Bad-debts reduced by ₹2 trillion; 'bad bank' to be set up in two months -

New Delhi: – There has been a significant reduction in the bad debts of the banks India. Since 2018, bad debts of the banks have reduced by ₹2 trillion. Union Minister of State for Finance, Anurag Thakur, said in the Rajya Sabha that this was possible due to the various measures taken by the government. At the same time, on Monday, Finance Minister Nirmala Sitharaman announced the formation of a ‘Bad Bank’ to tackle the problem of bad debts in this year’s budget. On Tuesday, Financial Services Secretary Debashish Panda informed that the Bad Bank would be established in two months.

Bad Debts was the biggest crisis faced by the banking industry in the country. Many of the banks had almost gone bankrupt due to bad debts. The government is working on this problem since the last five years; it had warned the banks to maintain transparency regarding their bad debts. Many other measures were taken in this respect. Restrictions were imposed on banks having a major burden of bad debts. The government even provided working capital to these banks from time to time to bail them out of the crisis. Facilities given to some restructured loan accounts were also withdrawn. These are the effects of all these measures.

In 2018, the bad debt burden in the banking industry was ₹10.36 trillion. It is reduced to ₹8.8 trillion in 2020. The government has always maintained the transparency policy, regarding Non-Performing Assets (NPA) meaning bad debts, and Union Minister of State for Finance Anurag Thakur said that reforms are consistently being implemented in the banking sector to reduce the NPA burden. Meanwhile, the government is establishing Bad Bank to address the problem of bad debts. Union Minister Sitharaman announced this in the Union budget. Reports were being received consistently that the government may establish a Bad Bank. A proposal for this had been submitted by the financial services department.

The NPAs of the banks will be transferred to the Bad Bank and this bank will take over the further process of recovery. It is reported that Currently, NPAs of ₹2.5 trillion will be transferred to the Bad Bank. Debashish Panda, Secretary of the Financial Services Department, informed that the Bad Bank will be established in the next two months during an interview.