“Simple things like tracking related party transactions, tracking the promoters shareholding that is pledged, the quality of financial statements, can enable NBFCs
ability to repay but to willingness to repay as well, he said.
Subramanian also suggested a way to solve the problem -- adopt technology and use available data to screen sketchy borrowers. “The problems of the financial inclusions and the bad debts from the large loans given to corporates, remains the same from 50 years back to today.
“We are not using enough data analytics, machine learning in financial sector. The financial sector has to lead the growth. Technology usage can be far higher in the financial sector, he said.
He also raised concerns over liquid debt mutual funds. “We have liquid debt MFs investing in commercial papers that are issued by NBFCs, it generates a certain interconnectedness which poses significant amount of systemic risks, the veteran economist highlighted.
CEA also said that financial services need to focus on making Indian banks on the scale of any global economy.
He highlighted that today just one Indian bank is in the top 100 bank list, which is a small fraction of India’s size.
“We need to be counting in the global schemes of things. For the fifth largest economy that is sizable enough, we cannot be punching so much below the weight of the economy. This is one area in which India lags behind and a lot of work is required,” said Subramanian.