INSUBCONTINENT EXCLUSIVE:
Union Cabinet has approved bank guarantee for bad bankThe Union Cabinet has approved Central Government guarantee to the tune of up to Rs
Minister Nirmala Sitharaman said on Thursday.The Cabinet clearance to the government guarantee was given on Wednesday, she told media
persons during a press conference.NARCL has been incorporated under the Companies Act and has applied to Reserve Bank of India for license
as an asset reconstruction company (ARC).Known as bad bank in common parlance, NARCL has been formed by public sector banks to consolidate
all NPAs which will be put up for resolution.The government guarantee will be invoked to cover the shortfall between the amount realised
which will be valid for five years.The main condition for invoking the government guarantee will be faster resolution of stressed assets,
official sources said.Public sector banks will have a majority stake of 51 per cent in NARCL, while the task of managing assets and engaging
with market professionals will be undertaken by India Debt Resolution Company Limited (IDRCL), which will be a service company.IDRCL is in
the process of being setting up and the majority stake in it will be with private sector lenders, while public sector banks and public
financial institutions will hold up to 49 per cent stake in it.The Finance Minister said that the government guarantee will be invoked to
cover the shortfall between the amount realised from the underlying assets and the face value of security receipts issued for that asset,
realisation in many of them will be more than the acquisition cost, Ms Sitharaman added.She informed that in 2015, an asset quality review
of banks had been conducted, where high incidence of non performing assets (NPA) were revealed.In the last six years, the government's
strategy of four "Rs", i.e
NPAs in banks' balance sheets and manage as well as dispose them of professionally, the finance minister said.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
