India's bad bank plan sparks concern loan prices could be inflated

India’s move this week to set up a bad bank to manage one of the world’s largest piles of soured loans could bring unintended consequences.
 

One that some market participants say they’ll be closely watching is whether it could wind up inflating the price of distressed assets. That could happen if the creation of the bad bank reduces pressure on loan owners to price such debt at discounts attractive enough to draw other buyers, the argument goes.
 

There are many details about the bad bank that policy makers haven’t clarified, including its ownership structure, which makes any analysis challenging. But