Nirmala Sitharaman announces ‘Bad Bank’, approves guarantee proposal of 30 thousand 600 crores


Bad Bank: Union Finance Minister Nirmala Sitharaman said on Thursday that the Union Cabinet has earmarked 30 thousand 600 crore rupees for the security receipts to be issued by the National Asset Reconstruction Company Limited (NARCL) for the resolution of bad loans. Government approved the proposal to give guarantee.

The proposed bad bank i.e. NARCL will pay 15 percent of the agreed value for the loan in cash while the remaining 85 percent will be in the form of security receipts guaranteed by the government. If there is a loss against the fixed price, then the Government Guarantee will be encashed.

Finance Minister Nirmala Sitharaman told reporters about this decision that banks have recovered bad loans worth Rs 5.01 lakh crore in the last six years. Out of this, Rs 3.1 lakh crore has been recovered since March 2018.

Jyoti Prakash Gadiya, Managing Director, Resurgent India said – “The announcement of guarantee of Rs 30600 crore is an important step, which will facilitate the banks to take quick decisions. In the absence of guarantee, banks would have been required to make higher provisioning. A win for all stakeholders.”

Sonam Chandwani, managing partner, KS Legal & Associates, believes that transfer of bad loans to National Asset Reconstruction Company Limited will undoubtedly end the problem of bad loans. He said- “The approval of the cabinet will pave the way for the operationalization of NARCL. There is still a liquidity problem with the banks, so the support of the central bank will really save the bad banks.

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