“Mentor’s Comments”
- https://indianexpress.com/
article/opinion/columns/india- bad-bank-national-asset- reconstruction-company-china- 7374608/ - In the intro, briefly explain the bad bank.
- In the body, discuss the advantages such as freeing up of assets and locked capital, cleaning the balance sheets of banks, the quickening of the resolution process etc. In next part, mention the issues like lack of capital, lack of interest by private investors in the bad bank. In the suggestions mention fixing the tenure for bad bank, specific mandate, diverse investors in bad banks etc.
- Conclude by mentioning that the government need to be aware of the above issues with bad banks as demonstrated by the experiences of other countries such as China.
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Anupam
Introduction is good. In advantages points you have mentioned are fine. You can further mention-
– resolution of twin balance sheet deficit
– more assurance for both operational and financial creditors regarding recovery of their funds
– less chance of litigation on decision of arbitrage
– will reduce the requirements of frequent capitalization
– more public confidence due to nature of political economy in India.
Bad bank will be created for resolution purpose only, so lack of professional shouldn’t be an issue. Rest of the points are fine. Some you can add-
– it can lead to populism and lead to more wastage of resources
– it will set a bad precedent for market based resolution through IBC
– funds to support such large scale expenditure are beyond fiscal scope of govt.
In the suggestions also mention fixing the tenure for bad bank, specific mandate with a clear resolution strategy, develop market method of resolution , promote IBC etc
Conclusion is good.
Your structure of the answer is fine, you can work a bit on the content to include diverse points.
Read some other answers. Keep writing.
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Ankita
Introduction is fine. You can add that economy survey recommended it.
In the body mention the advantages and drawbacks under separate subheadings. Some points are totally irrelevant, like the 1st point you have written, just don’t summarize the article mentioned, try to understand the demands of the question and answer accordingly.
You can mention the following advantages-
– faster resolution of twin balance sheet deficit
– more assurance for both operational and financial creditors regarding recovery of their funds
– less chance of litigation on decision of arbitrage
– deeper pocket of this bank will allow more assured and quicker resolution
– will reduce the requirements of frequent capitalization of banks
– more public confidence due to nature of political economy in India.
Major challenges-
– it can lead to populism and lead to more wastage of resources
– it will set a bad precedent for market based resolution through IBC
– funds to support such large scale expenditure are beyond fiscal scope
– lack of interest by private investors in the bad bank
Way forward and conclusion are good. Read some other answers. Keep writing. 🙂
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Sumita
Good attempt, structure of the answer is good, content is also fine, you can add some more points.
In advantages you can add – less chance of litigation on decision of arbitrage, deeper pocket of this bank will allow more assured and quicker resolution, will reduce the requirements of frequent capitalization of banks, more public confidence due to nature of political economy in India etc.
Issues mentioned are also okay, you can add – can lead to populism and lead to more wastage of resources, will set a bad precedent for market based resolution through IBC, funds to support such large scale expenditure are beyond fiscal scope too.
Way forward is good, mention also the need to have a diverse set of investors.
Conclusion is good. Read some other answers. Keep writing.
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Rajesh
You have made a decent attempt, your knowledge of the topic is good.
Introduction is good, flowchart is fine too. No need to write challenges faced by banks in dealing with NPAs. You can just mention that there are a lot of NPAs and the crisis is far from over, use some data point-in the intro only.
Core demands of the question are advantages, challenges and way forward for band banks.
Points in advantages are good. Challenges part is missing. In challenges you can mention-
– it can lead to populism and lead to more wastage of resources
– it will set a bad precedent for market based resolution through IBC
– funds to support such large scale expenditure are beyond fiscal scope
– lack of interest by private investors in the bad bank
Way forward and conclusion are good. In way forward you can add points like need of diverse investors in bad banks, also market based resolution methods should be promoted etc
Read some other answers. Keep writing. 😊
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Gauri Shankar
Concept of bad banks has been there from quite some time, Indian banks are not the first one to initiate it, so you can avoid that line. Otherwise introduction is fine.
Mention advantages of bad banks rather than need, you can mention needs here only.
You can add some points such as – more assurance for both operational and financial creditors regarding recovery of their funds, less chance of litigation on decision of arbitrage, will reduce the requirements of frequent capitalization of banks, more public confidence due to nature of political economy in India etc
Challenges are fine,not clear what do you mean by not suited for Indian problem, you can explain it a bit.
In way forward mention things like fixing the tenure for bad bank, specific mandate with a clear resolution strategy, develop market method of resolution, need of diverse investors etc
Structure of your answer is okay, you can work on improving the content a bit.
Read some other answers. Keep writing.
4.5/10
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Arpit
Decent attempt. Introduction, advantages and challenges- all are good. Points are also enough I think for a 10 marker. However, you can mention recapitalization point in advantages of bad bank as then government won’t have to recapitalize the banks so frequently.
Also you have missed a core demand of the question, that is suggesting ways to make the bad banks effective.
Mention a way forward with steps such as-
fixing the tenure for bad bank
specific mandate with a well defined resolution strategy
diverse investors in bad banks etc.
Also you can mention that we should develop market method of resolution, promote IBC etc
Conclusion is fine. Read some other answers. Keep writing.
4.5/10
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Rajlaxmi
Good attempt. Introduction is fine. Advantages are also fine, last point is not needed, you can mention in the intro only that rising NPA crisis inspite of various efforts have forced us to think in the direction of bad banks. Further in advantages you can add points like- will reduce the requirements of frequent capitalization of banks, more public confidence due to nature of political economy in India etc
Points in demerits are good.
Way forward is also good. Regarding 3rd point about security receipts, better write that we need a diverse set of investors for bad banks rather than banks themselves financing it. Otherwise such accurate data will be hard to remember in exam.
Conclusion is good. Read some other answers. Keep writing. 🙂
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Akchhat
Introduction is fine. Points in utility are also good. You can add some points like- will reduce the requirements of frequent capitalization of banks, more public confidence due to nature of political economy in India etc
Challenges are also well written. One of the major problems however is the lack of capital for bad banks.Funds to support such large scale expenditure are beyond fiscal scope of government and their is a lack of interest by private investors in the bad bank.
Also you have missed a core demand of the question, that is suggesting ways to make the bad banks effective.
Mention a way forward with steps such as-
fixing the tenure for bad bank
specific mandate with a well defined resolution strategy
diverse investors in bad banks etc.
Also you can mention that we should develop market method of resolution, promote IBC etc
Read some other answers. Keep writing.
3.5/10
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Maira
Introduction is fine, also mention that bad banks try to resolve the NPAs they but.
No need to mention the challenges of NPAs. This is a 10 marker and already you have to write enough in advantages, drawbacks and way forward for bad banks. You can mention in the intro only that rising NPA crisis inspite of various efforts have forced us to think in the direction of bad banks.
In utility, 1st point that you have mentioned is definition only, use it in intro. You can mention some of the following advantages-
– faster resolution of twin balance sheet deficit
– more assurance for both operational and financial creditors regarding recovery of their funds
– deeper pocket of this bank will allow more assured and quicker resolution
– will reduce the requirements of frequent capitalization of banks
– more public confidence due to nature of political economy in India.
In drawbacks, mention issues with bad banks only, no need to mention problem of NPA. Rest of the points are fine. One of the major problems however is the lack of capital for bad banks. You can mention this.
In way forward, points are fine. You can add points like-
Need of fixing the tenure for bad bank,
diverse investors in bad banks etc.
Conclusion is good.
Your knowledge is fine but stick to the core demands of the question, no need to write too much.
Read some other answers. Keep writing.
4.5/10
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Dr House
Nice attempt. Introduction and utility are fine. You can add some more advantages like- will reduce the requirements of frequent capitalization of banks, more public confidence due to nature of political economy in India etc
Challenges are also fine. One of the major problems however is the lack of capital for bad banks.Funds to support such large scale expenditure are beyond fiscal scope of government and their is a lack of interest by private investors in the bad bank. You should mention this.
Way forward and conclusion are good. You can write a point regarding need of diverse investors in bad banks.
Also you can mention that we should develop market method of resolution, promote IBC etc
Read some other answers. Keep writing.
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