| Pub. Date | : October, 2021 |
|---|---|
| Product Name | : The IUP Journal of Accounting Research and Audit Practices |
| Product Type | : Article |
| Product Code | : IJARAP421021 |
| Author Name | : Rajinder S Aurora* and Roopali Srivastava |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 6 |
Given the increasing menace of Non-
Performing Assets (NPAs) the
Indian government is seriously
contemplating setting up a Stressed Assets
(SA) Bank so that the NPAs can be transferred
to this entity. Table 1 shows the components
of SAs.
Role of Bad Bank
A bad bank is a special type of financial
institution that buys bad debts of a bank at a
mutually agreed value and attempts to
recover the debts or associated securities by
itself. The bad bank takes over a portion of
the debts that are recognized as NPAs. All
the rights held by the lender (the bank) in
respect of the debt are then transferred to
the bad bank.
Bad Banks Abroad
The idea of a bad bank has been there since
the 1980s when the US and Sweden became
their early adopters. Bad banks have been
institutionalized and considered a success in
several countries, including the US, Sweden,
Finland, Belgium and Indonesia. Countries
like Malaysia created a bad bank sponsored
by the government, the US launched the
Troubled Asset Relief Program (TARP) in
2008. Ireland too had set up a National Asset
Management Agency (NAMA) in 2009. But
conditions in these countries were far
different from what is being tried in India. A
very different and a bold step has been
initiated in India.