Bookmark Bookmark

FINANCE MINISTER ANNOUNCES RS 30, 600 GOVERNMENT GUARANTEE FOR ‘BAD BANK’

FINANCE MINISTER ANNOUNCES RS 30, 600 GOVERNMENT GUARANTEE FOR ‘BAD BANK’

Context:

The Union Cabinet approved a Rs 30,600 crore government guarantee for the National Asset Reconstruction Company (NARCL), thus paving the way for the operationalisation of a bad bank. One of the key ideas for building bad banks is to de-stress the balance sheets of the banks.

Bad Bank:

  • A bad bank is a company building that separates dangerous assets held by banks in a separate entity.
  • It has been established to purchase non-bank assets (NPAs) at the bank at a price determined by the bad bank itself.
  • The bad bank or NARCL will pay up to 15% of the cash loan amount and the remaining 85% will be government-guaranteed receipts.
  • A government guarantee will be issued if there is a loss against the threshold value.
  • The number of bad loans recorded in bank accounts to be transferred to NARCL is around Rs 2 lakh crore.
  • About Rs 90,000 of bad loans will be transferred in the first phase. The guarantee of Rs 30,600 crore will cover the entire pool of Rs 2 lakh crore.

NARCL:

  • It is 51% owned by public sector banks.
  • It will have an operational entity, India Debt Resolution Company Ltd, to manage these assets and find potential buyers for them.
  • Banks that transfer their stressed assets will get 15 per cent of the value in cash and 85 per cent as tradable security receipts.

You might be interested:

Daily News Digest:18 September 2021

KAUSHALACHARYA AWARDS 2021Dharmendra Pradhan, Union Education Minister and Skill Development Minister virtually presented Kaushalacharya Awards 2021 to 41 skill trainers for their exemplary contributi ...

one year ago

One Liners of the Day, 19 September 2021

Important day World Bamboo Day – 18 September. International Coastal Cleanup Day - Third Saturday of September. Defence The Indian Air Force (IAF) has inked an agreement to purchase worn-out ...

one year ago

THIRD FOREIGN OFFICE CONSULTATIONS BETWEEN INDIA AND EL SALVADOR

THIRD FOREIGN OFFICE CONSULTATIONS BETWEEN INDIA AND EL SALVADOR Context: On September 17, 2021, India and El Salvador held their 3rd Foreign Office Consultations in San Salvador. Key Highlights: Ind ...

one year ago

21ST MEETING OF THE SHANGHAI COOPERATION ORGANISATION (SCO)

21ST MEETING OF THE SHANGHAI COOPERATION ORGANISATION (SCO) Context: On September 17, 2021, the 21st Meeting of the Shanghai Cooperation Organisation (SCO) Council of Heads of State was held in a hybr ...

one year ago

‘EK PAHAL DRIVE’ BY MINISTRY OF LAW

‘EK PAHAL DRIVE’ BY MINISTRY OF LAW Context: On September 17, 2021, the Ministry of Law and Justice launched a Pan-India Special Campaign called “Ek Pahal Drive” for Justice De ...

one year ago

45TH GST COUNCIL MEETING

45TH GST COUNCIL MEETING Context: On September 17, 2021, the 45th GST Council Meeting was chaired by Finance Minister Nirmala Sitharaman in Lucknow. Negotiations on petrol & diesel delivery under ...

one year ago

Provide your feedback on this article: