Govt dissolves SASF two decades after its creation to resolve IDBI bad loans

The Government of India has dissolved the Stressed Assets Stabilisation Fund (SASF), a special purpose vehicle created more than two decades ago to take over and resolve bad loans from the erstwhile Industrial Development Bank of India (IDBI), marking the end of one of the country’s earliest institutional mechanisms for stressed asset management.

In a public notice issued through the Department of Financial Services under the Ministry of Finance, the government said the SASF Trust “stands dissolved at the end of business on March 31, 2026” following approval from the competent authority.

The SASF was established in September 2004 as part of the restructuring of IDBI Bank, which transitioned from a development financial institution into a commercial banking entity from October 1, 2004. At the time of the transition, IDBI had accumulated non-performing assets (NPAs) of around Rs 9,000 crore, largely due to its exposure to long-gestation industrial and infrastructure projects.

To ring-fence these stressed assets and clean up the institution’s balance sheet before its banking transformation, the Centre created the SASF in the form of a trust. The trust was tasked with acquiring, managing and recovering identified stressed loan assets transferred from IDBI.

The government had allocated Rs 9,000 crore in the Union Budget for FY05 for extending a loan to the trust. However, the transaction structure was designed in a way that did not require any immediate cash outgo from the exchequer. The trust invested the amount in zero-interest special government securities with a 20-year maturity, issued by the government itself.

These securities were then assigned to IDBI Bank in exchange for 636 non-performing and stressed loan accounts having a net loan outstanding of Rs 9,004 crore. The structure enabled IDBI to move legacy bad loans off its books while the trust pursued recoveries over time.

The SASF represented one of India’s earliest dedicated bad-bank style arrangements, preceding the emergence of asset reconstruction companies under the SARFAESI Act and later mechanisms such as the Insolvency and Bankruptcy Code (IBC) and the National Asset Reconstruction Company Ltd (NARCL).

Over the years, SASF handled recovery and resolution of several large corporate stressed accounts inherited from the development finance era. While detailed recovery figures were not disclosed in the notification, the trust had continued to exist for more than two decades to administer residual assets and recovery proceedings.

Its dissolution now effectively closes a chapter in India’s evolving bad-loan resolution framework that began before the country adopted modern insolvency and stressed asset resolution mechanisms.

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