CENTRE NEEDS TO BAIL OUT PRIVATE COs

Kochi, March 14: The government needs to bail out large corporate borrowers at times in a capitalist system though it may lead to charges of cronyism, Chief Economic Adviser Arvind Subramanian has said, while supporting the idea of a 'national bad bank'.

Conceding that bailing out big borrowers will lead to the allegations of corruption and crony capitalism, he underlined that at times there is no other way to solve the problem but to write off the mountain of debt.

The NPAs or bad loans in the banking system, particularly state-owned lenders, more than doubled to `6.95 trillion (`6.95 lakh crore) or over 9.3 per cent in 2015-16 from close to `2.97 trillion 2012-13.

As of December 2016, the total stressed assets, including restructured accounts, amounted to more than 15 per cent of the total advances.

In order to tackle the mounting NPAs, there have been suggestions from various quarters to set up a ‘bad bank’, which he said could be a state-owned entity to collect banks' sour assets and try to resolve the stress, which may include writing off the bad loans where there is no scope of revival.

He also said the recent election results came as a surprise to him, and the outcome has given the Modi government a “political mandate” to carry out its economic agenda. Nobody was able to predict the “magnitude of the UP election”.