INSUBCONTINENT EXCLUSIVE:
The government is neglecting bank recapitalisation as it focuses on debt moratoriums and interest waivers for borrowers amid the COVID-19
pandemic, a former central bank official told news agency Reuters on Monday.The country's banks are saddled with over $120 billion in bad
debt, and in severely stressed conditions the bad-loan ratio could nearly double by March, according to Reserve Bank of India
projections.Restoring banks' capital is critical for aiding a meaningful recovery, but there has been little focus on the matter, former RBI
Deputy Governor Viral Acharya said."This lack of focus is tantamount to kicking the can down the road and jettisoning financial stability
for short-term gains," said Mr Acharya, who recently wrote a book titled the "Quest for Restoring Financial Stability in India"."This
repeated mistake has prevented India from recovering well from adverse shocks," Mr Acharya said
His comments came weeks after India offered to waive the compounded interest component on all loans up to Rs 2 crore following a legal
challenge to the terms of a six-month moratorium.Designing moratoria and forgiveness like farm-loan waivers that favour borrowers
excessively in the short term has been detrimental to a sound recovery of credit growth in the medium term, Acharya said.Though the latest
one-time restructuring package has been fine-tuned to ensure it cannot be misused, it still has a little bit of a "band-aid and
short-termism" approach to it, he said.Funds to provide for the losses that would be incurred through restructuring should be set aside so
that banks do not strangle growth as the economy begins to recover after the pandemic."If the government doesn't wish to recapitalise banks
in a timely manner, then it must ensure that the contours of debt moratoria and forgiveness package aren't so generous that banks won't be
in a position to lend well during the recovery phase, which is likely around the corner," Mr Acharya said."It would be good to learn from
the past mistakes and start the work of repairing bank balance sheets at the same time as giving a soft landing to bank borrowers and the
