Govt clears formation of ‘bad bank,’ announces govt guarantee of up to ₹ 30,600 cr

The Central guarantee will back security receipts to be issued by National Asset Reconstruction Company Ltd

Govt clears formation of ‘bad bank,’ announces govt guarantee of up to ₹ 30,600 cr
Finance Minister, Nirmal Sitharaman with Debashish Panda, Secretary, Department of Financial Services ( Banking Secretary) briefing the media on Cabinet decisions which took place on wednesday, in New Delhi, on Thursday, Sept. 16, 2021. Photograph : Rajeev Bhatt

In an attempt to address the problem of non-performing assets (NPAs) resulting in bad loans in public sector banks, Finance Minister Nirmala Sitharaman on Thursday said the Cabinet has cleared the formation of the country’s first ‘bad bank.’

The minister announced a government guarantee up to ₹ 30,600 crore ($ 41,57,303.76) for security receipts issued by the National Asset Reconstruction Company Ltd (NARCL) as part of the resolution of bad loans.