The ‘bad bank’ proposed in the Union Budget will not jeopardise the activity of existing asset reconstruction companies (ARCs) , said Reserve Bank of India Governor Shaktikanta Das on Thursday. He added that the central bank was in the process of upgrading their regulatory structure.
Advocating a durable push for Indian exports through free trade pacts with ‘strategically important economies,’ Mr. Das warned that the recovery in global trade was uneven and sought urgent attention from global policymakers to rein in disruptions in global supply chains caused by a steep surge in shipping costs and delivery times.
“Refining and upgrading the ARCs’ regulatory architecture is something that is getting our attention to ensure that they have skin in the game and are very much in business,” Mr. Das said at an interaction with the Bombay Chamber of Commerce and Industry.
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The Budget proposal for setting up a new ARC, he said, had been mooted by public sector banks, adding that there was scope for a strong ARC formed by the banks themselves.
“It’s not really a bad bank (but) an ARC-type entity that will be set up to take over the stressed assets from the books of public sector banks and try to resolve them like any other ARC. So that is targeting a specific set of bad assets which certain groups of PSBs hold. In no way will it jeopardise the activity of existing ARCs,” the governor said.
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“Even though merchandise trade has shown incipient signs of revival since end-2020, recovery in services trade is yet to gain traction as subdued cross-border tourism and travel restrictions continue to weigh on the overall performance of the sector.
“Uneven global trade recovery led by a few Asian countries and select sectors such as medical equipment and electronic products raises concerns regarding its sustainability,” he said.
A crucial impediment to revival of global trading activity was the continued disruptions in global supply chains, accompanied by a steep rise in shipping costs since November 2020 and longer delivery times leading to rising commodity prices, he added.
On free trade pacts, he said, “Another policy area which needs focus for providing a durable push to India’s exports and growth is Free Trade Agreements (FTAs) with key strategically important economies. Key considerations should be to identify countries and regions that not only have the potential as a market for domestic goods and services but also have the scope to enhance domestic competitiveness.”