Thread by @PIBMumbai

Union Finance Minister @nsitharaman will address a press conference, at @PIB_India, New Delhi at 5 P.M. today

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Media Conference by Finance Minister @nsitharaman to begin shortly

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#Cabinet has yesterday approved Central Government guarantee up to Rs. 30,600 Crore to back Security Receipts to be issued by National Asset Reconstruction Company Limited (NARCL), announces Finance Minister @nsitharaman

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#Budget2021 had announced Govt.’s intention to set up an Asset Reconstruction Company (ARC) along with Asset Management Company to consolidate and take over existing stressed debt and thereafter manage and dispose them off to buyers for value realization, recalls FM @nsitharaman

#Banks' asset quality review had happened in 2015, for cleaning up and fully provisioning bank balance sheets, this revealed very high incidence of Non Performing Assets

- FM @nsitharaman


@airnews_mumbai

Govt. then came up with 4 R strategy of Recognition, Resolution, Recapitalisation and Reforms

- Finance Minister @nsitharaman

Live Now

After recognition, quantification of NPAs started in a planned manner, recovery too started

In last 6 financial years, the 4Rs were executed meticulously, banks have recovered Rs. 5,01,479 Crore

- FM @nsitharaman

https://twitter.com/PIBMumbai/status/1438468684842868740?s=20

Live Now

Out of Rs. 5,01,479 Crore recovered by banks during last 6 years, Rs. 3.1 Lakh Crore has been recovered since March 2018

In 2018-19 alone, a record Rs. 1.2 lakh crore has been recovered

- FM

#Cabinet has approved Rs. 30,600 Cr to back Security Receipts to be issued by NARCL

Out of the amount of Rs. 5,01,479 Lakh Crore recovered by banks during last 6 years, Rs. 99,996 Crore comprises amount recovered from written off assets

- FM @nsitharaman addressing the media

Live Now

In 2017-18, Government infused Rs. 90,000 Crore

☑️2018-19 - Rs. 1.06 Lakh Crore
☑️2019-20 - Rs. 70,000 Crore
☑️2020-21 - Rs. 20,000 Crore
☑️2021-22 - Rs. 20,000 Crore to be infused as per #Budget2021

So, out of 4Rs, recapitalization too has happened

- FM @nsitharaman

Managerial reforms,
Bringing Co-op banks under @RBI,
Supervisory framework for primary co-op banks,
Bank Board Bureau,
ARCs,
Strengthening risk management practices,
Debarring of willful defaulters from capital markets,

- FM recalls banking reforms introduced in recent years

Large frauds of Rs. 100 Crore or more have an average lag time of 57 months for fraud detection

- FM @nsitharaman explains one of the reasons for the level of NPAs

Live Now

Fugitive Economic Offenders Act of 2018 is showing a lot of results, informs FM @nsitharaman

Live Now

In 2018, just two of the 21 Public Sector Banks were profitable; I am happy to say that in 2020-21, only 2 reported loss for the year

- FM @nsitharaman

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Public Sector Banks are now not only making profits, they are also raising money from the markets, a total of Rs. 58,697 Crore has been raised by PSBs as debt and equity, informs Finance Minister @nsitharaman

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National Asset Reconstruction Company Limited will aggregate NPAs in banks' balance sheets (for which full provisioning has been done) and manage and dispose of them professionally, this will thus clean up banks' balance sheets

- FM @nsitharaman

@FinMinIndia

Along with NARCL, we are also setting up an India Debt Resolution Company Limited

PSBs will have 51% ownership in NARCL, while PSBs and public financial institutions will have a maximum of 49% stake

- FM @nsitharaman

https://twitter.com/PIBMumbai/status/1438473014127972353?s=20

15% cash payment to be made to banks for NPAs based on some valuation, 85% to be given as Security Receipts

For Security Receipts to have their value in tact, Govt. has to give backstop arrangement, hence the gov. guarantee of Rs. 30,600 Cr. cleared by #Cabinet yesterday

- FM

Many Asset Reconstruction Companies are there in the Pvt. sector, but they hesitate to take up big-ticket asset resolutions, that is why govt.-backed Security Receipts are required, explains FM @nsitharaman

The government guarantee shall be for Rs.30,600 Crore, valid for 5 years.

Govt. guarantee can be invoked by NARCL for meeting the shortfall between the face value of the Security Receipt and the actual realization upon resolution / liquidation

- FM

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Through setting up of NARCL and various other steps taken in recent years, we have in totality addressed the issues facing Indian banking sector, which was in 2015 staring at us with twin balance sheet problem,
We now have a way of resolving the stressed assets

- @nsitharaman

Why is govt. guarantee limited to 5 yrs?

Because we expect to clear it in 5 yrs; idea is to ensure value locked within assets is used making banking system robust

So limit provides an incentive for banks

If process delayed beyond 5 yrs, guarantee can't be invoked
-@FinMinIndia

NPAs has been sitting in banks for which they have been repeatedly provisioning

Once you take them out, manage, re-evaluate, give them for people to buy, they'll fetch a higher value

- FM explains rationale for adopting route of NARCL for resolution of stressed assets of banks

Toxic assets worth around Rs. 2 Lakh Crore have been identified for being moved to the NARCL

- informs Secretary, @DFS_India, @FinMinIndia

Out of Rs. 2 Lakh Cr of toxic assets/NPAs, about Rs. 90,000 Cr is going to be warehoused in NARCL in 1st phase

Once valued and sold off, the govt. backstop will come in for the gap between face value & realized value; in many cases, it may not have to be invoked

- explains FM

The aggregated assets going into NARCL are going to be managed by specialist debt resolution professionals belonging to various verticals in India Debt Resolution Company

- FM @nsitharaman

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It is now the #Banks who are raring to go, since they want the money back

We will give all support to ensure that stressed assets are resolved on time and money comes back to the system, making the #Banking system more robust

- Secretary, @DFS_India, @FinMinIndia

One reason for the legacy NPAs has been that bank professionals don't have specialization in dealing with NPA disposals, valuation and cannot deal with asset reconstruction; now, bank staff will be free to do their original tasks within their core competency

- FM @nsitharaman

#Cabinet has approved Central Gov. guarantee up to Rs. 30,600 Cr to back Security Receipts to be issued by NARCL

You can watch FM's media conference
🎥here👉

Thank you for joining us

For more details check this 🧵👇

https://twitter.com/FinMinIndia/status/1438476480539860995

@FinMinIndia