In a manifestation of Finance Minister Nirmala Sitharaman's proposal to build a bad bank to usher a new lease of life into the bad debt-laden public sector banks (PSBs), nine banks and two non-bank entities are coming together to jointly invest Rs 7,000 crore of initial capital in the proposed entity, reports Economic Times.

The entities include PSBs like State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India, Bank of India. Other than these, private sector lenders ICICI Bank, Axis Bank, IDBI bank are also a part of the combine.

Meanwhile, the non-bank entities include state-owned financiers of power projects- Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).

It should be noted that each of the 11 entities will initially hold just above nine per cent of the share in the proposed bad bank, even as more shareholders could join in the combine at a later stage which could result in dilution of the stakes for the aforementioned investors.

It is expected that the proposed bad bank could be operational in the first quarter of the upcoming fiscal itself. For the same, banks are also said to have already identified bad debt of as much as Rs two lakh crore, for which they are expecting Rs 40,000-50,000 crore.