Amid high levels of stressed assets in the Indian banking system, Niti Aayog Vice Chairman Arvind Panagariya has said that the government does not have any immediate plans to create a bad bank to resolve the bad loans issue. He said “Immediately, I don`t see any plans to create a bad bank. In the three-year agenda, we suggested that let us do it through private sector asset reconstruction companies (ARCs) instead of bad bank.”
Referring to the non-performing asset (NPA) ordinance which empowers Reserve Bank of India (RBI) to direct banks to initiate insolvency process against any defaulter, Arvind Panagariya said that it has opened the doors to genuine resolution of this problem. He also said that each of these NPAs will now be put on a path to resolution as there is no other way to resolve the problem. He further said that the first set of 45-50 bad assets are likely to be taken up for resolution in the next six months and added not that they will be resolved, but at least they will be taken out of the books of banks.
Suggesting that the government needs to increase the amount for bank recapitalisation beyond Rs 70,000 crore allocated for four years, Panagariya said “We do a three-year fiscal framework for the country, which is a bit more ambitious than Rs 70,000 crore currently allocated. Fiscally, it is feasible to move up that figure a bit.” He further said that eventually lot of recapitalisation needs to happen, but the banks too need to take initiative.