Idea of bank to tackle bad loans gaining traction: CEA Arvind Subramanian

NEW DELHI: The idea of setting up a state-owned asset reconstruction company (ARC) or a bank to deal with mounting bad loans is gaining traction and it needs to be created quickly, Chief Economic Adviser Arvind Subramanian said on Wednesday.

“Essentially, there seems like a growing convergence towards the idea (of state-backed asset reconstruction company). The broad idea that we should do like this is gaining traction,” he said.

Newly appointed RBI Deputy governor Viral V Acharya on Tuesday suggested a two-pronged strategy to resolve the issue of bad loans including creation of a private asset management company. For larger stressed assets, loans need to be bought by the government owned asset management company, he had suggested.

Making a case for ARC, Subramanian said, “You were already on the hooks (with bad loans) so not tat bad bank is going to cost you more. Second, is RBI has already tried so many things including private ARCs, where is the solution.”

The CEA said that rising global oil prices will not pose a serious risk to the economy if they remain within the range of $55-65 a barrel.

Subramanian said that the budget for 2017-18 is remarkably favourable to macroeconomic stability and low inflation.