Letters to the editor dated February 2, 2021

| Updated on February 02, 2021

A bad bank is good

Finally the shape of a bad bank has been finalised. The new asset reconstruction company would be predominantly owned by the government. The existing ARCs are hampered by shortage of capital. In the FM's words the proposed Asset Reconstruction company limited and and Asset Management company will take over the existing debt and then manage and dispose of the assets to alternate Investment Funds and other potential investors for eventual value realisation. So far so good. The removal of stressed assets from the PSBs will make them focus on fresh lending without the fear of NPAs. Secondly since it is owned by government PSBs would be more confident about making larger haircuts. Sovereign backing of ARC will enable it to raise funds for restructuring viable units. But on the flip side, pre-Covid NPAs are already provided for. Secondly most of the stressed assets are not backed by assets and finally have to be written off. Valuation of assets will be most critical in ensuring successful functioning of ARC.


Bhimavaram (AP)

Lifting the economy

With reference to the Editorial ‘Batting on the front foot’ (February 2), the Budget has been well documented to lift an economy which has been severely battered by the Covid-19 pandemic. While the proposed capital expenditures is a booster to generate more jobs , the equal importance to revenue expenditures will push the demand. However, the supply of goods and services need to be smooth to avoid price rise.

The proposal to set up Developmental Financial Institutions to ensure the free flow of credit to long-gestation projects in the infrastructure sector will promote investments, addressing the NPA headache. The proposal to infuse ₹20,000 crore into the public sector banks will enhance the capacity to lend. The proposal to privatise the public sector banks will adversely affect financial stability, and growth. The idea to set up Asset Reconstruction Company and or Bad Bank is not a panacea to resolve the NPA crisis but on the contrary, will erode the resources of the banks. It is imperative to further strengthen the recovery tools available to lenders to enable them to speed up the recovery of the bad loans, rather than setting up and allowing the ARC and or Bad Bank.

VSK Pillai


It is good that fiscal conservatism has been kept aside and growth has been given top most priority. Though this Budget proposes to add two PSU banks to the list of Air India, Concor, BPCL etc for divestment but how government will carry out the sell-off process will be crucial. Production Linked Incentive should have been expanded to more sectors. While it is good that as much as ₹1.18 lakh crore is allocated for roads and highways but clarity on incomplete projects was also needed. The ₹35,000 crore has been earmarked for Covid -19 Vaccine, but it is critical to rope in the private sector in the vaccination drive.

Bal Govind



No surprises

The high point of Budget is it is bereft of nasty surprises. But are Budgets indeed magic wand to turn things around?

The government’s ambitious projects with whopping outlay like smart cities, restoring the glory of holy Ganges, Yamuna, National highways, housing for all and to name a few are to still see the light of the day.

Opaque disinvestment of BPCL, Air India is proving an uphill task. Rolling out big ticket projects and flagship schemes without timeline, action plan and no accountability make little sense.

The Centre must take stock of the Budget on quarterly basis and publish the report of the milestones accomplished vis a- vis the Budget targets.

This shall keep the executive on the toes and the Budget more trustworthy.

Deepak Singhal



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Published on February 02, 2021
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