Govt-sponsored bad bank likely to start operations in January

The bad bank sponsored by the government is likely to start operations from the second week of January, according to a report. This could help the banking industry to dress up its balance sheet as the fiscal year comes to an end in a quarter.

According to the ET report, banks may report one-off gains in their fourth-quarter earnings as they have already fully provided for those sticky loans estimated at about Rs 82,000 crore in 22 accounts.

The bad bank plans to recruit as many as 50 professional executives for the asset management company (AMC) – India Debt Resolution Company Ltd (IDRCL) – to begin with, the business daily mentioned citing people familiar with the matter. The bad bank’s regulatory framework is being worked out.

“We are currently busy setting up the infrastructure as we aim to generate write-backs for lenders by the end of this financial year,” the publication quoted one of the senior executives involved in the matter as saying.

The assets that are to be taken over by the bad bank are spread across industries such as power, road construction, infrastructure and manufacturing include Castex Technologies, Lavasa Corporation, Jaypee Infratech, GTL and Reliance Naval.

“The bad bank will bring more efficiency and expertise under one roof as the whole objective is to resolve distressed assets,” the business daily quoted Ashutosh Khajuria, executive director and CFO at Federal Bank as saying. “Realistic valuation will likely ensure lower haircuts increasing chances of higher recovery.”

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