Bad Bank: Good idea, but timing and execution being questioned

Without beefing up the regulatory framework, moral hazard may outweigh advantages, say experts

The idea of setting up a bad bank partly funded by the government, public sector banks and investment trusts is gaining currency with a fortnight to go for the Union Budget. 

Conceptualised as an entity akin to an asset reconstruction company (ARC), its role would be to absorb toxic assets in the banking system.

Globally, this concept has helped several large banks come out of stress, especially after the 2008 global financial crisis. Citibank, Bank of America, and Barclays Bank are examples where a bad bank has acted as a sponge absorbing their bad loans.

But, in the Indian context,