NPA Crisis

Indian Banks’ Association may set up online platform to sell bad loans


Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Particulars of the IBA

Mains level: The proposed platform can help in countering the NPA crisis


News

Online trading platform by Indian Banks’ Association (IBA)

  1. The Indian Banks’ Association (IBA) is examining the possibility of setting up an online trading platform to sell bad loans
  2. Why: to improve price discovery and market liquidity.
  3. The IBA will prepare a discussion paper as well as consult with all stakeholders including asset reconstruction companies (ARCs) and banks

It was a suggestion by the RBI

  1. RBI had urged banks and ARCs to collaborate for setting up an online trading platform for selling bad loans as it would help develop such a market

Why is this platform important?

  1. According to industry experts, an online platform can double up as a bidding platform, where live auctions can be conducted, with options for the bidder to remain anonymous
  2. This can improve the sale valuation, especially in the current scenario where banks are selling large bad loans against the earlier preference for off-loading old NPAs

Back2basics

Indian Banks’ Association

  1. Indian Banks’ Association (IBA), formed on 26 September 1946 as a representative body of management of banking in India operating in India – an association of Indian banks and financial institutions based in Mumbai
  2. With an initial membership representing 22 banks in India in 1946, IBA currently represents 237 banking companies operating in India
  3. IBA was formed for development, coordination and strengthening of Indian banking, and assist the member banks in various ways including implementation of new systems and adoption of standards among the members
  4. Indian Banks’ Association is managed by a managing committee, and the current managing committee consists of one chairman, 3 deputy chairmen, 1 honorary secretary and 26 members
  5. Current chief executive is V G Kannan. He succeeds M V Tanksale who demitted office as Chief Executive on August 9, 2016, after being at the helm for three years

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