What is a bad bank? Discuss the proposed structure and advantages of the bad bank in the Budget FY22. 10 marks

Mentor’s comment-

  • https://indianexpress.com/article/opinion/columns/npa-bad-loan-covid-pandemic-indian-banks-7240423/
  • In the intro, briefly define bad bank.
  • In the body, discuss the structure of the proposed bad bank which involves the creation of Asset Reconstruction Company and Asset management Company, setting up of National Asset Reconstruction Company and National Asset Management Company, attracting institutional funding through strategic investors, AIFs etc.
  • Conclude by mentioning that the practice of setting up bad bank is in line with the global practice.
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