Press conference: Sitharaman announces Rs 30,600-cr guarantee for ‘bad bank’ NARCL

• NARCL will aggregate NPAs — for which full provisioning has been done — in banks' balance sheets and manage and dispose of them professionally
• Along with NARCL, the Centre will set up an India Debt Resolution firm

New Delhi: The Union Cabinet has approved 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, said Finance Minister Nirmala Sitharaman at a press conference on Thursday. The minister said that the NARCL will aggregate NPAs — for which full provisioning has been done — in banks' balance sheets and manage and dispose of them professionally, which will clean up banks' balance sheets.

In her 2021-22 Budget speech, Sitharaman has announced the creation of NARCL or bad bank for the resolution of NPAs in the banking sector.

Here are highlights of the announcements made during the press conference:

1.    The guarantee will be valid for a period of five years.
2.    Along with NARCL, the Centre will set up an India Debt Resolution firm, Sitharaman has said.
3.    In NARCL, the public sector banks will have 51 percent ownership.
4.    Sitharaman said the bank and the RBI have taken various steps to reform the banking sector.
5.    She also said that the public sector banks are not waiting for the government to infuse capital but are raising funds through equity and debt markets.
6.    The Finance Minister said that in 2018, two out of 21 PSB were profitable. "In 2020-21, only two public sector lenders reported a loss for the full year," she added.
7.    Around Rs 99,000 crore recovered from written-off assets such as Bhushan Steel, Essar Steel, said Sitharaman.

8.    After recognition, quantification of NPAs started in a planned manner, the recovery too started. In the last six fiscal years, the 4Rs – Recognition, Resolution, Recapitalisation, Reforms – were executed meticulously, banks have recovered Rs 5,01,479 crore. Of this, Rs 3.1 lakh crore have been recovered since March 2018.
9.    Budget 2021 had announced Government's intention to set up an Asset Reconstruction Company (ARC) along with Asset Management Company to consolidate and take over existing stressed debt and thereafter manage and dispose them off to buyers for value realisation.
10.    Cabinet has approved issue of government guarantees up to Rs 30,600 crore for security receipts to be issued by NARCL or bad bank, announced the Finance Minister.
11.    GST Council to meet tomorrow: The GST Council, chaired by Sitharaman, will meet on September 17, which among other things may review tax rate of over four-dozen items and extend till December 31, tax concessions on 11 Covid-19 drugs.
12.    Also, taxing petrol and diesel under the single national GST tax and a proposal to treat food delivery apps such as Zomato and Swiggy as restaurants and levy a 5 percent GST tax on supplies made by them would be taken up by the Council at its meeting in Lucknow.

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