Creation of a public-funded asset reconstruction company (ARC)
Substantial debt write-offs have already been made by the banks.
Act tough on wilful defaulters.
The penal provisions of the Insolvency and Bankruptcy Code need to be strengthened.
A key systemic cause behind such intense corporate debt distress and the accumulation of bad loans within the public sector banks is to be found in the premature euthanasia of the Development Financial Institutions (DFIs) in India. Following the recommendations of the Narasimham Committee-II, DFIs like the ICICI and IDBI, which were created in the post-Independence period to provide long-term finance for industry, were converted into universal commercial banks. The committee’s presumptions regarding the capacity and skills of the commercial banks and capital markets in India being sufficient in meeting the financing needs of the industrial sector have turned out to be gross overestimates. The govt. should revive the DFIs.
Substantial debt write-offs have already been made by the banks.
Act tough on wilful defaulters.
The penal provisions of the Insolvency and Bankruptcy Code need to be strengthened.
A key systemic cause behind such intense corporate debt distress and the accumulation of bad loans within the public sector banks is to be found in the premature euthanasia of the Development Financial Institutions (DFIs) in India. Following the recommendations of the Narasimham Committee-II, DFIs like the ICICI and IDBI, which were created in the post-Independence period to provide long-term finance for industry, were converted into universal commercial banks. The committee’s presumptions regarding the capacity and skills of the commercial banks and capital markets in India being sufficient in meeting the financing needs of the industrial sector have turned out to be gross overestimates. The govt. should revive the DFIs.
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