India on Friday gave greater powers to the central bank to intervene in cases of bad loans, seeking to tackle a mountain of debt that experts say is holding back the economy.
The move authorises the Reserve Bank of India to order banks to take specific measures to deal with bad debts under the provisions of the existing bankruptcy laws.
In its executive order, it said the “stressed assets in the banking system have reached unacceptably high levels and urgent measures are required for their resolution.”
India remains the world’s fastest-growing major economy, but its banks are saddled with some of the highest levels of bad debt in the emerging markets according to the International Monetary Fund.
That means banks are stretched too thin to lend for fresh investments. But industry experts said it was not clear that the latest move would be sufficient to tackle the problem.
“It’s another tool amongst the many the government has launched without success in the past,” Ashish Gupta, Credit Suisse’s head of equity research, told AFP.