Budget 2021 plans to set up new bad banks

Finance Minister Nirmala Sitharaman introduces the new Financial budget for the year to the Lok Sabha today. Along with this comes new policies, stimulus packages, and incentives.

Adding to this, the plan to introduce more bad banks has also been revealed.

A bad bank is a corporate structure that isolates illiquid and high-risk assets held by a bank or a financial organization, or perhaps a group of banks or financial organizations. It essentially buys bad loans from another financial institution or assumes the risky assets of another financial institution.

This plan is essentially for the benefit of the pandemic-hit banking sector. Bad banks may relieve them of the stress that they have experienced due to the same.