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India to Set Up Bad Bank for Record Levels of Soured Debt

  • Bank stock index surges more than 7%, biggest jump since May
  • India to privatize two more state lenders, one insurer
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India will set up a company to manage banks’ bad loans, which are expected to reach record levels this year and threaten the financial stability of the world’s second-most populous nation.

The firm will hold stressed assets -- bad loans, restructured debt and advances to companies that can’t service their debt -- which can be sold on to investors at a reduced price, Finance Minister Nirmala Sitharaman said in a budget speech on Monday, without giving further details. An index of bank shares surged the most since May.