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Govt. mulls bad bank
Why is it in news?
- As per the official statement, the government is exploring all options, including setting up of a bad bank, to improve the health of the country’s banking sector.
- According to Economic Affairs Secretary, bad bank can reducing the burden of non-performing assets (NPAs) of the public sector banks.
More about Bad Banks:
- A bad bank buys the bad loans and other illiquid holdings of other banks and financial institutions, which clears their balance sheet.
- The need for a government-owned bad bank has been felt for some time as the commercial banks are finding it difficult to deal with NPAs or bad loans.
- India's NPA ratio is higher among major emerging economies.
- High NPAs have weighed down the Indian banking system's capacity to lend money to the corporate sector, resulting in a drag on the country's growth.