Why in the news?

• The Reserve Bank has called for putting in place an online trading platform on the lines of the system in the US, to sell distressed assets to ensure more transparency and better price-discovery.

More on news

• The banking system is saddled with over Rs 10 trillion of bad loans, which is over 10.2 per cent system wide, as of the September 2017 .
• RBI Deputy Governor has opined that such a platform could help create a thriving market for selling bad loans, which is plaguing the domestic banking system, and asked all the stakeholders to come together to develop such a mechanism.
• RBI has, since last June, identified 40 largest stressed accounts and asked banks to refer them to various debt recovery tribunals.
• In the financial stability report released recently, the central bank had warned that the bad loans could spike to 10.8% by March and 11.1% by September, 2018.
• The Indian Banks Association, Association of Asset Reconstruction Companies [Arcon] and the credit rating agencies can come together to set up what could be the equivalent to the Loan Syndication and Trading Association (LSTA) in the United States, said the deputy governor.
• "The U.S. and South Korea have built such platforms during their banking crises and then it became an industry standard for doing loan sales thereafter,” the Deputy Governor noted.
• He further added that If such a platform is developed, then loan sales can occur for risk transfer, perhaps, prior to default or becoming an NPA because, maybe somebody wants to come in even before an (Insolvency and Bankruptcy Code (IBC) filing takes place.

Source

The Hindu, Indian Express.