The Indian Banks’ Association (IBA) has begun identifying bad loans which can be transferred to the Centre’s proposed bad bank.
The IBA has written to banks asking them for a list of all bad loans worth Rs 500 crore and above to “identify magnitude of the problem” and “get clarity over initial capital required for the entity”, The Economic Times reported.
Moneycontrol could not independently verify the report.
The two-page communication informs lenders that the “IBA, the Department of Financial Services and a few lenders” are working to set up the bad bank and the identification of accounts which can be transferred to the proposed bank is “being carried out.”
The list compiled will have details of NPLs (in or outside consortium) above Rs 500 crore which are nearing resolution under the bankruptcy courts or are in the liquidation process. The list will exclude equity exposures, unsecured bad loans and fraud accounts – but will include provisions for these cases and the expected recovery on exposures, the report added.Nirmala Sitharaman had proposed setting up of a bad bank during her Union Budget 2021 speech on February 1. She said the proposed entity would take over stressed loans from banks to sell to alternative investment funds (AIF).