Source: money control
As announced by Finance Minister Nirmala Sitharaman in Union Budget 2021-22, the new 'Bad Bank' would be set up within the next one or two months which would allow the banks reeling under stressed assets to clear up their balance sheets, Sitharaman had said during her post-Budget press conference. It is expected by the government to adequately address the non-performing assets (NPA) crisis of the public sector lenders. The organization will be set up through an Asset Reconstruction Company (ARC) model.
About the idea of the Bad Bank, in 2018, the government announced a plan for PSBs called 'Project Sashakt', which had a five-point plan for bad loan resolution in public sector banks. The government then spoke of a model, with the guiding principles of an Asset Management Company (AMC) resolution approach, under which an independent AMC would be set up to focus on asset turnaround, job creation and protection. The functions of this new company will be aligned with the Insolvency and Bankruptcy Code (IBC) process and IBC laws as explained by the government.