The government’s bid to revive the post-COVID Indian economy through massive infrastructure and public investment push will not succeed without reducing the level of toxic assets in the sector, Chief Economic Advisor Krishnamurthy Subramanian said on March 9.
“The financial sector has to improve its own governance, individual institutions have to own up. Of course, the government will do its part, and the infrastructure announcements in the budget show our intent. But for effective financing of that infrastructure, the levels of NPA in the sector need to come down,” Subramanian said at an event organised by industry body FICCI.
Subramanian’s views echo that of Reserve Bank of India Governor Shaktikanta Das. In July 2020, Das had said a big push for mega infrastructure projects could reignite the economy but pointed out that banks, still saddled with infra-related NPAs, may not be best placed to finance these projects.
Some 18 percent of all infra-related loans are now NPAs, as per the RBI.