FM Sitharaman Announced Setting Up Of National Asset Reconstruction Company
3 min read
fairly difficult
Finance minister Nirmala Sitharaman on September 16 announced that the Cabinet has approved a central government guarantee of up to Rs 30,600 crore to back security receipts to be issued by National Asset Reconstruction Company Limited (NARCL). The guarantee would be valid for a period of five years. Asset reconstruction companies (ARCs) generally buy distressed assets with a 15 per cent cash payment and 85 per cent in security receipts.
"Public-sector banks will themselves have a 51 per cent stake. India Debt Resolution Company and public financial institutions will hold a maximum of 49 per cent stake, and then the private sector lenders will also be participating... 15 per cent cash payments would be paid to the banks based on some valuations and the rest 85 per cent given as security receipts," Sitharaman said at a press conference.

The NARLC will aggregate NPAs in banks' balance sheets (for which full provisioning has been done) and manage and dispose of them professionally, thus cleaning up banks' balance sheets. "Many asset reconstruction companies are there in the private sector, but they hesitate to take up big-ticket asset resolution, which is why government-backed security receipts are required," Sitharaman said.

The minister also announced that along with NARCL, the government was also setting up India Debt Resolution Company Limited (IDRCL). IDRCL would be…
Kamalika Ghosh, Saptaparno Ghosh
Read full article