Non-Performing Assets in Scheduled Commercial Banks of India: Is a 'Bad Bank' a Viable Solution?

Abstract

Sachin Bhaskar Bhurase and Kishor V. Ghormade

The persistent issue of Non-Performing Assets (NPAs) in India's banking sector has significantly impacted the country's financial stability and economic growth. Despite various regulatory measures, including the Insolvency and Bankruptcy Code (IBC) and recapitalization initiatives, a sustainable resolution to the NPA crisis remains elusive. The establishment of the National Asset Reconstruction Company Ltd. (NARCL), also known as India's 'Bad Bank,' marks a critical step toward addressing this issue. This research paper explores the concept of bad banks, evaluates international case studies, and examines the progress and challenges faced by NARCL in India. The study identifies key barriers, including asset valuation complexities, operational inef- ficiencies, and funding constraints, while providing policy recommendations for improving NARCL's efficacy. Through a com- parative analysis of alternative NPA resolution strategies, this research highlights the importance of transparent governance, risk mitigation mechanisms, and continuous monitoring. The findings emphasize the need for a multifaceted approach to address the NPA problem comprehensively, contributing to systemic financial stability and investor confidence.

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