Bad Bank

In the wake of rising NPAs, Indian Banking Associations (IBA) and Economic Survey 2017-18 suggested the formation of Bad Banks.

• A bad bank is technically an asset reconstruction company that buys bad loans(NPAs) from the commercial banks at a discount and tries to recover the money from the defaulter by providing a systematic solution over a period of time.
• The idea of a bad bank seeks to reduce the NPAs in the banking sector and then revive lending and credit growth.

Impact

• Easing Provisioning Requirement: Bad bank by way of absorbing NPAs, will ease the provisioning requirement by the banks and help ....