
Let ARCs shoulder NPAs, banks focus on credit creation
The ARCs, the quintessential bad banks, can help the commercial banks focus on underwriting good loans, supporting GDP growth.
The ARCs, the quintessential bad banks, can help the commercial banks focus on underwriting good loans, supporting GDP growth.
The new guarantee to all Security Receipt holders that in the event of a shortfall it is the government who will step in and pay from the public exchequer is a problematic development.
According to a BofA Securities report, the Covid-19 shock could delay India touching the GDP of Japan by three years. In their latest estimates, it will now happen by 2031 if the economy grows at 9%.
Asset reconstruction companies (ARCs) were set up in India to solve the NPA problem. India's 29 ARCs are a reflection of the success of the ecosystem in alleviating the stressed asset challenges.
Apart from recapitalisation, public sector banks get a shot in the arm in the form of ARC and AMC mechanisms to clean up their books.