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Source: ET

 Context: The government has finally renewed its federal guarantee to the National Asset Reconstruction Company (NARCL), making it easier for the entity to acquire bad loans from lenders.


About NARCL:

NARCL has been set up by banks as a strategic initiative to clean up the legacy stressed assets with an exposure of Rs 500 crore and above in the Indian Banking system.

  • Public Sector Banks maintain 51% ownership in NARCL.

Purpose: The main purpose behind the formation of the NARCL is to acquire bad loans from banks and sell them to buyers who are looking for Non-Performing Assets (NPAs). The organisation itself will also decide the price of these NPAs.

Structure: It has been incorporated under the Companies Act and registered with RBI as an Asset Reconstruction Company under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.