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What is a Bad Bank and How it Works? [Video]

What is a Bad Bank and How it Works?

In this video, we discuss all about Bad Bank, how it works, and the pros and cons.

What is a Bad Bank?
All the toxic assets and NPA’s of a normal bank are passed on to a Bad bank. This helps the normal banks to focus on the main business.
Bad banks, after procuring these assets, try to recover the amount by using different recovering strategies to make a profit from them.

Advantages of Bad bank.
– Helps in dealing with toxic and bad loans.
– Reduces the burden of actual banks.
– Helps the banks to clear their balance sheets.
– Allows the banks to focus on the main business as it deals with toxic loans.

Disadvantages of mutual fun
– They charge a higher margin on bad loans.
– Bad banks do not take critical loans.
– May use unethical ways to procure the loans.
– Subjected to window dressing.

For more details, you can refer to our article – https://www.wallstreetmojo.com/bad-bank/

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