WHENEVER THE economy slowed, a quick remedy to regain pace was to make banks lend more. It helped businesses expand and consumers buy more, driving up demand for goods and services. Now, however, banks’ headroom to lend has been limited by a mountain of non-performing assets (NPAs).
The pandemic has made things worse. Sectors like travel, tourism, and retail are severely affected. And bad loans across the system are expected to spike. The latest financial stability report by the Reserve Bank of India says the bad loan ratio is likely to hit a 23-year high. “The gross NPA ratio of all scheduled commercial banks may increase from 7.5 per cent in September 2020 to 13.5 per cent by September 2021 under the baseline scenario; the ratio may escalate to 14.8 per cent under a severe stress scenario,” it says.
Finance Minister Nirmala Sitharaman has a plan for stopping bad loans from dragging the entire sector down—create a bad bank. A bad bank is essentially an institution that purchases NPAs from banks, restructures them, and then sells them. It can save banks the trouble of dealing with toxic assets and help them focus on their more important role of lending.
The government has been toying with the idea, but Sitharaman’s announcement in the budget was the first solid step towards it. She proposed that an asset reconstruction company (ARC) and asset management company (AMC) would be set up to consolidate and take over the existing stress debt and then manage and dispose of the assets to alternative investment funds and other potential investors for eventual value realisation. “The solution is coming out of the banks themselves,” she told
Bu hikaye THE WEEK dergisinin February 21, 2021 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye THE WEEK dergisinin February 21, 2021 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Giriş Yap
There Is A Wind Blowing Against The BJP, And It Will Only Pick Up Speed
Interview - Akhilesh Yadav, Former Chief Minister, Uttar Pradesh
Between hospital and home
Transitional care centres can add a lot to India's health care system
EFFORT VS EFFECT
The government's attempts to ensure quality drugs is evident, but how well new policies can be monitored on the ground remains to be seen
A way to let go of fear
Accepting the use of adult diapers is a journey with various stages-denial, concealment, rejection and reluctance
Mandeeps & a miracle
Two strangers, one deadly disease and an act of kindness. How Mandeep Mann saved Mandeep Singh, an acute leukaemia patient, by donating his stem cells
The A, B, C of cosmetic surgery
Between eight to 10 lakh cosmetic surgeries happen in India every year. Who is an ideal candidate, and what are the risks and results you can expect?
Vaccines and meningitis
In sub-Saharan Africa, from Senegal in the west to Ethiopia in the east, and encompassing the northern part of Nigeria, there exists a region known as the African Meningitis Belt (AMB).
Celebrating diversity and inclusivity
As Indians battle it out in our nation's 18th general election, it is again time for voters to reflect on the \"Idea of India\"-or rather, on two duelling ideas of India that are now before us and between which the nation must choose at the ballot box.
Defendant: an Hermès handbag
When Hermès was hit with a class-action lawsuit last month for \"antitrust\" activities, it didn't see it coming. Most of the luxury world has all eyes on this suit, filed by two interested consumers who claim they were denied a purchase, and whether it would go to trial.
A legacy, bound
Amal Allana's biography of her father, Ebrahim Alkazi, is as much personal as it is historical