She also delved deeper into the nitty-gritties of this entity. So let’s understand what NARCL or “bad bank” is?
We all know that banks accept deposits and pay a certain rate of interest to depositors, and charge an interest rate on the loans disbursed. And the interest earned from the loans makes up for the profit of the banks. But when disbursed loans are not repaid on time or within the window of 90 days, the loan which is an asset of the bank turns into a non-performing asset. And then the rising NPA’s leads to a decline in the profitability of the bank. This is not a problem exclusive to one particular bank, in fact, the problem of NPA’s has been a formidable challenge for the entire banking sector. A ‘bad bank’ is a bank that buys the bad loans of other lenders and financial institutions to help clear their balance sheets. The bad bank then resolves these bad assets over a period of time.