Bad Bank is an entity designed to absorb ‘bad' loans or loans that aren't repaid on time to lenders. These are assets against which banks have already set aside money to cover losses. Banks sell such assets to ‘Bad Bank' at a steep discount, often 15-20% of their value. This helps banks clean up their balance sheets. Bad Bank then tries to resolve these assets either by reviving or selling in parts to recover the maximum possible value. Banks receive 15 percent of the value of these assets upfront in cash and 85 percent later as security receipts (SRs). If the resolution extends beyond five years, the government pays banks against the SRs.