Setting up of an asset reconstruction company by govt is a good idea. But test will lie in giving its managers a free hand.
- It will prepare them to lend to the corporate sector as and when economic activity picks up speed.
- Non-performing assets (NPAs) and restructured loans of scheduled commercial banks have only increased over the last two years.
- They stood at over 11 per cent of total advances in September 2015.
- The idea of dipping into taxpayer money for the ARC’s equity is opposed by some on the grounds of it creating a “moral hazard”.
- But if banks and corporates are forced to pay for the mess, a state-backed ARC would bring credibility to the asset recovery programme.