Bad Bank is a bank that purchases bad loans and other illiquid assets from other financial institutions at market price. It helps the financial institutions to clear their balance sheets to a certain extent. The National Asset Reconstruction Company Limited (NARCL), which is likely to be set up this month, is the India?s first bad bank.
Lenders like PNB, IDBI bank and others are looking sell off their stakes in asset reconstruction companies to free up capital for the NARCL. The NARCL is expected to come up this month and clean up the bad loans from banks? balance sheets.
Written by IAS POINT