Limited Scope

The government plans to form an asset management company to takeover the debts of the two state banks.
A top Central Bank official said the upcoming Bank Rescue Law, will makes its way to parliament before end September.

rnrnThe debt recovery and collection agency or RACA will be modelled on similar lines to the successful Malaysian model, Danaharta.

rnrnFollowing the Asian financial crisis, the Malaysian government set up this asset management company to isolate and remove bad debts, that were crippling its banking sector.

rnrnDanharta put these non-performing loans (NPL) into a separate company at a pre-determined valuation. In return, the government took an equity stake in these banks on a pre-determined proportionate basis.

rnrnThe NPLs were then restructured in a systematic manner into viable entities and sold off or liquidate if they were not viable.

rnrnBy wiping of bad debts, the banks could then move forward and embark on fresh lending to fuel economic growth.

rnrnAccording to bank