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NARCL to acquire stressed assets of about Rs 2 lakh crore in phases

  • Published
    21st Sep, 2021

GS-III: Economy

  • Sub-topic: Money & Banking
Context

The government recently approved extending a guarantee of Rs 30,600 crore to the National Asset Reconstruction Company Ltd (NARCL) to help clear the banking sector’s stressed assets of around Rs 2 lakh crore in a time-bound manner.

Prelims question:

Consider the following statements:

  1. National Asset Reconstruction Company Ltd (NARCL) is wholly government owned ‘bad bank’ that will aggregate and consolidate stressed assets for their subsequent resolution.
  2. India Debt Resolution Company Ltd is the operational entity of NARCL that will manage assets and find potential buyers for them.
  3. Asset Reconstruction Companies (ARCs) in India have no legal backing.

Which of the above statement(s) is/are correct?

  • A.
  • B.
  • C.
  • D.

Mains Question:

‘Bad banks’ can potentially ease the balance sheet problems of commercial banks in India, however, it is not a panacea to the NPA crisis in India. Discuss. (250 Words)

Approach:

  • In the introduction, give a definition of Bad banks and their objectives.
  • Enumerate the positive impacts Bad Bank will have on Banking sector of India
  • Enumerate the challenges that would still remain
  • Way Forward and Conclusion

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