombergQuint, the new institution is set to handle stressed debt worth about ₹2 trillion ($27 billion) over time. This accounts for about a quarter of India’s non-performing debt load.
Therefore, there will be growing interest in whether the bad bank would actually focus on resolving the assets or would merely keep them like a warehouse. Raj Kumar Bansal, managing director at financial services conglomerate Edelweiss Asset Reconstruction, is of the view that bankruptcy reform is a key element in resolving the debt crisis. “The proposed bad bank is useful as a one-time clean-up exercise of the bad loans that are pending resolution for years now… But it’s not a long-term solution in dealing with the stressed assets,” he said.
Despite these concerns, as the bad-loan ratio in India’s financial service sector is set to almost double by the end of September, banks are expected to welcome this opportunity to finally throw out some of the stressed loans to the new bad bank. “Stressed loans have taken far too much management time across the industry in the past couple of years,” Yes Bank’s Chief Executive, Prashant Kumar, told Bloomberg. “This bad bank will help shift focus from resolving soured loans to improving credit growth.”
