Read more about Bad bank, no Covid cess: Why Sensex zoomed 2,100 pts post Budget proposals on Business Standard. The optimism despite higher borrowing and a wider fiscal deficit, analysts say, was on account of the positive measures to revive the Covid-19 hit economy
Das said that the setting up of a bad bank to tackle the high non-performing loan problem in the financial system has been under discussion for a “long time”.
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Why Corporate Houses Should Not be Allowed to Promote Banks: A Reading List
The new proposal by an RBI Internal Working Group to allow large corporate/industrial houses to float banks poses various risks for the banking sector.
In November 2020, the Reserve Bank of India (RBI) released a report of its Internal Working Group, which recommended that large corporate/industrial houses be permitted to promote banks, subject to necessary regulatory amendments.
In a similar vein, it recommended that well-run non-banking financial companies (NBFCs), including those owned by corporate houses, be considered for conversion into full-fledged banks. It also allowed for raising of the cap on promoters’ stake in a private bank from the current 15% to 26%.
ISSUE DATE: December 28, 2020
UPDATED: December 18, 2020 23:40 IST
Illustration by Nilanjan Das
India’s banking sector is frequently under the spotlight, and usually for unflattering reasons, from an insupportable pileup of loans gone bad (non-performing assets or NPAs in banking parlance) to outright fraud to cronyism or worse. The rot is endemic, has hit banks small and big, including some well-regarded names, and is by no means limited to the public sector. If government-owned banks like Punjab National Bank (PNB) and State Bank of India (SBI) have embarrassed themselves, names like YES Bank and ICICI Bank in the private sector have also made headlines for the wrong reasons. The list of banks of dubious honour is long, including, most recently, Lakshmi Vilas Bank (LV Bank), which the RBI (Reserve Bank of India) had to step in to bail out. The Covid-19 pandemic has aggravated the crisis by another order of magnitude, with the government-mandated moratorium on interest payments