Public Asset Reconstruction Agency

The Public Sector Asset Rehabilitation Agency (PARA) colloquially called “Bad Bank” is a proposed agency to assume the Non-Performing Assets (NPA) of public sector banks in India and to deal with the recovery of the bad loans. This agency has been proposed in Economic Survey 2016-17.

The main function of PARA would be to take charge of the largest, most difficult cases, and make politically tough decisions to reduce debt.  The funding of this body would come either by selling the bonds or by inviting private companies to buy its equities. The survey also suggests that instead of investing funds and recapitalize the banks year after year, it would be better for the government to focus on recovery.

Note:

The major components of the current framework around NPA are

  • SARFAESI Act
  • Asset Reconstruction Companies (including private companies).
  • 5:25 scheme
  • Strategic Debt Restructuring (SDR)Scheme
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