Passage

The resolution of bankruptcy cases of Indian banks under the Insolvency and Bankruptcy Code should help bring non-performing assets (NPA) situation under some control. Despite the slow pace of resolution by the National Company Law Tribunal, the Code can be helpful in cleaning up bank books in future credit cycles. The recapitalization of public sector banks too can help increase the capital cushion of banks and induce them to lend more and boost economic activity. But bad debt resolution and recapitalization are only a part of the solution as they, by themselves, can do very little to rein in reckless lending that has pushed the Indian banking system to its current sorry state. Unless there are systemic reforms that address the problem of unsustainable lending, future credit cycles will continue to stress the banking system.

QUESTION

CSAT

Easy

Comprehension

Prelims 2021

Which one of the following statements best reflects the most logical, rational and practical suggestion implied by the passage given above?

Select an option to attempt

Explanation

Option A is close but incorrect: The author refers to the need for systemic reforms for addressing the problem of unsustainable lending. Systemic reforms go much beyond the measure of simple monitoring or regulation.

Option B is incorrect: The author states that "Unless there are systemic reforms that address the problem of unsustainable lending, future credit cycles will continue to stress the banking system." Now, changing interest rates is a short-term measure and not a systemic improvement. Also, the author mentions recapitalization of public sector banks specifically, and not interest rate lowering, as a measure for providing capital to banks to lend. So, this measure goes beyond the scope of the passage.

Option C is incorrect: It is not mentioned or referred to anywhere in the passage, and hence goes beyond its scope.

Option D is correct: The author clearly states the need for the same in the lines, "Unless there are systemic reforms that address the problem of unsustainable lending, future credit cycles will continue to stress the banking system."

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