Bad Loans, NPAs and the IBC
Bad Banks and Asset Reconstruction
Asset reconstruction companies buy bad loans from banks, and a national bad bank, NARCL, was set up in 2021 to take over large stressed loans.
A place to put the bad loans.
SARFAESI
A 2002 law lets lenders seize collateral without going to court.
ARCs
Asset reconstruction companies buy bad loans and try to recover money.
NARCL
The National Asset Reconstruction Company, set up in 2021, took over large stressed accounts, with a government guarantee on part of the price.
Doubts
Some question whether a bad bank solves the underlying problems.
A sale
A bank sells a bad loan for a fraction of its face value to an ARC.
Thinking a bad bank makes losses disappear
Someone still bears them.
Key takeaways
- SARFAESI lets lenders seize collateral.
- ARCs buy bad loans.
- NARCL was set up in 2021.
- Losses still exist.
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