Shreshtha Menon, IFIM Law College, Bangalore
ABSTRACT
Financial stability is an essential condition for a developing nation. It reflects the country's credit efficiency, economic development, market conditions and efficiency in the allocation of resources to productive sectors. However, despite prudential regulation and supervision through legislative enactments the Indian banking industry is plagued with the problem of Non-Performing Assets. Various political, economic, social, technological, legal and environmental factors contribute to this problem. In the Financial Budget 2021-2022, the Finance Minister Nirmala Sitaraman announced the plan of ‘Bad Banks’ to consolidate an Asset Reconstruction Company Limited and Asset Management Company to take over the existing stressed debt crisis. Guaranteed by the central government, the NARCL aims to clean up bad loans in the banking system. This paper highlights and analyses the existing regulatory legislation related to Non-performing assets. The economic and financial factors which cause Non-performing assets. The paper will further analyze the need of asset reconstruction machinery in the form of NARCL and whether it will help in resolving the growing NPA problem in India.
Keywords: Non-Performing asset, Asset reconstruction machinery, stressed loans.
