FM Sitharaman announces Rs 30,600 crore govt guarantee for ‘bad bank’

FM Sitharaman announces Rs 30,600 crore govt guarantee for ‘bad bank’

In an attempt to tackle the NPA problem that leads to bad credit with public sector banks, Finance Minister Nirmala Sitharaman said on Thursday that the cabinet had approved the creation of the country’s first bad bank.

 The minister issued a government guarantee of up to 30,600 crores on securities issued by the National Asset Reconstruction Company (NARCL) as part of troubled loan repayment.

She said that the cabinet has admitted an approved central government yesterday, guaranteed Rs. 30,600 crore to issue the security sales of NARCL. 

Sitharaman said that the budget of 2021 had announced the government’s intention, formed together with Asset Management Company to consolidate and adopt the existing stressed debts, and then manage them Rejected for the shirt valuation. 

Dotted the media, she said that the quality assessment of the banks had happened in 2015 to set up and fully equipped with the account balance, this revealed a very high incidence of NPAs and added that the government came with a Four strategy of recognition resolution, recapitalization and reform. 

Upon recognition, NPA quantification began as planned and recovery also began, Sitharaman said, adding that in the past six fiscal years, 4Rs have been meticulously executed and banks have recovered 5.01,479 crores of rupees. 

The finance minister said that of the rupees out of the 501,479 received by banks in the last six years, Rs 3.1 million have been received since March 2018, adding that in 2018 alone, a record 1.2 million Rupees were received19. 

She said, Rs 5,01479 crores received by banks in the last six years, Rs 99,996 is the amount received from assets written off.

Speaking of the recent banking reforms in the last few years, Sitharaman spoke of governance reforms, bringing cooperative banks to the Indian Reserve Bank (RBI), overseeing major cooperative banks, the Bank’s Board Office, ARC, strengthening risk management. the practice and exclusion of willful insolvent persons from capital markets. 

Explaining one reason for this NPA level, Sitharaman said that for large frauds of 100 crores or more, the average delay time to detect fraud is 57 months.

Speaking about the condition of public sector lenders, the finance minister said that only two of the 21 public sector banks (PSB) were profitable in 2018 and added that she is pleased to report that in 2020 21 only 2 recorded losses in a year. 

 She also said that now public service broadcasters are not only making a profit but also collecting money from the markets, a total of 58,697 crores of rupees have been raised by public service broadcasters as debt and equity.

In addition, she said now public service broadcasters are not only making a profit but also collecting money from the markets, a total of 58,697 crore rupees has been raised by public service broadcasters as debt and equity.

Sitharman said NARCL will aggregate NPAs on the balance sheets of banks and professionally manage and dispose of them, thereby clearing bank balance sheets.

We are also creating India Debt Resolution Company Limited with NARCL, OBO will own 51% of NARCL, while CBO and government financial institutions will have a maximum of 49%,  she said, adding a 15 per cent stake. cash cents paid to banks for the NPA, based on some estimate, 85 per cent must be provided as guarantee receipts.

The minister noted that in order for the security revenue to retain its value, the government must provide support, which is why yesterday the Cabinet of Ministers approved a government guarantee of 30,600 rupees.

A government guarantee may be invoked by NARCL to cover the difference between the face value of the security voucher and the actual sale after settlement/liquidation.

Through the creation of the NARCL and various other steps taken in recent years, we have generally addressed the challenges facing the Indian banking sector, which was looking at us with the double balance sheet problem in 2015. We now have a way to fix this problem. stressful assets, she said.

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