"This is an unprecedented situation for
the government of India. In the last 70 years nobody had faced this
sort of situation where the entire financial system is under threat and
nobody is trusting anybody else. Within the private sector nobody is
ready to lend, everyone is sitting on cash.
"You may have to
take steps which are extraordinary. It takes lot of courage to break the
inertia. Now we are in a system where we are encouraged to take steps.
The second point is that I think the government must do whatever it can
to take away some of the apprehension of the private sector," he said.
whole nature of the game has changed after demonetisation, GST and IBC.
The earlier period where you had 35 per cent cash sloshing around has
become much less now. All of these put together it is fairly complex
situation. There is no easy answer.
"I have no hesitation in
saying that there is no business of the government to hold back payments
which are due to the private sector. At the moment there is huge effort
going on to try and get this sorted out", he added.
the government has taken steps to address concerns of the stressed
non-banking finance company (NBFC) sector, Kumar said the government
does acknowledge NBFCs as a growth driver and has prevented many of them
"This is an unprecedented situation and we are
still grappling to find the right modality to get a fix. The government
must take steps that eliminate apprehension from the minds of private
sector players and encourage them to step up investments," he said.
also said some steps had already been announced in the Union Budget to
address stress in the financial sector and give a push to economic
growth which hit a 5-year low of 6.8 per cent in 2018-19.
the genesis of the financial sector stress that has led to a slowdown
in the economy, Kumar said the entire phenomenon started with
indiscriminate lending during 2009-14 leading rise in non-performing
assets (NPAs or bad loans) post 2014.
Rising NPAs reduced the
ability of banks to do fresh lending, which space was taken over by
shadow banks with credit growth of around 25 per cent. The NBFCs could
not manage this high loan growth, leading to defaults by some of the
large entities that eventually triggered the economic slowdown,
according to the Niti Aayog Vice Chairman.
"The whole nature of
the game has changed after demonetisation, the Goods and Services Tax
and the Insolvency and Bankruptcy Code. The earlier period where you had
35 per cent cash sloshing around..it has become much less now. All of
these put together it is a fairly complex situation. There is no easy
answer," he said.
On the issue of delay in payments by the
government to the private sector in lieu of goods and services availed
from them, Kumar said this could be one of the reasons for the slowdown,
but the authorities are making all efforts to expedite the process.