अनुच्छेद 99 के बारे में खबरों में क्यों? संयुक्त राष्ट्र महासचिव ने अंतरराष्ट्रीय शांति और सुरक्षा के खतरों को संबोधित करने के लिए संयुक्त ...
What is a Bad Bank?
Banks drive the nation’s economy, however many times the borrowers find it difficult to service their loans. It requires the lenders to set aside the capital to cover the losses. This is when the bad bank comes into the picture to help them free up to start lending. A bad bank is an Asset Reconstruction Company in other words.
👉🏻Key Points: Bad Bank
➖The bad bank does not involve itself in lending and taking deposits, but it helps to make commercial banks clear their balance sheets and resolve bad loans.
➖The process of taking over bad loans is generally below the book value of the loan
➖Bad bank tries to recover as much as possible from those bad loans
➖Mellon Bank based in the USA was the first one in this field. It is referred to as the first bad bank in 1988.
➖A bad bank aids a bank to segregate its good assets from the bad ones which make it easier to raise capital through equity or debt.
👉🏻What is the Significance?
The toxic assets separation helps in generating some confidence among potential investors so that they can then clearly examine the financial health of the lender. Sour loans when transferred to a bad bank can help lenders prioritize their financing business and the specialized institution deals with maximizing loan recovery.
👉🏻The requirement of bad bank :
➖The lockdown that was imposed due to pandemic to curb covid spread has crimped the earnings of the businesses and individuals. It impaired their ability to repay loans which caused a hike in non-performing assets of banks. The corporate sector has come under the debt of INR 15.52 lakh crore.
➖Despite the regulatory forbearance as a loan moratorium, borrowers are finding it difficult to service their loans. This then requires lenders to set aside their capital to cover such losses. A bad bank can provide them with the freedom to restart lending.
➖The RBI in its recent FSR informed that the gross NPAs in the banking sector was expected to shoot up to 13.5% of advances by September 2021, from 7.5% in the previous year.
👉🏻Challenges of Bad Bank:
➖The major issue would be of finding buyers in the pandemic hit economy. The government is itself facing fiscal deficits at present
➖Without governance reforms, the Public sector banks would continue doing business in the same way as in the past. It may also end up piling-up bad debts again.
➖Union Government has already infused almost 2.6 lakh crore in banks through recapitalisation so now bad banks would do no better as per many economists.
➖Bad banks can also ease off the banks of their moral responsibility and let them lend without any commitment to clear their NPAs.
▪️First bank in India- Bank of Hindustan (1770)
▪️First Bank managed by Indians- Oudh Commercial Bank
▪️First Bank with Indian capital- Punjab National Bank (Founder of the Bank is Lala Lajpat Rai)
▪️First Foreign Bank in India – HSBC
▪️First bank to get ISO certificate – Canara Bank
▪️First Indian bank outside India –Bank of India
▪️First Bank to introduce ATM – HSBC (1987, Mumbai)
▪️First Bank to have joint stock public bank (Oldest) – Allahabad Bank
▪️First Universal bank – ICICI (Industrial Credit and Investment Corporation of India)
▪️First bank to introduce saving account – Presidency Bank (1833)
▪️First Bank to introduce Cheque system – Bengal Bank (1833)
▪️First bank to give internet banking facility – ICICI
▪️First bank to sell mutual funds – State Bank of India
▪️First bank to issue credit cards - Central Bank of India
▪️First Rural Regional Bank (Grameen Bank) – Prathama Bank (sponsored by Syndicate Bank)
▪️First bank to get ‘in principle’ banking license – IDFC and Bandhan Bank
▪️First Bank to introduce merchant banking in India – Grind lays bank
▪️First bank to introduce block chain technology – ICICI
▪️First bank to introduce voice biometric – Citi Bank
▪️First bank to introduce robot in banking service- HDFC
✔️ Miscellaneous points:
▪️Largest public sector bank in India – State Bank of India▪️Largest private sector bank in India – ICICI
▪️Largest foreign bank in India – Standard Chartered Bank
▪️Bank with more branches in India – State Bank of India
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