Mentor’s comment-
- https://www.livemint.com/
opinion/columns/its-better-to- stop-the-creation-of-bad-debt- than-set-up-a-bad-bank- 11610985109485.html - https://www.thehindu.com/
opinion/op-ed/Why-a-%E2%80% 98bad-bank%E2%80%99-is-tricky/ article15477841.ece - In the intro, briefly mention the rising level of NPA in Indian banks which is expected to grow further due to pandemic.
- In the body, explain what Bad Bank is. In the next part, mention various issues with its creation like ownership of the Bad Bank, in the government ownership constraints will be same as faced by the PSBs, management challenge and paying the expert to manage it would be a challenge.
- Conclude by mentioning the need to find the solution to the NPAs by sorting out these challenges.
Comments
3 responses to “What is Bad Bank? What are the challenges it could face in the Indian context? 10 marks”
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Hi KG
Good intro.
Thumbs up for the strucutre.
In the issues, you can write about moral hazard- Former RBI Governor Raghuram Rajan had said that a bad bank may create a moral hazard and enable banks to continue reckless lending practices, without any commitment to reduce NPAs.
Rest of the answer is well written.
Good conclusion.
Keep writing.
Hi Jaya
Good intro.
You have discussed the challenges and measures in a good manner.
Also suggest that the debate regarding setting up a bad bank must be preceded by proper implementation of holistic reforms in the banking sector, as envisaged under the IndraDhanush plan.
Underline keywords.
Keep working hard.