The Union government, in tandem with the Reserve Bank of India (RBI), is working on a radical proposal to resolve the issue of bad debts in the Indian banking system – FM Arun Jaitley. The problem of big NPAs (non-performing assets) is confined to at best 50 companies and therefore those 40-50 accounts need to be resolved. Now, in way of that resolution, several issues come up: You have to find a buyer, strategic partner to find a solution. And if people are slow at doing so, thinking that the system is somewhat hopeless, the system will have to bring in some other instruments. The government and the central bank have been debating many measures to tackle the bad debt problem including the creation of a private asset management company which will work out a feasible resolution plan for the stressed company as well as a national asset management company with a minority government stake for companies that are more stressed. Separately, RBI signalled that it may introduce third-party assessments of bad loans—a move that could help accelerate resolution of sticky assets choking the country’s banking system.

(Live Mint)