Financial services entities seek setting up of a bad bank


NEW DELHI: Financial services sector entities batted for a one-time restructuring of all loans and setting up of a bad bank — or a system like the Troubled Asset Relief Program (TARP) of the US — to help revive the economy and shore up weak balance sheets that they said would be seen a year from now due to the impact of Covid-19.

Speaking at the 125th annual session of the Confederation of Indian Industry on Tuesday via videoconference, entities representing non-banking financial companies (NBFCs), health insurers and private equity firms also backed the idea of a single financial regulator, besides enabling healthcare insurance for all.

“Going into Covid, we had a weak financial sector. A $25-30 billion TARP-like programme can pull sectors like NBFCs out of distress,” Bain Capital Private Equity managing director Amit Chandra said.

Others also backed one-time restructuring. “A weaker credit book business will be the result of the moratorium (for six months on loan repayments) as it gives time for the borrower, but it is not the solution; a one-time restructuring plan (is),” said Sanjay Nayar, the CEO of KKR India.

Sanjiv Bajaj, the managing director of Bajaj Finserv, the country’s largest NBFC, also supported the one-time restructuring plan, saying that while the moratorium was needed for survival, borrowers chose to pay their instalments when they were educated about interest accrual. “When we explained, the 50% people who came for availing of the moratorium, ended up paying us.”

The NBFC sector has sought a one-time restructuring of all loans, where staggered repayments can be done beginning with small amounts, as many retail and business customers face cash flow problems due to the lockdown.

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Nayar lobbied for a bad bank, on the lines of China, Portugal, Spain and Italy.





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