NPA resolution to spur credit expansion, growth: Panagariya
Aug 13,2017 , 09:32 PM IST
New Delhi : Resolution of bad loans in the banking system is on ‘right track’ and will open the door to rapid credit expansion and growth, NITI Aayog Vice-Chairman Arvind Panagariya said. Terming the non-performing assets (NPAs) or bad loans problem as a ‘legacy issue,’ he said that even after three years of the NDA government taking charge, it has not gone away. “Now, we’re on absolutely right track.
Once we solve the NPAs issue, it will open up also the door to faster credit expansion. If this is done, this problem of twin balance sheet issue (over-leveraged companies and bad-loan-encumbered banks) will get addressed at the result of this. “So, banks will be better equipped to lend and on the sides of borrowers there will be greater appetite,” Panagariya said.
The banking sector is saddled with NPAs of over Rs 8 trillion (Rs 8 lakh crore), of which Rs 6 trillion is with public sector banks (PSBs). As part of its strategy to rein in the unacceptable level of NPAs, Reserve Bank of India (RBI) recently identified 12 accounts for Insolvency and Bankruptcy Code (IBC) proceedings with each of them having over Rs 5,000 crore of outstanding loans, accounting for 25 per cent of total NPAs of banks.