Projects with implementation risks should be financed by capital markets: Former RBI Dy Governor

Projects with implementation risks should normally be financed by the capital markets and not by banks using public deposits, former RBI Deputy Governor N. S. Vishwanathan said on Thursday.

Speaking at an event organised by industry body Assocham, Mr. Vishwanathan said India needs a very strong bond market that can fund projects and manage its risks.

The biggest contributor to the higher net interest margin is the high NPAs, he noted.

According to Mr. Vishwanathan, going forward, the Indian banking system should have non-performing assets (NPAs) of globally accepted standards.

Also, speaking at the event, Insolvency and Bankruptcy Board of India Executive Director Santosh Kumar Shukla said that in 2014, the RBI thought of creating a study of the asset-quality review due to the huge NPAs the banks were sitting on.

Mr. Shukla noted that in the last five years, the (Insolvency and Bankruptcy) code had achieved a lot, but it is still the beginning.

He informed that the time taken for the resolution deteriorated the value of the asset.

“If the CoC (committee of creditors) can take faster decisions and cooperate with the other ecosystem, or the entities playing in the ecosystem in a constructive way, the amount of time will come down,” he explained.

Niti Aayog’s distinguished expert – economics & finance – Ajit Pai pointed out that India’s debt to the GDP is very high when compared to most of the G20 countries.