How does Warak Credit Bank work? Is it possible to settle Rs 2 lakh crore debt .. !!
The Central Government has expedited the implementation of the Warak Credit Banking Scheme announced during the budget presentation as the Union Ministry of Finance is compelled to reduce the Warak debt burden, which is a major problem for Indian public sector banks, while at the same time forcing Warak to settle its debts expeditiously.
Warak Credit Bank
The Warak Credit Bank, also known as the National Asset Reconstruction Company Ltd (NARCL), was launched in July and was given a Rs 30,600 crore guarantee by Parliament on the 16th.
How does this Warak Credit Bank work in this situation ..? What is the use of this ..?
NARCL is a system for collecting warak loans in public sector banks, ie loans declared to be non-performing by banks.
Banks usually lend large sums of money by mortgaging assets. In this case, the NARCL’s mission is to reduce the burden on banks by selling non – performing assets.
Debt over Rs 500 crore
The NARCL system is only available for loans exceeding Rs 500 crore. It has a policy of not forcing loans that are less than that. Banks are already working on resolving the Warak debt.
But its unique feature is that not only is the loan settlement quicker as it is a system developed exclusively for the Warak loan, but it will also make it much easier for large investors and foreign investment firms to access a single system to seize the assets trapped in the Warak loan.
Rs 2 lakh crore debt
Although NARCL has decided to seize Rs 2 lakh crore in debt from Indian public sector banks, it has decided to settle only the Rs 89,000 crore debt in key accounts with high debt burden.
How does it work ..?
The NARCL system will inspect the assets belonging to the Warak loan account in the banks and determine the specific amount. Of this, NARCL will advance 15 per cent and seize the assets, with the remaining 85 per cent as security receipts based on the Rs 30,600 crore guaranteed by the government.
Security Receipt Rhythm
The security receipt for 85 per cent of the proceeds from the sale of the property will be withdrawn and the due amount will be paid. The main problem is that the NARCL system will be severely affected if the assets cannot be sold, on the one hand, this method will quickly reduce the banks’ bad debt burden.
The government will fill
It has also been reported that the government will meet the security receipt value provided by the NARCL system to the banks if there is any deficiency in the value of the Warak loan.
Only 5 years ..?!
On the one hand, the banking side welcomes this, but market experts say it will not succeed. The main reason for this is that the government has guaranteed this 30,600 crore rupees for 5 years only. What is the status of the NARCL system after 5 years is a big question mark. Similarly it is very difficult to settle the total Warak debt.
Although the NARCL system was launched in July, it has not yet been approved by the Reserve Bank and is unable to move on to the next steps. The organization is said to be licensed soon.