India NPAs May See Unprecedented Rise In Next Six Months, Raghuram Rajan Says
Raghuram Rajan, former governor of the Reserve Bank of India. (Photographer: Tomohiro Ohsumi/Bloomberg)

India NPAs May See Unprecedented Rise In Next Six Months, Raghuram Rajan Says

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India’s banking sector is likely to witness an unprecedented increase in NPAs in the next six months, former RBI governor Raghuram Rajan said Tuesday, adding that sooner the problem is recognised the better it would be.

The coronavirus outbreak and the subsequent lockdown to curb the spread of the disease has hit businesses hard and many of them are 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...,” Rajan said. “We are in trouble and sooner we recognise it, better it is because we really need to deal with the problem.”

The former central banker was addressing a session at the India Policy Forum 2020 organised by New Delhi-based thinktank National Council of Applied Economic Research.

Referring to the article titled Bold Decisions, Strong Political Will: Economic Reforms Are Sustained, Deep and Pronounced under PM Modi by Finance Minister Nirmala Sitharaman published on Tuesday, Rajan said that it talks about the success of Jan Dhan Yojana but some economists have contrary views on this.

"We have difficulty in targeting transfers to people. We're 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, sees one positive factor for the Indian economy in these unertain times—the agriculture sector is doing well. "Certainly, the government has come up with reforms. These are reforms which have been talked about for a long time,” Rajan said. “They certainly can be beneficial for a significant portion of our economy if implemented.”

As part of the reform process for the farm sector, the government amended 65-year-old Essential Commodities Act, 1955, to deregulate food items, including cereals, edible oil, oilseeds, pulses, onion and potato. The amendment will also provide for no stock limit to be imposed on any produce.

Last month, the government approved an ordinance to allow barrier-free trade in agriculture produce outside the notified APMC mandis.

The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, proposes to bar 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.

At present, farmers are allowed to sell their agriculture produce at 6,900-odd APMC (Agriculture Produce Marketing Committees) mandis spread across the nation. There are restrictions for farmers in selling agri produce outside the mandis.

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