The new 'Bad Bank', as announced by Finance Minister Nirmala Sitharaman in Union Budget 2021-22, would be set up "within the next one or two months", Financial Services Secretary Debashish Panda said on February 2.
The new Development Finance Institution (DFI) announced by the finance minister will be called the 'National Bank for Financing, Infrastructure, and Development', Panda told Moneycontrol.
The stakeholders will be state-owned and private scheduled commercial banks, he further added.
The Bad Bank is expected by the government to adequately address the non-performing assets (NPA) crisis of the public sector lenders.
The creation of Bad Bank would allow the banks reeling under stressed assets to clear up their balance sheets, Sitharaman had said during her post-Budget press conference.
Bad Bank to use 15:85 model
Explaining the details about Bad Bank, Panda had earlier told Moneycontrol that the Bad Bank would function in a 15:85 mechanism. It means that banks will get 15 percent upfront payment as cash and 85 percent value as receipts.
"The government is not going to put any money, nor is it going to have any shareholding of Bad Bank," Panda said.
IIFCL can be merged with new DFI
The government is also considering merging India Infrastructure Finance Company Limited (IIFCL) with the new Development Finance Institution (DFI), the Financial Services Secretary claimed.
Panda clarified that the new DFI, or any private DFI, will be regulated by the Reserve Bank of India.
The proposed DFI was announced by Sitharaman with the intent to enable long term funding of Rs 5 lakh crore in three-year period for infrastructure projects.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
