The Economic Survey 2016-17 tabled in Parliament on Tuesday by Finance Minister Arun Jaitley has mooted the formation of a centralised public sector asset rehabilitation agency (PARA).

According to the survey, the country is grappling with a 'Twin Balance Sheet' (TBS) problem of over-leveraged companies and bad-loan-encumbered banks, a legacy of the boom years around the global financial crisis.

"So far, there has been limited success. The problem has consequently continued to fester: Non-performing assets (NPAs) of the banking system (and especially public sector banks) keep increasing, while credit and investment keep falling," the survey said.

"Now it is time to consider a different approach -- a centralised PARA that could take charge of the largest, most difficult cases, and make politically-tough decisions to reduce debt."

As per the survey, gross NPAs has climbed to almost 12 per cent of gross advances for public sector banks at end-September 2016.

"At this level, India's NPA ratio is higher than any other major emerging market, with the exception of Russia. The consequent squeeze of banks has led them to slow credit growth to crucial sectors -- especially to industry and medium and small scale enterprises (MSMEs)-- to levels unseen over the past two decades," the survey elaborated.

"As this has occurred, growth in private and overall investment has turned negative. A decisive resolution is urgently needed before the TBS problem becomes a serious drag on growth."