Government is determined to go ahead with the proposal to set up an asset reconstruction company (ARC) with equity contribution from the government and the RBI. RBI Governor Raghuram Rajan has reservations about ARC.
He asked why the taxpayer should pay for reckless lending by banks in the past.
Rajan has made several suggestions to ease the NPA crisis, such as corporate debt restructuring (CDR), the 5/25 scheme, and strategic debt restructuring (SDR). These require banks to absorb some stress rather than going scot-free.