India sets up bank for bad loans in push to boost credit

The new lender will allow financiers to transfer as much as $27bn of soured loans and free up their balance sheets

epa07343908 Auto rickshaws drive through traffic on the western express highway in Mumbai, India, 14 November 2018. People move and commute in many different ways depending on how the live, where they live, and where they go. In western countries, the daily transportation options mainly comprise of buses, trains and taxis.  Across the globe, Asian commuters move around in vehicles that are often outdated in the west or were never used. From motorcycle taxis to trams to horse drawn carriages, Asian commuters utilize a wide variety of vehicles every day.  Motorcycles and mopeds are used widely in Asia because they are relatively affordable.  They are used to transport goods ranging from boxes to balloons or even chickens. Some countries have a moto taxi system that helps commuters beat the heavy traffic. The traditional tuk-tuk design, a three wheeled cabin cycle, is also used as public transport in countries like Thailand, Laos, Cambodia, India and Indonesia where it is called bajaj. In Laos and Cambodia tuk-tuks are used mainly to cover short distances and cheaper fares, while they are rather a national symbol in Thailand and as such, most tourists will want to ride in one before heading back home. The jeepney is a cultural icon of the Philippines, a stretched out jeep remnant from WWII, converted into public buses. Colorful and hard to miss on the streets, jeepneys are often crammed with commuters as they are not only popular with tourists but with locals for their cheap fares. Pedaled or pulled rickshaws have dwindled in some countries over the years but they are still very much alive in places like Nepal, Myanmar and India. Nepal's three wheeler rickshaw and Myanmar's trishaw, or side-car as it is known locally, are pedaled like a tricycle, while the Indian rickshaw is pulled by its driver running often barefoot. Effectively every country in Asia has its own preferred mode of transportation. Convenient and cheap, operating on water, rail tracks, or pavement. Som

India formally set up a bad loan bank as part of efforts to remove one of the world’s largest piles of soured debt from the balance sheet of financiers and boost lending.

The bank was registered as the National Asset Reconstruction Company on July 7, with Padmakumar Madhavan Nair as managing director, according to filings with the Registrar of Companies, where business establishments must register before becoming operational.

Its paid-up capital is 746 million rupees ($10m), according to the filing. Mr Nair previously worked at the State Bank of India where he handled the resolution of stressed assets.

Sunil Mehta, chief executive of the Indian Banks’ Association, will be a director while SBI’s Salee Nair and Canara Bank’s Ajit Nair are nominee directors on the board, according to the filing.

The bad loan bank will be owned by government-run and private sector lenders and will allow financiers to transfer as much as 2 trillion rupees of soured loans.

The will effectively free them from years of carrying and providing for these loss-making assets. The announcement of such an entity was first made by India’s Finance Minister Nirmala Sitharaman in her budget speech in February.

The government’s decision to start the bad loan bank comes after an overhauled bankruptcy process unveiled in 2016 only resulted in muted success.

The bad loan bank will provide much-needed relief to Indian lenders struggling to bring down their massive problem debt pile that has eroded profit and constrained their ability to lend.

It is intended to be a fillip to Prime Minister Narendra Modi’s attempts to boost credit flow to revive the South Asian economy, which has shrunk the most in about seven decades due to coronavirus-induced slowdown.

Updated: July 13, 2021, 11:01 AM