How to Tackle India's Bad Debt Problems

The video discusses the Indian government's recent measures to empower the RBI in tackling the bad debt issue, including a new bankruptcy law. It highlights the realization of the debt problem's scale, with bad debts and stressed assets each constituting 8% of total loans. The discussion suggests that larger measures, such as significant capital injections and privatization of state-owned banks, are needed to address the banking sector's challenges. However, political challenges may hinder these solutions.

What recent measures have been taken by the government to address the bad debt issue?

• Reducing taxes on banks

• Giving more power to the RBI and passing a new bankruptcy law

• Increasing interest rates

• Implementing stricter loan approval processes

What percentage of total loans in India's banking system is currently classified as bad debt?

• 8%

• 12%

• 10%

• 5%

Why are the current measures by the government and RBI considered insufficient?

• They increase the fiscal deficit

• They focus too much on private banks

• Banks are unable to take on necessary haircuts for resolution

• They do not address the root cause of the problem

What is one proposed solution to recapitalize the banking sector without harming government finances?

• Privatization of state-owned banks

• Reducing government spending

• Increasing taxes

• Increasing foreign investments

What is a major challenge in implementing the privatization of state-owned banks in India?

• Lack of interest from private investors

• Political difficulties

• High operational costs

• Insufficient legal framework