An Indian Bad Bank: A Path to Choose from Starting Anew and Resurrecting Existing Arcs

The Non-Performing Asset has constantly been damaging the Indian Banking sector, slackening the economy's credit creation and money flow. However, the unprecedented Covid 19 induced economic slowdown has further aggravated the crisis and obtruded the problem of unresolved NPA in the system. Recently the government has announced its decision to create a bad bank to accommodate these bad assets, but the discussion itself attracted too many questions on its relevance and efficiency. In this context, this paper studies the proposal of government bad bank with its merit and demerit. The paper will also focus on the merit of the government's decision to go with the bad bank plan, especially when the country already has a privately funded Asset Restructuring Company (ARC) to clean up these NPAs. The paper also addresses the concern about the existing ARC model and the best choice for the Indian NPA crisis.