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Bad bank is actually a good idea × If the bad bank is designed with a good business model, it may address the twin balance sheet problem in India and capital adequacy concern too The concept of bad bank has come to limelight as our Finance Minister announced in the Union Budget recently that an Asset Reconstruction Company (ARC) and Asset Management Company (AMC) would be established to address stressed debt of ₹2.25 lakh crore in the banking sector. The main objectives of creation of the bad bank are (a) to clean the balance sheets of banks in India, (b) to enable the banks to reach the required level of capital adequacy by mobilising fresh capital from the market, and (c) to focus on credit growth to boost investment and ultimately economic growth. Essentially a bad bank would help the Indian banks to trim losses and concentrate on their core business of lending. Let us discuss the same in detail.

Tamil naduAndhra pradeshPanchayati rajAsset management companyIndian institute of management tiruchirappalliAsset reconstruction companyAsset reconstruction companiesNational institute of rural developmentUnion budgetFinance ministerReserve bankProgress reportEconomic surveyAssociate professorNational instituteRural development