Union Cabinet NARCL - 16 Sep 2021

National Property Restructuring Company Limited: 

The Union Cabinet on September 16 approved government guarantees of up to Rs 30,600 crore for the issuance of security receipts from the National Property Restructuring Company Limited (NARCL). Security receipts represent an undivided right or interest on a financial asset. Typically, asset restructuring companies or bad banks buy unsecured assets with 15 percent cash and the remaining 85 percent security receipts.

According to FM, banks have recovered Rs 5,01,479 crore in the last six financial years. Out of this, Rs 3.1 lakh crore has been recovered since March 2018. Sitharaman said the government guarantee would give borrowers more confidence to sell their assets to NARCL.

National Property Restructuring Company Limited

Addressing a press conference in the national capital, FM said, "We are also setting up Bharat Debt Solutions Company Limited to manage non-performing assets (NPAs). The company will have a 49% stake in public sector banks (PSBs) and state-owned financial institutions." "Private sector banks will also have a stake," he said.

"Banks will be paid 15 percent cash for their toxic assets, 85 percent will have security receipts. Banks will have a backstop guarantee," FM said. Sitharaman said security receipts provide backstop funding, which will only be good for five years.

"There is an incentive for faster disposal of these non-performing assets," she said. The government guarantee offers to effectively differentiate between the face value and the actual value of security receipts issued by NARCL. If the actual value is higher than the face value, the profit will also be credited to the banks.

"Through the establishment of NARCL and many other steps taken in recent years, we have completely solved the problems facing the Indian banking sector, which was taking us away from the double balance sheet problem in 2015. Now we have a way to solve this problem. Stretched assets," FM said.

Financial Services Secretary Debashish Panda said the five-year limit would encourage banks not to drag the process, adding that NARCL has already been included as a company. He said NPAs worth Rs 90,000 crore would be transferred to NARCL in the first phase.

Earlier on September 15, the Union Cabinet had approved a proposal to give universal support to security receipts issued by NARCL. This will further boost the operations of NARCL.

A bad bank is a bank set up to buy bad loans and other liquid holdings from another financial institution. The government intends to take non-performing assets from their books through planned 'bad banks'.

According to previous reports, NARCL will buy bad debts at 15 percent in cash and the remaining 85 percent in security receipts guaranteed by the government.

Banks and non-banking financial companies (NBFCs) in India are accounting for non-performing assets (NPAs) कर्ज loans where there has been no repayment for more than 90 days from the due date for many years, but now the problem is that the pay-as-you-go With the loss of jobs in small and medium businesses, many people are struggling to pay off debts even though it has become more widespread.

At the end of June, the gross NPA level of the banking system was 7.5 percent and the capital adequacy level was around 16 percent.

A recent ASSOCHAM-CRISIL joint study states that the total non-performing assets (GNPAs) of banks are likely to exceed Rs 10 lakh crore by March 2022. According to the S&P Global Rating, the stretched assets of Indian banks will remain at 11-12. % In FY2022

The agency expects non-performing loans and restructured assets to grow by 11.5% in the current fiscal year from 8.7% a year ago. Also, the impact of the second wave is expected to affect the performance of banks in the first half of the financial year.

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