Bad bank plan meets scepticism

Mumbai/New Delhi, Feb. 22: Indian bankers on Wednesday poured scepticism on a proposal by the RBI to set up new private or state companies to buy up bad debt from lenders, warning that the plan would add more complexity and delay restructuring.

Economists say it has become imperative to tackle record stressed loans of $133 billion held by banks by last September, or about 12.34 percent of their total loans, as the burden constrains lending and delays private investment.

The RBI deputy governor Viral Acharya, in a major speech to bankers on Tuesday, proposed the creation of a privatebased agency or a government asset management entity to buy and restructure the soured loans.

But in a sign of the difficulties the RBI would face, bankers expressed opposition to the proposal, saying it would take too long to agree on how the scheme would work and then risk further delays as the institutions are set up.

Instead, bankers urged the RBI to stick to an existing framework and make improvements, if required.

New rules under the former RBI governor Raghuram Rajan forced banks to first recognise the true extent of bad loans and then provided flexibility to restructure them.