How Bad Banks will help to Tackle NPA

Abstract

Purpose: This paper presents a brief overview of bad banks, how they work, impact NPAs, a view on how bad banks can help to remove the stressed asset, the necessity for implementing bad banks, and a few key positive and negative opinions on basis of SWOT analysis or point of view on the establishment of bad banks.

Methodology: The data has been collected from a variety of sources, including newspapers, research papers, websites, and journals. The information has been analyzed and synthesized to provide a comprehensive overview of the topic.

Findings: A bad bank is a financial institution specializing in managing assets that are likely to default and is characteristic of troubled loans. The bank aims to separate risky assets from traditional banks so that they can be dealt with separately, either sold or restructured. High NPA’s suggest that banks’ funds are locked and the bank does not have enough money to lend.

Originality: A bad bank is a financial institution that holds non-performing assets (NPAs) of another bank or financial institution. The purpose of a bad bank is to remove these NPAs from the original institution’s balance sheet so it can focus on its core operations. A bad bank is also sometimes known as an "NPA resolutions bank."

Type of Paper: Conceptual Paper.