Projects with implementation risks should be financed via the capital market: Former governor of RBI Dy

“In the future, the Indian banking system should have non-performing assets (NPAs) with globally recognized standards.”

“In the future, the Indian banking system should have non-performing assets (NPAs) with globally recognized standards.”

Projects with implementation risks should normally be funded through capital markets rather than banks with public deposits, former RBI Deputy Governor NS Vishwanathan said on Thursday.

Speaking at an event organized by industry association Assocham, Mr Vishwanathan said India needs a very strong bond market that can fund projects and manage its risks.

The biggest contributor to the higher net interest margin is the high NPAs, he noted.

According to Mr. Vishwanathan, going forward, the Indian banking system should have non-performing assets (NPAs) with globally recognized standards.

Speaking at the event, Santosh Kumar Shukla, Executive Director of the Insolvency and Bankruptcy Board of India, said that in 2014, due to the huge NPAs banks were sitting on, the RBI thought about producing an asset quality review study.

Mr. Shukla noted that the (Insolvency and Bankruptcy) Code had achieved a lot in the last five years, but it was just the beginning.

He shared that the time it took to resolve had degraded the value of the asset.

“If the CoC (Creditors’ Committee) can make quicker decisions and collaborate with the other ecosystem or entities playing in the ecosystem in a constructive way, the time will decrease,” he explained.

Ajit Pai, Niti Aayog’s distinguished economist and finance expert, pointed out that India’s debt-to-GDP ratio is very high compared to most G20 countries.

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