The idea behind a bad bank is to clean the balance sheets of the banks and financial institutions of an economy. Currently, the Indian economy is under a lot of pressure because of increasing NPAs in the banking sector particularly from the time when RBI started conducting asset quality review of the banks to get a clearer picture of the situation and this problem is going to escalate further because of the surge in COVID 19 cases and lockdowns due to the pandemic. This pandemic hits the Indian economy very hard, leading to a fall in growth rate, increasing unemployment, and providing uncertainty to all the sectors of the economy. Amidst this pandemic, the government proposed to setup a 'Bad Bank' in Union Budget 2021-22 to handle the stress in the banking sector of our economy. This study explores the idea of a bad bank in the Indian economy and analyse the positive and negative implications of it and this paper also attempts to understand the evolution of the regulations related to ARCs and see the performance of the present ARCs in India by looking into its shareholding pattern, size of non performing assets (NPAs) acquisition, recoveries in comparison with other resolution options, etc. the study revealed that the acquisition and the rate of recoveries of ARCs are growing but it is not sufficient to handle the entire NPAs crisis.