Can Asset Reconstruction Companies (ARCs) be Part Solution to the Indian Debt Problem?
Bhagwati, Jaimini; Khan, M. Shuheb; Bogathi, Ramakrishna Reddy | April 2017
Abstract
The Indian debt overhang issue is one of the major reasons that fresh investments are currently not being made in the scale required to promote higher growth and boost employment. Among banks the public sector banks (PSBs) are burdened with the bulk of net non-performing loans (NNPAs). These NNPAs are concentrated in long gestation projects, for example, in the steel, power and infrastructure sectors and most of the lending was to about 50 major borrowers. This paper details the approaches of other countries when their banking sectors were burdened with unsustainable levels of impaired assets. The paper examines the bad debt situation in India, the circumstances under which Asset Reconstruction Companies were registered and the changing regulatory requirements under which they have been operating in India. Till now, the extent to which ARCs have helped towards resolving the debt problem has been limited. Given that fixed costs in setting up ARCs have already been incurred this paper suggests how ARCs could play a catalytic and more significant role in addressing the debt overhang. The paper does not discuss the causal origins of Indian bad debt in any detail and is not intended to suggest comprehensive remedies to this debt problem.
Citation
Bhagwati, Jaimini; Khan, M. Shuheb; Bogathi, Ramakrishna Reddy. 2017. Can Asset Reconstruction Companies (ARCs) be Part Solution to the Indian Debt Problem?. © Indian Council for Research on International Economic Relations. http://hdl.handle.net/11540/7029.Keywords
International Financial Market
Multilateral Financial Institutions
Economic Recession
Market
Crisis
Economic indicators
Growth models
Gross domestic product
Macroeconomics
Economic forecast
Financial Stability
Financial Management System
Financial Restructuring
Capital Market Development
Market Development
Economics
Erosion
International Economics
Macroeconomic
Macroeconomic Analysis
Performance Evaluation
Impact Evaluation
Business recessions
Multilateral development banks
Regulatory reform
Capital
Exports
Economic development projects
Economic policy
Economic forecasting
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