Rs 30,600 crore guarantee to back security receipts of NARCL on stressed assets

New Delhi, Sep 16 (UNI) Union Cabinet has approved the issue of Government of India guarantee upto Rs 30,600 crore for the security receipts which will be issued by National Assets Reconstruction Company Ltd (NARCL), announced Finance Minister Nirmala Sitharaman on Thursday.
The NARCL or the so-called bad bank will aggregate non-performing assets (NPAs) in banks’ balance sheets and manage and dispose them professionally.
NARCL proposes to acquire stressed assets of about Rs 2 lakh crore in phases. It intends to acquire these through 15 per cent cash and 85 per cent in security receipts.
“For the security receipts to hold on and their value intact, there is a need for government to give back-stop arrangement. This is why this Rs 30,600 crore has been cleared by the Cabinet yesterday,” the Finance Minister said.
Along with the national assets reconstruction company, the government has also decided to set up India Debt Resolution Company Ltd for professional management of the bad debts.
“In the National Assets Reconstruction Company, public sector banks themselves will have 51 per cent ownership and in the India Debt Resolution Company public sector banks and public financial institutions will hold a maximum of 49 per cent stake and then the private sector lenders would also be participating in it,” Sitharaman said.
“So, what this does is actually give us a complete picture of the Indian banking sector reform, cleaning up of the books, taking away the NPAs, and getting the banks their dues in the due course,” she added.
In her budget speech in February this year, Sitharaman had said that the high level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books.
The move is aimed at consolidating and taking over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization.
The Finance Minister today said that NPAs have been sitting in banks for which they have been repeatedly provisioning.
“Once you take them out, manage, re-evaluate, give them for people to buy, they’ll fetch a higher value,” she said.