‘Banks themselves will drive bad bank’
Finance minister Nirmala Sitharaman on Monday said that she was confident the National Asset Reconstruction Company Ltd (NARCL), effectively a bad bank, will work because “this entire mechanism is driven by the banks”.
Last week, the finance minister announced ₹30,600 crore in government guarantees that will back the securities issued by NARCL to acquire bad loans worth ₹2 lakh crore. NARCL will buy these loans that are fully provided for by banks; the move will reduce bad loans on the books of banks, she announced.
“Because this entire mechanism was driven by the banks; many of these big-ticket exposures are through consortia; unless all banks agree, no resolution is possible. Now because it’s through IBA (Indian Banks’ Association) it’s for them to constantly keep moving towards better resolution, towards consensus,” Sitharaman said in an interview with Hindustan Times.
When asked if enough had been done for the telecom sector as part of a relief package announced recently, she said: “Definitely. The way in which the package has come – it also brings in reforms. It removes a lot of anomalies, and constraints. Business has been given space to breathe. Govern
ment wants that sector to be run in a free manner and also have more than two or three players. For free and fair competition, markets should be given play; and customers will benefit.” A four-year moratorium on dues, and the option for the government to convert dues into equity after the moratorium period expires, and prospectively redefining how adjusted gross revenue (AGR) dues are computed were key elements of the relief package approved by the Union Cabinet.
During last week’s Goods and Services Tax (GST) Council meeting, it was decided that the time was not appropriate for moving fuel under GST. On when such a move would be ideal, she said: “To a large extent, that depends on states feeling comfortable. States feel that they have very few items on which they can have a consideration to increase or decrease tax. Tax on fuel, liquor are in their hands. They feel that at this time they need to have revenues, and reach a level where they can let it go. I wouldn’t want to push states at a time like this.”
Amid the growing hold of cryptocurrencies across the world and suggestions that India could develop its own digital currency, Sitharaman said such a decision has to be thought through. “We have to evolve something suitable for our systems. India has the strength of the technology; fintech gives us the command over the instrumentalities with which you can play; our economy is full of possibilities. So we have to be cautious; but we have to think it through.”
The finance minister also said she felt reassured about where the Indian economy stood currently. “Indians have faced it all (because of Covid), have suffered, and have shown grit to come out of it. How much ever you do — and our government tried doing as much as it could – will not be enough. This is the kind of pandemic the world has not seen before, so I am willing to hear everything people say of what we could have done [better] and so on. But I am immensely grateful to the people of India. And looking at the way the vaccination drive is progressing, I feel we will come through it.”