The agency is to be given strong debt recovery powers to clean up banks
quote balance sheets jointly with the private sector, Prime Minister Ranil Wickremasinghe said.
rnrnBad debts currently account for 18 percent of the banking sector
quote s total loans, with only one out of six major banks meeting Central Bank
quote s capital adequacy requirement, if provisions are made for 50 percent of non-performing loans.
rnrnWhile state bank
quote s like Peoples Bank is carrying negative net assets, a few privately owned commercial banks are also saddle with massive non-performing assets. Wickremasinghe says this problem is keeping lending rates at dizzy heights.
rnrnThe debt recovery and collection agency (RACA) proposed by Wickremasinghe is similar to Danaharta, the separate unit set up by Bank of Negara, Malaysia.
rnrnDanaharta took over bad loans at ten percent of their value or at the fair value of the collateral. The banks were then issued zero coupon bonds.
rnrnAny excess recoveries were shared at a