Government guarantee to NARCL to help in development of secondary market for security receipts: SBI chief

The government decision to provide a Rs 30,600 crore guarantee to National Asset Reconstruction Company for acquiring stressed loan assets will help in the development of a secondary market for security receipts, State Bank of India Chairman Dinesh Khara said on Friday. Earlier this month, the government decided to provide a sovereign guarantee for security receipts (SRs) issued by National Asset Reconstruction Company Limited (NARCL).

“The SRs (issued by NARCL) are going to be guaranteed by the government, which actually will lend a lot of credibility to these SRs and perhaps it will lead to the development of the secondary market for SRs,” Khara said at a virtual event organised by Bengal Chamber of Commerce and Industry.

The bad bank or NARCL will pay up to 15 per cent of the agreed value for the loans in cash and the remaining 85 per cent would be government-guaranteed security receipts. The government guarantee would be invoked if there is a loss against the threshold value.

He said the bad bank will not merely act as an aggregator of bad loans but will ensure that aggregation of all such assets with the banking system happens.

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