Direction for the following 4 (four) items: Read the following four passages and answer the items (51-54) that follow. Your answers to these items should be based on the passages only.

The resolution of bankruptcy cases of Indian banks under the Insolvency and Bankruptcy Code should help bring non-performing assets (NPA) situation under some control. Despite the slow pace of resolutions by the National Company Law Tribunal, the Code can be helpful in cleaning up bank book in future credit cycles. The recapitalisation of public sector banks too can help increase the capital cushion of banks and induce them to lend more and boost economic activity. But bad debt resolution and recapitalisation are only a part of the solution as they, by themselves, can do very little to rein in rockless lending, that has pushed the Indian banking system to its current sorry state. Unless there are systemic reforms that address the problem of unsustainable lending, future credit cycles will continue to stress the banking system.

Which one of the following statements best reflects the most logical rational and practical suggestion implied by the passage given above?

Correct Option: Indian banking system requires structural reforms as a long-term solution for bad loans problem.

Step-by-step Explanation:

1. Analyze the Passage Content:
- The passage discusses the Insolvency and Bankruptcy Code (IBC) and recapitalisation of public sector banks as temporary or partial measures that help clean up bank balance sheets and increase capital cushion.
- However, it explicitly states: "bad debt resolution and recapitalisation are only a part of the solution as they, by themselves, can do very little to rein in reckless lending..."
- The concluding sentence highlights the ultimate core requirement: "Unless there are systemic reforms that address the problem of unsustainable lending, future credit cycles will continue to stress the banking system."

2. Evaluate the Options:
- Option 1: Suggests monitoring/regulation by the Central Government. The passage mentions systemic/systemic-level reforms rather than specifying Central Government control.
- Option 2: Proposes keeping interest rates low to boost lending. This is not mentioned or implied in the passage; in fact, reckless/unsustainable lending is criticized.
- Option 3: Suggests merging banks into a few large banks. The passage contains no reference to bank mergers.
- Option 4: States that the Indian banking system requires structural reforms as a long-term solution for bad loans problem. This directly captures the author's key point that systemic/structural reforms are essential to prevent future cycles of unsustainable lending and bad debt.

3. Conclusion:
The most logical, rational, and practical suggestion implied by the passage is that structural (systemic) reforms are necessary to address the root cause of bad loans in the Indian banking system.