The government and the Reserve Bank will have to bring in a new set of regulations to ensure that borrowers repay their debt on time following the Supreme Court striking down an earlier rule of the monetary authority, Niti Aayog chief executive Amitabh Kant said Wednesday.
Amidst a rash of announcements over income support schemes, the bureaucrat also stressed on the need to ensuring higher growth to fund such dole-outs.
With the Supreme Court striking down (the February 12, 2018 RBI circular on NPAs) as ultra vires, the issue needs to be relooked by both the RBI and government to arrive at a new regulation that will ensure that financial discipline from borrowers should continue, he told reporters.
Speaking on the sidelines of a conference of the world federation stock exchanges here, Kant said such a move ensuring timely repayment and resolution of stressed assets is essential for long-term growth.
Kant said a lot of work has been done by the government and the RBI to bring in financial discipline and good regulation to end crony capitalism.
In what is being seen as a jolt to the bad assets resolution framework, the Supreme Court Tuesday quashed the stringent RBI circular which mandated banks to recognise even one-day defaults and finding a resolution within 180 days failing which the account in question has to be sent to bankruptcy courts if it is Rs 2,000 crore and above.
The ruling by a division bench of Justices Rohinton Nariman and Vineet Saran has put a big question mark on the resolution of 70 large accounts which together owe the system over Rs 3.8 trillion.
The ruling came on a petition filed by 34 power companies which alone owe Rs 2.3 trillion to banks.
Legal and industry experts have voiced concern over the order, stating that there was a marked change in borrowers' behaviour after the circular was issued which would now change for the worse.
Meanwhile, on the rash of announcements on income support like the Congress promise of ensuring an annual income of Rs 72,000 each to poor families which account for 20 per cent of country's population through the Nyay scheme, which would involve an outgo of Rs 3.6 trillion per annum, Kant flagged the need to look at growth.
You cannot have redistribution without growth. If you don't grow higher you will not have surpluses to put into these schemes, he said, adding the country needs to grow at 9-10 per cent as against the present 7 per cent, to generate such surpluses.
While delivering his speech, he said radical reforms will be required to accelerate growth from the present levels.
We will have to focus more on manufacturing that will result in higher exports which deliver higher margins per unit of sale, he said, adding such a move will also create jobs as we cannot grow without jobs.
Agriculture will also need to be focused on, Kant said, and called for scrapping the APMC and Essential Commodities Acts.
He made it clear that agriculture cannot grow on subsidies and can develop only through market interventions.
He also said the country has become data-rich before actually becoming rich economically, stressing that the vast quantum of data being generated is a big asset, leading to a slew of changes, including an end to physical bank branches and branch managers.