Banking reforms are moving in the right direction, with recapitalisation of public sector banks (PSB) following the notification of the Insolvency and Bankruptcy Code, under which bad loan resolution is already underway, according to Principal Economic Adviser in the Ministry of Finance, Sanjeev Sanyal.
Speaking at an event organised by PHD Chamber of Commerce & Industry on Thursday, Mr. Sanyal said the government brought out the IBC before the PSB recapitalisation to ensure banks begin the cleaning-up process prior to the capital infusion. He said a mere recapitalisation plan would have only resulted in ‘encouraging the perpetuation of old problems’.
On the demonetisation of currency notes as well as the implementation of the Goods and Services Tax regime, he said structural changes were ‘bound to create some friction’.
Mr. Sanyal said, with these measures, the Centrewas trying to shift India from a rent-seeking and patronage-based economy to one based on rules and compliance.
These reforms are causing a fundamental shift in the way business was done in India, he added.The official said when a new regulatory framework like the GST is created, it is bound to have unintended consequences, but added that the government was open to getting feedback and tweaking the norms at the edges. Referring to reforms including the IBC and GST, he said the government was capable of bringing in reforms faster, but it was also important to ensure that the economy was able to absorb such speed levels in reforms.
