Niti Aayog against the idea of 'Bad bank' to deal with NPAs

Niti Aayog against the idea of  'Bad bank' to deal with NPAs

Two key policy makers of the government have sharply differed on an idea gaining traction of late to get rid of bad loans of public sector banks.
While Chief Economic Adviser Arvind Subramanian has been vehemently pursuing 'bad bank' to deal with non-performing assets of PSUs which have astronomical figures, NITI Aayog vice chairman Arvind Panagariya Tuesday said that a private sector asset reconstruction company (ARC) can do better job than 'bad bank'.
"A bad bank is a difficult thing to do. Public-owned ARC is often called the bad bank. Private-owned ARC ultimately can be more effective," Panagariya told reporters here.
He made the remark while sharing some of the key highlights of the three year action agenda that the Aayog is preparing for the government.
Subramanian had recently told a press conference that the government was in touch with the Reserve Bank of India on creation of 'bad bank' to take over the loans of ailing companies from state-owned lenders.
RBI too has favoured the idea in the recent past with its Deputy Governor Viral Acharya suggesting two-pronged strategy to resolve the issue of bad loans. He suggested creation of a national asset management company for larger stressed assets of power companies and the likes. The second, he said, could be a private asset management company which could buy loans of telecoms, textiles and metals where the demand was good and loans were not too large.
The gross NPAs of the state-owned lenders have risen to Rs 6.3 lakh crore at the end of September 2016, according to the latest available official data.

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