Union Cabinet clears proposal for government guarantee for bad bank

The Union Cabinet has cleared 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, Finance Minister Nirmala Sitharaman said on Thursday.

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 receipts.

The government guarantee would be invoked if there is loss against the threshold value.

Briefing reporters on the decision, she said banks have recovered Rs 5.01 lakh crore of unpaid loans in the last six years. Of this, Rs 3.1 lakh crore has been recovered since March 2018.