Govt to set up National Asset Reconstruction Company, tackle bad loans: FM Sitharaman

On Thursday, Finance Minister Nirmala Sitharaman in a presser announced outlay for 'bad bank' that the government has supported a guarantee of Rs 30,600 crores for the bad bank for security receipts issued by the National Asset Recognition Company Ltd (NARCL), set to solve the threat of bad loans tormenting the public and commercial sector banks in the country.

The Union Government had earlier on Wednesday passed the proposal of the government guaranteeing security receipts issued by NARCL as a part of the resolution of bad loans. The guarantee comes as contingent liability that does not involve immediate cash outflow from the government exchequer. 

FM stresses rising cases of NPA, informs recovery of loans by banks

Sitharaman also stressed rising cases of Non-Performing Assets (NPA). "The bank asset quality took place in 2015, for cleaning up and fully provisioning bank balance sheets. The process discloses very high cases of NPAs," the FM said. The Sitharaman further informed that during the past six financial years, banks have recovered Rs 5.01 lakh crore loans of which Rs 3.1 lakh crore has been recovered since March 2018. She also stated that in 2018-19 alone, a record Rs 1.2 lakh crore were recovered. The Finance Minister said that banks from across the nation reported large recoveries of bad loans after the asset quality review of 2015.

"The Union Budget announced the intent to set up an ARC-AMC to takeover existing debt, manage and dispose of them off to buyers to realise the value of the stressed assets," Nirmala Sitharaman announced.

Discussing the recent banking reforms introduced over the past few years, the FM reminded of the managerial reforms, the introduction of cooperative banks under the Reserve Bank of India (RBI), the supervisory framework for primary co-op banks, Bank Board Bureau, ARCs, strengthening risk management practices and debarring of wilful defaulters from capital markets.

Sitharam announces outlay for bad bank, govt to set up Debt Resolution Company

"Along with National Asset Reconstruction Company Ltd, we are also setting up an India Debt Resolution Company Limited. PSBs will have 51 per cent ownership in NARCL, while PSBs and public financial institutions will have a 49 per cent stake," said Finance Minister Nirmala Sitharaman.

On NARCL, FM Sitharaman said, "Through setting up of NARCL and various other steps taken in recent years, we have in totality addressed the issues facing the Indian banking sector, which was in 2015 staring at us with twin balance sheet problem, We now have a way of resolving the stressed assets."

Sitharaman while announcing the outlay of Bad Bank said, "The NARCL will purchase bad loans from banks under 15-85 per cent partnership structure where it will contribute 15 per cent of the net asset value in cash while issuing security receipts for the rest."

(Image: ANI)