Public Sector Banks formed Bad Bank for defaulted loans

Public Sector Banks formed Bad Banks

The Public sector banks have officially formed the bad bank for loans that are in default. A bad bank is its National Asset Reconstruction Company (NARC).  Public Sector Banks formed Bad Bank for defaulted loans

They will now be seeking the approval of the Reserve Bank of India (RBI) to operate in the country as an ARC. Banks, in May, decided to appoint Padmakumar k Nair as the Managing Director of the newly formed Bad Bank. 

According to RBI am ARC must have at least 15 per cent of the financial assets as net assets. Lenders have found 22 Asset accounts that are worth 82,500 crores approximately.  The ARC would require to pay 6000 crores to purchase these assets. 

The 15 per cent value can be paid in cash while other amounts can be paid by issuing security receipts. The government told that there would be a minimum recovery of 31,000 crores, to make the security receipts more safe and attractive for people buying them. 

Loans that have been approved include Videocon Oil Ventures, Jaypee Infratech, Reliance Naval etc. 



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