NPA mess cleared without adding to fiscal burden: Nilesh Shah, Kotak MF

Earlier the government and the RBI asked banks to provide for non-performing assets (NPA), but banks did not have enough capital to write off NPA, not that they did not know which company was a NPA.

Now by providing capital, banks will have the ability to write off NPAs. The way this entire recap bond has been structured as per the global definition it becomes part of fiscal deficit of this year. In terms of total debt -to-GDP, India is at a much lower level and it just goes up by 0.7%.

Without adding to fiscal burden we have created a solution where banks will have capital to write off NPAs, government fiscal stance continues to remain valid and banks now have the ability to create credit.

Read more at https://economictimes.indiatimes.com/articleshow/61233596.cms