Bad Bank

◾️News: RBI Governor has agreed to look at a proposal for creating a Bad Bank.

◾️Key points:

1. Function as a bank but has bad assets to start with.

2. It is an Asset Reconstruction Company (ARC) or an Asset Management Company (AMC).

3. It is not involved in lending and taking deposits.

4. It helps commercial banks clean up their balance sheets and resolve bad loans.

5. US-based Mellon Bank created the first bad bank in 1988.