What do you understand by a Bad Bank ........

Economic Affairs Types of Banks and Banking

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What do you understand by a Bad Bank?

A Bad Bank is one which is having high NPAs (non Performing Assets) beyond those prescribed by Basel norms.

A Bad Bank is the Bank which is also involved in financial markets.

A Bad Bank is an entity that would buy the NPAs from other banks to free up their books for fresh lending.

A Bad Bank is a bank whose shares are witnessing a downfall for atleast six months in the stock market.

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Explanation:

Bad Bank would be set up as a separate entity that would buy the NPAs from other banks to free up their books for fresh lending. In the meanwhile, it would work towards suitably disposing off the toxic assets.
The concept was pioneered at the Pittsburgh-headquartered Mellon Bank in 1988 and has been successfully implemented in many western European countries post the 2007 financial crisis like Ireland, Sweden, France etc.