New Delhi: The banking sector of the country has been badly affected by the Kovid-19 epidemic and the economic recession that has caused it. The Reserve Bank of India (RBI) has taken several steps to revive the sector. At the same time, the central government has not been able to take any decision yet about the ‘bad bank’ for the banking sector.
Many experts, including the Chief Economist of the International Monetary Fund (IMF) Geeta Gopinath, have also supported the idea of ’bad bank’ and they feel that it can help the central government to revive the financial institutions of the country. Gopinath had said in an interview that “Bad Bank is definitely a right idea, but right now I would like to encourage banks and NBFCs to raise capital given the financial situation”.
What is bad bank
A bad bank acts as an aggregator of all stressed assets in the system and its goal is to resolve the issues and keep the banks free to focus on the business. A financial institution with non-performing assets (NPAs) can sell its holdings at the market value to Bad Bank, which helps them to clear their balance sheets.
Much reliance on capital infusion is not good
although. Many experts believe that over-reliance on capital infusion is not a good long-term plan for public sector banks (PSBs).DEA Secretary Tarun Bajaj said sometime back that “Bank is an important area that we need to correct.
Nidhi Malviya is fun loving girl. She writes at NoobFeeds about various topics related to Finance, Technology, Business etc.