Letter to BS: Bad bank is a bad idea, will only benefit defaulters

This will be in the nature of an Asset Reconstruction Company (ARC) where the participation of the government would be 50 per cent. Earlier also this idea was floated and the then governor of the Reserve Bank of India (RBI), Raghuram Rajan, had not agreed to it on the ground that the value at which the bad loans would be sold would be difficult to determine. The so called “hair cut” issue would stall the proceedings. This a highly mischievous and much maligned proposal and not without reasons. Earlier also, may be more than 15 years ago, there was a private ARC which was stopped for misuse of the system. Loans were being sold at too low a value that it forced the RBI to issue a circular against the practice of selling loans at such low prices. Now that the IBC (Insolvency and Bankruptcy Code) is in place and is working well, any attempt to bring alternative system is nothing but an attempt to derail it. There will surely be contradiction between two parallel systems leading to new court judgments leading to delays and complications in the whole process.

This proposal is mischievous and will only benefit the defaulters. It should be thrown out at the doorstep. 

Sukumar Mukhopadhyay  via email

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