How Good is the Bad Bank for Wiping-Off the Bad Loans?

Abstract

A medium to save the Banks from rising NPA is ARC - Asset Reconstruction Companies. But, when ARC’s efforts turned out to be insufficient for handling the bulging amount of bad loans; Bad Bank was brought into the picture by the Government of India. Backed by the full-fledged hand of the Indian Government, unlike the existing ARCs, NARCL-National Asset Reconstruction Company Ltd is the first-ever Bad bank in the country. The statistics of recent past years reflect a downtrend of Bad loans in the never-ending trail of NPA of the country. Yet, we cannot relax in slumber because the graph is still not low. Especially when talking regarding public sector banks, the downward slope is still quite high. It’s a good omen that Government realizes the need to act upon these vicious bad loans and has introduced NARCL, which is enthusiastically assembling itself, working towards taking up the stressed assets of NPA-laden banks and showing a sign of hope and relief to the economy. This paper is an attempt to highlight the concept of a Bad bank, its structure, working, criticisms, and prospects. As this NPA sweeper Bank, ’Bad bank’, initiates its functioning, we are all heads to see whether it stands to fulfil its objectives or entwines and ravels in the grind of NPA.