SANJAY THAPA
The move by govt to create Bad Bank for restructuring of NPAs may be a good beginning but will it solve the problem? Even as the NPAs of PSBs have been rising since the 2008 crisis yet the case has seen alarming increase since 2016. Even though the idea was going around since the time of late Arun Jaitley yet FM Nirmala Sita raman announced floating it in the budget in February 2021 itself. The govt has created two entities National Asset Reconstruction Company Ltd and Indian Debt Resolution Company Ltd. They will acquire the NPAs and then sell it off in the market for recoveries leaving the banks free to do their daily activities.
An initial capital of Rs 30600 crore has been earmarked for the same. The two entities NARCL and IDRCL will initially receive whopping Rs 2 lakh crore of NPAs that will be transferred to them in due course. Out of this 15 percent will be reimbursed by NARCL while the rest 85 percent will mobilized by IDRCL through auction of assets or sell off to buyers. The process of NPA assessment and their resolution has caught pace after the IBC was floated in 2016. However, NPAs too have increased substantially since then. The Covid pandemic in 2019 has further aggravated the situation. The total NPAs of the banking sector stood at Rs 83 lakh crore by the end of 2021. But the whole idea of recapitalizing the banks with huge NPAs is based on taxpayers money. Hence in case of no recoveries by the two asset reconstruction companies it will be the money of the tax payers will sink.
Initially, it seems as wrong timing. In the pandemic the economy itself gone into a downswing. Even as the govt shows a 20.1 percent pickup in GDP in the first quarter but remember its computed on a low base of 2020. Hence there is a need to sift the chaff from the grain.
