Fortifying the insolvency resolution framework
Better lending standards and a robust mechanism to address insolvency will lead to better allocation of capital and help augment growth in the medium to long run
The Indian banking system is struggling with a deluge of bad debt. At the end of the last financial year, total stressed assets—including non-performing and restructured assets—were estimated to be at over 12% of advances. In June, the Reserve Bank of India directed banks to start proceedings under the Insolvency and Bankruptcy Code (IBC) in 12 large accounts. As reported by this newspaper, the banking regulator has also asked banks to initiate the insolvency procedure in another set of at least 28 accounts if they don’t get resolved in the given time frame.