Padmakumar Madhavan Nair of State Bank of India has been appointed as the CEO of Bad Bank. The Bad Bank is a proposed entity of the National Asset Reconstruction Company (NARC).
About Padmakumar Nair
Current Mr Nair is serving as the Chief General Manager in charge of Stressed Assets of SBI. He has been holding the post since April 2020. Prior to this, he worked as the General Manager in SARG.
What is a Bad Bank?
- It is a financial organisation that takes over bad assets of lenders and resolves them. The entities will sell their non-performing assets to the bad banks at market price.
- It was suggested by the Indian Banks Association.
- The Confederation of Indian Industry had asked the Finance Ministry to establish “Multiple Bad Banks”.
- The bad banks free the financial organisations from the burden of Non-Performing Assets. This will help them to focus more on new loans.
- In February 2021, the Indian Banks Association had identified the bad loans that can be transferred to the proposed bad bank of the Central Government.
Recent Developments
Recently the Reserve Bank of India set up a Committee called the Sudarshan Sen Committee to study about the Asset Reconstruction Companies in the country.
Background
The Reserve Bank of India had warned in its Financial Stability Report that the Non-Performing Assets are increasing. This will be the highest in 22 years.
Benefits of Bad Banks
Usually, large debtors have several creditors. In this case, Bad banks can help in solving coordination problems.