The idea of creating a ‘bad bank’, a single entity which will house all bad loans in the banking system, is back on the discussion table. Two former central bankers, Raghuram Rajan and Viral Acharya and former State Bank of India (SBI) Chairman, Rajnish Kumar, have strongly supported the idea.
Days after a jointly-authored paper by Rajan and Acharya pitched the bad bank idea, outgoing SBI Chairman too said this is the best time to create a bad bank.
“In my view, this is the best time to create a bad bank,” said Kumar in an exclusive interview to Moneycontrol on Wednesday.
A ‘bad bank’ is a bank set up to buy the bad loans and other illiquid holdings of another financial institution. Once toxic assets are transferred to this entity, attempts for an early resolution by