New Delhi: The solution to the bad loans is expected soon, as five public sector banks are devising a plan to resolve the perennial issue of the non performing assets (NPAs). Five government banks, including State Bank of India, Punjab National Bank, and Bank of Baroda and others are preparing to form a new company altogether. The new proposed company is expected to work on the lines of Bad Bank.
As per the ET report, the work of the company would be to recover loans of less than Rs 5 crore for retail and for MSMEs. The agency expected to be coordinating on the matter would be PSB Alliance Private Limited, an alliance company of all major public sector banks. The draft blueprint for the entire plan of the work is prepared by the PSB.
The ET report says that initially the 5 banks would be involved in the creation of a new company. Eventually, other government banks would also join the project, making it a nationwide initiative. The proposed project is expected to make the recovery of small loans more effective. The creation of a new company would allow the banks to focus more on their core banking activities, as per the sources familiar with the matter. Currently, around three to four public sector banks are recovering their small loans through an external agency. The proposed new company would streamline the recovery process faster and would give banks an additional edge to increase their lending domain.
Finance Ministry Guidelines
The new initiative aligns with the guidelines issued by the Finance Ministry. FM issued guidelines to all the top 20 banks of the country to review their top 20 loans from time to time and devise better strategies for their resolution. The old and stuck loans of public sector banks increase the gross NPA (non-performing assets). Banks are already working in this direction by collaborating with the BAANKNET, a centralized e-auction platform for public sector banks (PSBs) to sell assets, particularly non-performing assets (NPAs), doorstep banking, and incorporating cloud infrastructure in their operation to increase their digital footprint.
According to a CARE Ratings report, the gross non-performing assets of public sector banks improved by 17% to Rs 2.94 lakh crore as of March 31, 2025, compared to a year ago. However, it noted that fresh slippages increased by 7.8% year-on-year to Rs 25,000 crore during Q4 FY25. On this, an official of PSB Alliance said that it is expected that the company being formed for loan recovery will start work in this financial year.
Five major Indian public sector banks (PSBs) are collaborating to establish a new company modeled after a “bad bank” to address the persistent issue of non-performing assets (NPAs). The proposed entity will primarily focus on recovering loans under Rs 5 crore for MSMEs and retail borrowers. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
