The better thing would be making banks to sell NPAs before providing capital, he said, adding banks not selling NPAs to asset reconstruction companies is a concern.
"If banks don't sell, NPAs are going to sit on their books and will continue to lose value. So frankly, if you would have thought that 60-70 percent provision was enough, in two years even 80 percent would not be enough," he added.
However, he said recovery rates from bad loans have improved after the implementation of the bankruptcy code in 2016 and with better recoveries, the return on assets will also see some improvement going ahead, he added. He also warned that if the slowdown is not arrested fast, then it can impact the return on assets for ARCs.
"If the slowdown prolongs say over the next six quarters, it means that whatever you thought of the asset generating 2 or 3x the value invested, it will not happen. It will also cause a problem for us," Bahuguna added.
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