Banks are facing severe problem of rising NPAs. Rising NPAs are affecting both the profitability and creditability of the banks. Banks are restraining from lending to priority sector and commercial users, as a result, there is a fall in real credit available in the economy. This in turn is affecting the overall growth of the economy. Economic Survey 2016-17 also pointed to twin balance sheet problem and proposed setting up of Public Sector Asset Rehabilitation Agency (PARA) or Bad Bank. Bank will be an entity entirely dedicated to the management and recovery of bad loans. However, setting up of bad bank in India is at very nascent stage. The paper highlights the severity of NPAs in the banking sector, elucidates the concept of bad bank and discusses the suitability of bad bank in Indian scenario.