News Update

India’s Bad Bank Has $ 27 Billion Loan Looming Over

• ByStartupStory     |    June 28, 2021

India’s bad bank, has $ 27 billion loan which has been expected to launch this month and help reduce to some extent loan pile, but market participants say it is still a long way to go. This bank is set to operate from the end of June, but before it could even start it’s operation, it has  a $ 27 billion dollar loan over its shoulder. This was reported first by the BloombergQuint report. The 2 trillion rupees, is about a quarter of the nation’s non – performing debt load. They would house bad loans of many lenders under one roof. This institution would further help in decision making, and improve bargain power when resolving these assets. For India to overcome its sinking in loan conditions, and to stabilize the financial system post the second wave of Covid, they first need to address fundamental problems, and then move on to other issues. The investor’s can no longer trust India’s bankruptcy reforms,and as a result, the creditor’s recovery loan has fallen ; as the delay in the number of cases being sold gradually increases, and liquidations exceed resolutions in the solvency courts.

“The proposed bad bank is useful as a one-time clean-up exercise of the bad loans that are pending resolution for years now,” said Raj Kumar Bansal, managing director at Edelweiss Asset Reconstruction Co. “But it’s not a long-term solution in dealing with the stressed assets,” he said, adding that bankruptcy reform is key. Market participants will be overlooking the entire scenario, judging whether this bad bank chooses to resolve the assets rather than keeping them like a warehouse, and whether the bank’s team consists of appropriate industry and turn around experts. Less than one in 10 companies admitted in the insolvency courts are getting resolved while a third are facing liquidation, data compiled by the Insolvency and Bankruptcy Board of India show. The recoveries for financiers from the resolved cases have also dropped to 39% of dues as of March from 46% a year earlier. And if the top nine cases which recovered are excluded, then the lenders have just received 24% of dues, according to Macquarie Capital.

 

 

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