The Union Cabinet on Wednesday approved a ₹30,600-crore backstop facility for guaranteeing securities to be issued by the National Asset Reconstruction Company Ltd. (NARCL), the so-called ‘bad bank’ that is being set up to help aggregate and consolidate lenders’ non-performing assets (NPAs) or bad loans.
A ‘bad bank’ is a financial entity set up to acquire NPAs from banks and resolve them. The bank, which sells the stressed assets to the bad bank, is now relieved of the burden of the bad loans and can focus instead on growing its business by advancing fresh loans to borrowers requiring credit. The cleaner balance sheet also makes it relatively easier for the lender to raise fresh capital, if required. (Read More)
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