In a major development, Debashish Panda, the secretary of the Department of Financial Services, said on Wednesday (25 August) that India could get the license for the bad bank very soon, reports CNBC TV18.
"We expect the license for the bad bank very soon," Panda said. He further underscored that the registration of the debt management company is also under process.
Earlier this week, the Indian Banks' Association (IBA) moved an application to the Reserve Bank of India (RBI) seeking licence to set up a Rs 6,000-crore National Asset Reconstruction Company Ltd (NARCL) or bad bank, PTI reported quoting sources privy to the development.
In June, the IBA had filed an application with the Registrar of the Companies at the ministry of corporate affairs (MCA) to incorporate both the asset reconstruction company and its debt management company.
The asset reconstruction company is a major move by the government in its move to clean up the banking sector.
Amid concerns of rise in non-performing assets in banks due to the pandemic, the government decided to come up with a bad bank to take over the stressed assets of the lenders.
Presenting the Union Budget for 2021-22, Finance Minister Nirmala Sitharaman had said that an Asset Reconstruction Company Ltd and an Asset Management Company will be set up to consolidate and take over the existing stressed debt.
The ARC and AMC will then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realisation.
Sitharaman had said that the high-level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books.