Twin Balance Sheet Problem-Is Public Sector Asset Rehabilitation Agency a Panacea?


  •   Inchara P. M. Gowda Institute of Management Studies, Kuvempu University, Jnana Sahyadri, Shankaraghatta
  •   K. R. Manjunatha Institute of Management Studies, Kuvempu University, Jnana Sahyadri, Shankaraghatta



ARCs, CDR, DRTs, Gross and Net NPAs, JLF, PARA, S4A, SARFAESI, SDR, Stressed Assets, TBS Problem.


Employment/investment of borrowed capital by the corporate on assets or in projects which fail to generate an adequate rate of return results in the assets (i.e., investment) not performing well in the balance sheet of corporate borrowers. This is one Balance Sheet problem. This failure results in the non-payment of interest on the borrowed capital to the lending banks. Hence, the banks' loans and advances (an item of banks' balance sheets) fail to receive the interest income from their borrower corporate - again leading to non-performing loans (NPLs or NPAs). This is another Balance Sheet problem. These problems are categorized as twin balance sheet (TBS) problems. To address and resolve this TBS problem, the Government of India and the Reserve Bank of India have formulated/ enacted a few schemes/Acts such as The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESIAct, 2002); Debts Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunals (DRATs); Lok Adalats; Joint Lenders' Forum (JLF); Corporate Debt Restructuring (CDR, 2001); Strategic Debt Restructuring (SDR, 2015); Flexible refinancing under 5/25 Scheme, S4A, etc. However, these Schemes have not been able to resolve the TBS problem. Hence, the GoI, in the Economic Survey, 2016-17, mooted the idea of setting up of a new central agency called, Public Sector Asset Rehabilitation Agency (PARA) to address the largest and the most difficult cases and to take politically tough decisions to reduce the debt of public sector which in turn enable the banks to reduce their NPAs. In this backdrop, this paper makes an attempt to present the magnitude of NPAs of SCBs, an overview of schemes formulated by the GoI/RBI to address NPA problem, nature of TBS and different facets of the proposed new agency, PARA.




How to Cite

Gowda, I. P. M., & Manjunatha, K. R. (2017). Twin Balance Sheet Problem-Is Public Sector Asset Rehabilitation Agency a Panacea?. Adarsh Journal of Management Research, 10(1), 1–13.





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