India's bad bank gets government nod — green lights NARCL with ₹30,600 crore guarantee

• The cabinet today approved a central government guarantee to the tune of up to ₹30,600 crore, wherein NARCL will buy bad loans from banks.
• The government guarantee will be valid for a period of five years.
• Banks have recovered ₹5.01 lakh crore of unpaid loans in the last six years, said finance minister Nirmala Sitharaman.

The Union Cabinet has cleared a proposal to provide Rs 30,600 crore government guarantee for security receipts issued by the National Asset Reconstruction Company (NARCL) as part of resolution of bad loans, Finance Minister Nirmala Sitharaman said on Thursday. The proposed bad bank or NARCL will pay up to 15 per cent of the agreed value for the loans in cash and the remaining 85 per cent would be government-guaranteed security receipts.

The government guarantee would be invoked if there is loss against the threshold value.

Briefing reporters on the decision, she said banks have recovered Rs 5.01 lakh crore of unpaid loans in the last six years. Of this, Rs 3.1 lakh crore has been recovered since March 2018.

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