A bad bank can help with debt collection, but it is not a substitute for a new injection of capital.
Last month, the Union government established the National Asset Reconstruction Company Limited (NARCL) under the Companies Act. It has thus kept its promise to create a âbad bankâ to clean up the balance sheets of commercial banks. Under the new setup, NARCL will take over loans worth nearly 2 lakh crore from commercial bank books at a mutually agreed price. NARCL will prepay 15% of the price of these cash loans to banks and then issue collateral receipts instead of the remaining amount. NARCL will then attempt to resolve these bad debts within a limited time frame with the assistance of India Debt Resolution Company Limited (IDRCL). In the event that the IDRCL is unable to sell these bad debts at a price satisfactory to repay the collateral receipts, the Center will step in and fund the deviation, but within a budget limit of 30,600 crore.
Here we are discussing the bad bank’s proposal.
Guests: CP Chandrasekhar, professor at the Center for Economic Studies and Planning, JNU; Ajit Ranade, Chief Economist of the Aditya Birla Group
Host: Prashanth Perumal J.
Read Parley’s article here.
You can now find The Hindupodcasts from on Spotify, Apple Podcasts and Stitcher.
Search for Parley by The Hindu. Email us with comments and feedback at [email protected]