Projects with implementation risks should be financed through capital markets: Former RBI Deputy Governor

Projects with implementation risks should normally be financed through the capital markets and not by banks using public deposits, former RBI Deputy Governor NS Vishwanathan said on Thursday. Speaking at an event organized by industry body Assocham, Vishwanathan said India needed a very strong bond market that could finance projects and manage its risks.

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

According to Vishwanathan, in the future, the Indian banking system should have Non-Performing Assets (NPAs) that meet globally accepted standards.

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

Shukla noted that over the past five years the (insolvency and bankruptcy) code has achieved a lot, but it’s still just the beginning.

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

“If the CoC (creditor committee) can make decisions faster and cooperate with the other ecosystem, or entities playing in the ecosystem constructively, the time will decrease,” he explained.

Niti Aayog’s prominent economics and finance expert Ajit Pai pointed out that India’s debt to GDP ratio is very high compared to most G20 countries.