Private ARC will tackle NPAs better, says Arvind Panagariya

Says, Idea of setting up a state-owned asset reconstruction company is needed to be created quickly

Niti Aayog Vice-Chairman Arvind Panagariya on Tuesday made a case against the idea of bad bank, saying it will be a difficult proposition and a private asset reconstruction company could do a better job.

"A bad bank is a difficult thing to do... Public-owned ARC is often called the bad bank. Private-owned ARC ultimately can be more effective," Panagariya said in a press conference.

Recently, Chief Economic Advisor Arvind Subramanian had said the idea of setting up a state-owned asset reconstruction company (ARC) or bad bank to deal with mounting NPAs is gaining traction and it needed to be created quickly.

To address the festering twin balancesheet problems — corporate debt and bad loans — the Economic Survey for 2016- 17 had suggested creation of state-owned ARC called Public Sector Asset Rehabilitation Agency (PARA).

The two issues were taking a heavy toll on health of public sector banks, the survey had noted.

As on September 30, 2016, gross NPAs of PSBs rose to Rs 6.3 lakh crore as against Rs 5.5 lakh crore at the end of the June quarter. This works out to an increase of Rs 79,977 crore on a quarterly basis.