Bad bank Details announced. What it means, how it works

Union Finance Minister Nirmala Sitharaman has said the Centre will provide Rs. 30,600 crore in guarantees to National Asset Reconstruction Company Limited (NARCL) to buy bad loans from banks. The NARCL will purchase bad loans from banks under a 15:85 structure, where it will pay up to 15% of the net asset value in cash and issue Security Receipts (SRs) for the rest. The Government guarantee would be invoked if there is loss against the threshold value. The government guarantee will be valid for a period of five years. An India Debt Resolution Company Limited (IDRCL) will also be setup. Finance Minister said that 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.