The government of India has approved a guarantee of Rs 30,600 crore for security receipts issued by the National Asset Reconstruction Company Limited (Bad Bank). Central Finance Minister Nirmala Sitharaman has announced that the government of India will guarantee the security receipts issued by the bad banks to the banks.
A security receipt of Rs 30600 crore has been approved for NARCL (Bad Bank) and this security receipt has already been issued. The FM said that after the Asset Quality Review of 2015, the recovery of bad loans has taken place in a big way as during that time, major deficiencies in asset quality were found.
A large number of NPAs came to the fore. In the last 6 years, the resolution of banks was worked out and the banks recovered Rs 5,01,479 crore. Banks have recovered Rs 3.1 lakh crore since March 2018. In 2018-19 alone, banks recovered loans worth Rs 1.2 lakh crore, which is a record in itself.
The Finance Minister had announced the establishment of bad banks in the budget speech of 2021-22 and she also said that an asset reconstruction company and asset management company would be set up to take care of stressed loans.
In the last six financial years, banks have recovered Rs 501479 crore and out of this, Rs 3.1 lakh crore has been recovered after March 2018. 1.2 lakh crores in 2018-19 Rs 1.2 lakh crores were recovered and these also include return of money.
During this period, the written off loans of companies like Bhushan Steel and Essar Steel were also recovered. FM said that government of India guarantee will give more confidence to the banks to sell their assets to NARCL.
What is Bad Bank?
Bad bank is an economic concept whereby loss making banks transfer their liabilities to a new bank during times of economic crisis.Technically a bad bank is an asset reconstruction company or asset management company that takes control of commercial banks’ bad loans, manages them and recovers money over time.