0
0
Investing.com — On September 16, minister of finance Nirmala Sitharaman announced that the govt would guarantee Rs 30,600 crore as security receipts which can be issued by the National Asset Reconstruction Company Ltd (NARCL), or the ‘bad bank’.
Sitharaman said, “We also are fixing an India Debt Resolution Company Ltd to manage the Non-Performing Assets (NPAs). during this company, public sector banks (PSBs) and state-owned financial institutions will own 49% stake.” She added that non-public sector banks also will be allowed to carry a stake.
Traditionally, the way a nasty bank or an asset reconstruction company works is that its pays 15% cash upfront to the lenders and therefore the balance in security deposits. The NARCL seems to be following an equivalent template “A 15% cash payment are going to be made to banks for his or her toxic assets, 85% are going to be security receipts. there’ll be a backstop guarantee for the banks,” the FM said. Sitharaman added that the safety receipts which give backstop funding, are going to be valid for five years.
“Through fixing of NARCL and various other steps taken in recent years, we’ve in totality addressed the problems facing the Indian banking sector, which was in 2015 watching us with twin record problem. We now have how of resolving the stressed assets,” she added.
Average Rating