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With the bad loan crisis casting a shadow on the ability of banks to lend as and when private sector investment picks up, the Prime Minister’s Office (PMO) is deliberating on a proposal to set up an asset reconstruction company with equity contribution from the government and the Reserve Bank of India (RBI).It’s learnt that the Union Finance Ministry and Niti Aayog have separately pitched for “taking the tumour (of non-performing assets or NPAs) out” of the banking system. Apart from making balance sheets look better, a recapitalisation will enable banks to service the growing credit needs of the economy.

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