The creation of bad banks will enable the growth of the Indian economy in various ways. Do you agree with this view? Comment (200 Words)
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· One of the recently announced reforms pertains to reducing frictions when it comes to allocation of capital across various sectors, especially when capital is stuck in inefficient firms or in unviable projects.
· It is regarding the Cabinet approval for what is commonly referred to as a ‘NARCL’ —National Assets Reconstruction Company Limited.
· It addresses a major bottleneck to India’s growth over the last few years due to heightened risk aversion in the banking sector.
· This risk aversion was largely an outcome of piling up of non-performing assets in the system due to excessive lending between 2008 to 2012.
· The mechanism is such that the bad bank will pay the banks and purchase these NPAs while it works on recovering the money that is owed to the banks.
· While the National Asset Reconstruction Company Limited (NARCL) will acquire assets from various banks, the India Debt Resolution Company Ltd (IDRCL) will be responsible for management of these assets.
· The structure of the bad bank is conducive for providing a final solution to the banking sector stress and it builds on a series of other reforms that have been initiated since 2015.
· Hopefully, this will culminate the legacy issue of NPAs once and for all and in process it will create a far more resilient, modern and dynamic banking sector.
Manish 3 years
Please Review !
IAS Parliament 3 years
Good attempt. Keep Writing.
Nivetha 3 years
please review
IAS Parliament 3 years
Try to provide a conclusion. Keep Writing.
