India's banking sector would likely see an "unprecedented increase" in non-performing assets (NPAs), or bad debts, over the next six months, former Reserve Bank of India (RBI) governor Raghuram Rajan has said.
Sounding a note of caution, Rajan said the sooner the problem was recognised the better it would be. The coronavirus outbreak and lockdown had hit businesses and many were facing difficulty in servicing debt.
"The level of the NPAs is going to be unprecedented in six months from now if we really recognise the true level of NPAs...We are in trouble and sooner we recognise it, better it is because we really need to deal with the problem," Rajan said during a virtual session at the India Policy Forum 2020 organised by Delhi-based think-tank NCAER.
Referring to an article written by Finance Minister Nirmala Sitharaman in a newspaper, Rajan, who remained RBI governor from September 2013-16, said it talked about Jan Dhan success but some economists had contrary views on it. He also said the piece failed to address the challenges facing the Indian economy.
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"We have difficulty in targeting transfers to people. We are still talking about universality because we can't target. (as highlighted by Vijay Joshi, Oxford University) Jan Dhan does not really work as advertised," Rajan said.
He, however, said one positive for the Indian economy was that the agriculture sector was doing well.
"Certainly, the government has come up with reforms. These are reforms which have been talked about for a long time. They certainly can be beneficial for a significant portion of our economy if implemented," Rajan said.
As part of the reform process for the farm sector, the government amended the six-and-a-half-decade-old Essential Commodities Act to deregulate food items, including cereals, edible oil, oilseeds, pulses, onion and potato.
The amendment, besides deregulating production and sale of food products, will provide for no stock limit to be imposed on any produce.
In June, the government approved an ordinance to allow barrier-free trade in agriculture produce outside the notified APMC mandis. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, bars state governments from imposing taxes on sale and purchase of farm produce undertaken outside the mandis and give farmers the freedom to sell their produce at remunerative prices.
Besides, any conflicts arising from the transactions will be dealt with exclusively by the Sub Division Magistrate and District Collectorate within 30 days and not in the jurisdiction of civil courts.
(With PTI inputs)
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