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Twin-Balance Sheet problem

Santhosh Kumar 12/07/2023

Twin-Balance Sheet problem upsc notes
Context
Finance Minister Nirmala Sitharaman's statement
Indian economy has twin-balance sheet advantage
Source: TH
What
Both banks and corporates face financial distress
High amount of non-performing assets (bad loans) (NPA)
NPA of public sector banks was 12% in 2016-17
Corporates have accumulated excessive debt
RBI's Financial Stability Report
Banking and corporate sector balance sheets have strengthened
India might have twin balance sheet advantage
Gross NPA ratio at 10-year low of 3.9%
Corporate balance sheet healthiest in 10 years
Profitability of public sector banks tripled since 2014
Reached over ₹1 lakh crore in 2022-23
Government initiatives
4R strategy (Recognizing, recapitalizing, resolving, reforming)
Central Repository of Information on Large Credits (CRILC)
Banks share information on large loans
Insolvency and Bankruptcy Code, 2016
National Asset Reconstruction Company (NARCL)
To handle bad debt

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National Asset Reconstruction Company (NARCL) upsc notes Source: ET Context Federal guarantee to NARCL renewed by the government Makes it easier for NARCL to acquire bad loans from lenders About NARCL Set up by banks A strategic initiative To clean up the legacy stressed assets Assets with an exposure of Rs 500 crore and above In the Indian Banking system Ownership Public Sector Banks maintain 51% ownership Purpose Acquire bad loans from banks Sell them to buyers Buyers who are looking for Non-Performing Assets (NPAs) The organisation decides the price of these NPAs Structure Incorporated under the Companies Act Registered with RBI as an Asset Reconstruction Company Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

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Categories: NPA

Tags: 12.07.2023, Newsbits

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