Rebooting Economy 67: Set the record straight before setting up a Bad Bank
India needs to collect and declare credible data on stressed assets, identify sectors and companies where these are accumulated and be transparent in insolvency resolution before jumping to a new mechanism
- Feb 14, 2021,
- Updated Feb 15, 2021 12:34 AM IST
Now that all its mechanisms to resolve stressed assets have failed (three since 2015), India is planning yet another one by setting up a bad bank. It needs no elaboration that shifting from one mechanism to another without addressing the root causes of such failures would do no good. Two key causes of failures are well known and tough to address: political interference in running banks and poor banking governance.
There are far simpler ones to address but long neglected. One critical one is credible data on the resolution of stressed assets. But before getting there, here is a shocker.
Now that all its mechanisms to resolve stressed assets have failed (three since 2015), India is planning yet another one by setting up a bad bank. It needs no elaboration that shifting from one mechanism to another without addressing the root causes of such failures would do no good. Two key causes of failures are well known and tough to address: political interference in running banks and poor banking governance.
There are far simpler ones to address but long neglected. One critical one is credible data on the resolution of stressed assets. But before getting there, here is a shocker.