After a lot of delay, called an evil bank was finally ready to take off. On January 28, at a video press conference named short notice, the Chair of the State Bank of India (SBI) Dinesh Kumar Khara announced that the project had received all the approval needed to take off. About 15 cases worth 50,000 crore will be transferred to the evil bank proposed in this financial year, he said. The asset is worth 2 lakh crore Rs which is expected to be planned to be transferred to a poor bank.

A total of 38 accounts with the total RS 83,000 Crore circulating have been identified for transfers so far but some have been resolved, Khara added. The double structure of Bad Bank will be a public-private collaboration with public sector banks that have majority shares in the National Asset Reconstruction Company Ltd. (NARCL) while private banks will have important shares in Indian debt resolution companies, he said.

So far good. But what’s next?

To be sure, bad bank trips will not be subtle – even with all government support and the banking sector. There will be two main challenges – assessment and asset resolution.

Remember, bad assets waiting to be absorbed by malicious banks is a very bad asset, which means the bank has tried to resolve these cases for several years but obviously not much lucky. Bank transferring these assets will always want an assessment as high as possible but the company’s reconstruction assets get this asset want a cheaper agreement.

Thus, to start, most of these bad assets have been fully provided for, accounts written in bank books. They no longer maintain the hope of meaningful recovery from these assets. Come to a bad bank deal, the most important part is how the bank arrives at the assessment to transfer this asset to NARCL.

Even if some price discovery mechanisms are done, the value of assets cannot exceed 10 percent to 20 percent of the asset during the transfer. The bank will want the maximum value for the assets transferred.

The second challenge is a timely resolution.

According to details distributed by the Minister of Finance at a press conference last year, the Bank will receive 15 percent of the value of assets transferred in advance; 85 percent will be given as security acceptance (SRS). If the debt resolution does not occur in a period of five years, the government must pay the bank against SRS if guarantees are called. There are no takers for these assets. Bad bank managers will be deducted by their assignments.

The limited success of the previous asset resolution mechanism includes a debt recovery court, the existing asset reconstruction company (ARC) and the company’s debt restructuring mechanism shows how difficult it is to get the asset back to performance and find value in these assets and get value. However, malicious banks are steps in the right direction. Hopefully this will help the Indian banking sector – burdened with bad loans – to clean their books and are ready to start new.

But the exact execution and asset resolution will be the key to ensuring the project does not meet the fate of some of the most hyped initiatives. (Banking Central is a weekly column that makes the close times and connecting points about this sector an important event for readers.)