The non – performing asset (NPA) situation has been one of the contentious issue in the country over the last few years. Even though demonstration has been issue Recently, the issue of NPAs has been at the foremost of the banking fraternity’s concerns in the last year. In the Context of an ordinance issued by the government to provide more independence to the Reserve Bank of India (RBI), it is important to understand what can really be done, considering that RBI has more powers to address this issue. The question for the RBI now is “How will it solve the problem?”. While experts 8/29/2020 Samacheer Kalvi 11th Commerce Solutions Chapter 10 Reserve Bank of India – Sam have commented on various measures, it would also be prudent to look across the border to China to see how to deal with this.
1. The first was to reduce risks by strengthening banks and spearheading reforms to the state – owned enterprises (SOEs) by reducing their level of debt. .
2. The second important measure was enacting laws that allowed the creation of assets management companies, equity participation and most importantly asset – based securitization.
3. The third key measure that the China took was to ensure the government had the financial loss of the debt “discounted” and debts equity swaps were allowed in case of growth opportunity.
4. The fourth measure they took was producing incentives like tax breaks,exemption from administrative fees and transparent evaluation norms.
5. To conclude, it is important to look after some of the key measures taken by other countries to address the NPA issue.
6. India should leam from it, especially is the context of valuations, securitization and more targeted NPA redresal mechanism. Sri Ram Balasubramanian is an economist First Published: Wednesday, May 10, 2017
