Consolidation Important, But Solving NPA Problem Is Government’s Top Priority: Sanjeev Sanyal

Though consolidation in the banking sector is important, government’s top priority right now is to solve the problem of non-performing assets (NPA), principal economic adviser Sanjeev Sanyal, who recently spoke at FICCI's Capital Market Conference in Mumbai, has said.

“Solving the NPA problem is the top most priority right now though consolidation is important,” Sanyal was quoted by the Economic Times as saying.

According to the daily’s report, the government believes resolving the problem of NPAs is crucial for creating fundamentally strong banks for India’s long-term growth.

Explaining the rationale behind government’s decision to go ahead with the Insolvency and Bankruptcy Code (IBC) and not adopt the earlier suggestion of setting up a bad bank, Sanyal said that a bad bank would end up being a warehouse of bad loans.

Responding to criticism on the issue of not testing bankruptcy laws, Sanyal explained that this was the only option as modelling would not have worked in this case.

“The idea is to do it, seek feed backs and fix it,” Sanyal was quoted as saying.

Speaking at the event, Sanyal also emphasised on the need for rule of law and enforcement of contracts for better functioning of the economy.

“We need to debate on fixing the legal system. We need more clarity and transparency in rules, ” he said.