CEA pitches bad bank led by private sector

Chief Economic Adviser K V Subramanian has made a strong case for setting up of a bad bank led by private sector to effectively deal with non-performing assets of the financial sector which may see a surge once regulatory forbearance to deal with the impact of COVID-19 is withdrawn.

The proposal to set up a bad bank has been under consideration of the government for long and some steps may be announced in the Budget 2021-22 to be unveiled by Finance Minister Nirmala Sitharaman on Monday in the Lok Sabha.

Bad bank refers to a financial institution which takes over bad assets of lenders and undertakes resolution. Lenders have been making a case for setting up a bad bank to ease out pressure of bad loans on them in these difficult times.

"The bad bank will certainly help in consolidating some of the non performing assets. It's important to also think about implementing the bad bank in the private sector that enables (faster) decision making," he told PTI in an interview.

Resolution of bad assets with alacrity in decision making often in the public sector is impacted because of the fear of 3Cs, he said.

3Cs refer to Central Bureau of Investigation (CBI), Central Vigilance Commission (CVC) and Comptroller and Audit General (CAG).