Debt Bank

A senior government official warned that the economy is in a silent crisis, which is evident in the balance sheets of the banks.






rnArjuna Mahendran, BOI Chairman and a key player in the government economic think tank, unveiled a structure of a debt recovery agency called lquote Recovery and Collection Agency quote or RACA as a solution to the country quote s chronic level of non-performing loans, which prevents the banks from creating credit growth to high potential sectors.

rnrnBad debts currently amounts to around 18 percent of the banking sector quote s total loans, according to a recent IMF study. Only one out of the six major banks will meet the Central Bank quote s capital adequacy requirement, if provisions are made for 50 percent of non-performing loans.

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rnrnAddressing businessmen at the Financial Sector Reform Forum, Mahendra said converting one of the two main state commercial banks could create RACA.

rnrnThe government will guarantee public deposits in the converted bank and will transfer