INTRODUCTION OF BAD BANK IN THE INDIAN BANKING SYSTEM

Abstract

A bank is a type of financial institution that deals with money and offers a variety of financial services. They have the responsibility of accepting the deposits and providing the loans to the customers and earning profit. The bank receives deposits from a range of customers, which are then circulated to the general public in the form of loans. If everything goes well, the loan is repaid on time then the loan is categorized as a normal asset, but if things go wrong the same asset can become a burden for the bank, if the repayment is not made on time for a variety of reasons, then these assets are classified as NPAs (non-performing assets). The idea of a bad bank has been suggested by many professionals in India, but during COVID-19 the idea got some major consequences. As a result, when presenting the budget for 2021-2022, the Union Finance Minister advocated the construction of these new types of banks. The governor of the Reserve Bank of India has also agreed to participate in this unique concept for maintaining the banking sector's growth and financial stability. The current paper examines the concept of bad banks, as well as its origins and implementations around the world.