In a major shift, RBI supports bad bank idea

TIL Desk/Business/Mumbai-In a departure from its earlier stand, the Urjit Patel-led Reserve Bank today appeared to be receptive of the ‘bad bank’ concept floated by Chief Economic Advisor Arvind Subramanian in the Economic Survey. “We have to remain open to all solutions at this point because I think the problem is quite large,” newly-inducted Deputy Governor Viral Acharya told reporters at the customary post-policy meet with media persons.

Acharya, who has been supportive of such an idea since his previous avatar as an academic, added, “We think it is something, if designed properly, could help.” He said the big problem is to ensure that banks sell the stressed assets to either asset reconstruction companies or private investors at the right price. Acharya said designing the bank in such a way that all the issues are taken care of is essential.

Another Deputy Governor, N Vishwanathan, said, “All options are open” and the RBI does not have a “dogmatic” view either ways on the subject. It can be noted that Patel’s predecessor Raghuram Rajan was not convinced about such an institution and had gone public with his concerns multiple times.