Cashing out: Central Bank to sell two NPAs worth Rs 251 crore

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  1. Central Bank of India has decided to put up its two non-performing assets(NPAs) worth Rs 251 crore for sale through the Swiss challenge method.
  2. A Swiss Challenge is a method of bidding often used in public projects in which an interested party initiates a proposal for a contract or the bid for a project.
  3. The government then puts the details of the project out in the public and invites proposals from others interested in executing it.On the receipt of these bids,the original contractor gets an opportunity to match the best bid.
  4. However,if the original contractor fails to do so,the authorities will have the right to award the contract for the best bidder.
  5. Further,if the Swiss Challenge is applied to bankruptcy cases,banks may get to squeeze out more from the auction of stressed assets.
  6. This method has been credited for being innovative.But there is also a fear that the process,if not backed by strict legal frameworks will aid firms that commit fraud to win projects.