- A “bad bank” is technically an Asset Reconstruction Company (ARC) or Asset Management Company.
- In India, it is named ‘National Asset Reconstruction Company Ltd.’ (NARCL).
- It takes over bad loans from commercial banks.
- It manages these bad loans and tries to recover money over time.
- Help in NPA Resolution:
- Helps commercial banks clean up their balance sheets.
- Frees up commercial bank’s capital for further lending.
- Promotes investment and growth in the economy.
- Centralizes NPA resolution with experts.
- Government guarantee on securities issued by bad bank provides comfort.