India may face hurdles in creating a bad bank
MUMBAI: The move to create a bad bank may hit a wall, as the banking regulator and the government, which is expected to sponsor it, are unlikely to accept two key proposals that the bankers’ lobby group has made. The Indian Bankers’ Association wants to transfer accounts where fraudulent activities have been detected to the new entity that will hold their risky assets. It is also proposing to sell bad loans at book value to the asset reconstruction company. As per the proposal submitted to the government and the Reserve Bank of India, fraud-hit accounts could be considered on a case-to-case basis, with approval from the regulator, to sell to the band bank. However, lenders who sell these loans will have to deal with all inquiries relating to fraud investigation. Current rules don’t allow s...
