Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
4. While National Asset Reconstruction Company Limited (NARCL) has the potential to assist banks in managing their NPA liabilities, its success will depend on various factors such as adequate capitalization, accurate asset valuation, efficient legal processes, and prudent lending practices by banks. Comment. (250 words)
Difficulty level: Moderate
Reference: Insights on India
Why the question:
The question is part of the static syllabus of General studies paper – 3.
Key Demand of the question:
To write about the potential of NARCL to solve the NPA issues in India.
Directive word:
Comment– here we must express our knowledge and understanding of the issue and form an overall opinion thereupon.
Structure of the answer:
Introduction:
Begin by defining National Asset Reconstruction Company Limited (NARCL) and its purpose.
Body:
First, describe the structuring of the NARCL and also mention its mandate that makes it a bad bank.
Next, write about the potential of NARCL – high capital, backing of the government, reduce the burden on taxpayers, revival or reclamation of assets etc.
Next, write about its limitations – presence of private ARC’s, issues with restructuring and write off, corruption etc.
suggest need of] right incentive structure and an innovative approach in handling assets for an effective performance of NARCL.
Conclusion:
Conclude by writing a way forward.
