Bad loan threat is manageable: Arvind Subramanian

Despite RBI governor Raghuram Rajan red-flaging the stress on the Indian banking sector due to bad loans, chief economic adviser Arvind Subramanian feels the stress caused by corporate loans turning bad is manageable.

“In China, the amount of loans that the banks have lend to firms or corporates is 165 per cent of its GDP, whereas in India, it is only 35 per cent... It is not a challenge that cannot be managed. RBI and the government is working together to make sure this does not become a time bomb and also does not impact on the economy,” the official said on Wednesday in a lecture at University of Hyderabad here.

RBI’s Financial Stabi-lity Report had also indicated that an improvement in India Inc’s leverage in 2015-16 and said that the overall risks in the corporate sector have moderated over the fiscal.

On the Brexit, which threatening to slow down the economy, Mr Subramanian said that India will also be impacted by the ripples created by the development.

“It is a landmark development. It is going to have ripples around the world. From India’s point of view, it is significant in economic terms because it may slow down the world economy as a result it may impact India also,” he said.

He, however, said India is “relatively well cushioned” to dwell any impact of this kind of external events.