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Raghuram Rajan explains how to fix India's debt-laden banking system in the middle of Covid storm

Raghuram Rajan explains how to fix India's debt-laden banking system in the middle of Covid storm
Raghuram Rajan explains how to fix India's debt-laden banking system in the middle of Covid storm
Unaddressed, bad loans only grow. Not only is it rare that the defaulting corporation turns around on its own without restructuring its debt, but also an over-indebted company, kept alive by regular fund infusions from banks that don’t want to recognise the inevitable, contributes to excess capacity.

SynopsisEven before the stalled infrastructure projects of previous regimes had been cleaned up, the current government pushed lending to small and medium firms. NPAs from this sector are now alarming and, in time-honoured fashion, may be pushed under the carpet. We must do better, and GoI may now have no option.

By Raghuram RajanThe Covid-19 pandemic will create, perhaps, the most significant economic challenge for India in my memory. It does not help that GoI has allowed legacy problems to fester, leaving us ill-prepared to face the pandemic. One such problem is bad bank loans, euphemistically called ‘non-performing assets’ (NPAs).In his insightful new book, The Quest for Financial Stability in India, former Reserve Bank of India (RBI) deputy governor
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