India must not neglect bank recap despite pandemic: Viral Acharya

Funds to provide for the losses that would be incurred through restructuring should be set aside so that banks do not strangle growth

India is neglecting bank recapitalisation as it focuses on debt moratoriums and interest waivers for borrowers amid the pandemic, former RBI Deputy governor Viral Acharya said on Monday.
 
Indian banks are saddled with over $120 billion in bad debt, and in severely stressed conditions the bad-loan ratio could nearly double by March, according to Reserve Bank of India projections. Restoring banks’ capital is critical for aiding a meaningful recovery, but there has been little focus on the matter, he said. “This lack of focus is tantamount to kicking the can down the road and jettisoning financial stability for short-term