Why proposal for bad banks to take over toxic assets may be dead on arrival

Most supporters point to the success of the Troubled Asset Relief Program (TARP) in the United States in the aftermath of the Lehman Brothers crash in 2008

The proposal to create a large asset restructuring company, or a bad bank, which will take over toxic assets of state-owned banks, is back on the table. Earlier this month, Finance Minister Piyush Goyal, after a meeting with banking chiefs in Mumbai, said a committee under Sunil Mehta, non-executive chairman of Punjab National Bank, would look into the proposal to form a bad bank for the resolution of non-performing assets (NPA) problem.

The proposal has been discussed on and off in banking circles. Most supporters point to the success of the Troubled Asset Relief Program (TARP) in the United States in