Chennai: An ecosystem for resolving non-performing assets (NPAs) is now in place with the passage of the Insolvency and Bankruptcy Code (IBC), the absence of which had impeded the ability of the Reserve Bank of India (RBI) to tackle the problem, former RBI governor Raghuram Rajan said in an interview. Rajan, who has just published his book, I Do What I Do, said it’s important to make sure that the resolution process reaches a logical conclusion so that “it doesn’t become an endless circle of appeals”. He also said government capital support is crucial for state-owned banks even if it means trimming allocations to other areas. Edited excerpts:
In your book you have written that despite the best and the brightest in RBI addressing the distressed assets situation, it was one area in which you couldn’t make much progress. How do you see the current strategy of dealing with NPAs differing from the steps you had taken?
I think what we had missing was a Bankruptcy Code because any kind of restructuring happens with the ultimate threat that if it doesn’t happen in an appropriate way, the Bankruptcy Code will be invoked. So I think what is really good about the current situation is we have a Bankruptcy Code in place.
