Centre for Development Economics
Department of Economics, Delhi School of Economics


Redesigning the Market for Distressed Debt in India


Rohit Prasad (Management Development Institute, Gurgaon)

This is a joint work with Mr. Yogesh Mathur (Senior Advisor, Grant Thornton)

Thursday, 4 February 2021 at 3:00 PM IST


We propose a re-design of the Indian bad debt market based on a theoretical model for gains to trade between banks, the sellers of non-performing assets(NPAs), and Asset Reconstruction Companies (ARCs), the buyers. The theoretical model is bootstrapped with relevant parameter values to provide insights on market trends. In a context when distressed debt can be bought using a combination of a. cash and b. securities issued against the NPA, levels of securitization consistent with the discovery of the ‘true value’ of NPAs are identified, and rules formulated to enable the endogenous discovery of the market value and the optimal level of risk transfer from banks to ARCs. These rules are applicable to other jurisdictions seeking to institutionalize ‘bad banks’ to ease the burden of NPAs on the economy. The analysis also has significant policy implications for achieving vibrant levels of market activity.

All are cordially invited.

Please find the link to the meeting below:


Meeting ID: 996 1941 1369
Passcode: 048355


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