ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Bad Bank Proposal for India

A Partial Jubilee Financed by Zero Coupon Perpetual Bonds

There have been two main proposals to tackle the stressed assets problem of Indian banks since the beginning of this year. Both proposals are based implicitly on the financial intermediation theory of banking. The alternative credit creation theory of banking opens up other possibilities. One such possibility is a partial Jubilee financed by zero coupon perpetual bonds.

I closed the November 2016 H T Parekh Column article (Öncü 2016) as follows: “A global Jubilee is in order.”

This was my proposal to tackle the difficulty of resolving the “private debt overhang” problem in the current global environment of low nominal output growth. The International Monetary Fund (IMF) issued a warning in the title of its October 2016 Fiscal Monitor: “Debt—Use It Wisely” (IMF 2016).

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Updated On : 14th Mar, 2017
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