MUMBAI: Former chief economic adviser Arvind Subramanian called for an asset quality review of non-banking finance companies, speaking in Mumbai on Friday at the launch of his book Of Counsel: The Challenges of the Modi-Jaitley Economy. He proposed that the RBI conduct an AQR on the lines of what it did for banks in 2015.
“I am proposing an AQR for NBFCs. We don’t know what is there. We need to get to the bottom of this in order to be confident, we finally know how much bad assets are there and then think of what solutions need to be thought of,” he said.
Concerns about defaults after the collapse of Infrastructure Leasing & Financial Services and the ensuing liquidity crunch has put the spotlight on NBFCs in recent months. Though systemically important, NBFCs are well regulated and milder compared to banks. Like how AQR on banks helped uncover a huge pile of bad loans, similar review on NBFCs can help bring out any hidden issues. “Here’s a `90,000 crore elephant that comes out of the blue … Just think about the quality of oversight,” he said on IL&FS.