Bad bank = Bad idea: There's dubious merit in a rehab clinic for toxic debt

The whole point of having a bad bank is to discover and recover the steady-state economic value of assets that may be currently depressed

Bad ideas keep returning to the corridors of power in New Delhi with the unfailing regularity of migratory birds. This year is no exception. According to media reports, some kind of a state-blessed asset manager to take over the distressed assets of Indian lenders is being considered again.

The proposal to set up a bad bank looked senseless even when it was first mooted in early 2016. It looked downright silly when the finance ministry floated the idea of raiding the central bank’s reserves to run the rehab clinic for toxic debt.

As much as 90 percent of nonperforming assets are with