In a big step towards the resolution of bad loans, Indian banks, the Reserve Bank of India (RBI) and the Ministry of Finance are in talks for setting up two special funds to resurrect troubled investments through equity infusion or more debt financing. The two funds proposed are the Stressed Assets Equity Fund (SAEF) and the Stressed Assets Lending Fund (SALF). According to RBI data, the stressed assets ratio for the banking sector, which includes gross non-performing assets (NPAs), increased to 14.5 per cent at the end of December 2015 as against 9.8 per cent at the end of March 2012. State-run banks have the highest share in stressed loans. While the SAEF is expected to invest in the equity of a stressed borrower, thus bringing in equity to burdened projects, the SALF will provide last-mile funding or working capital funding to assets that are in trouble due to funding constraints.