The Union Cabinet today cleared the promulgation of an Ordinance for the securitisation of assets of banks and financial institutions. The Ordinance aims at putting in place a framework for the enforcement of security or foreclosure norms and setting up asset reconstruction companies to take over non-performing assets (NPAs) of over Rs 74,000 crore of banks and FIs.
The Ordinance, however, proposes to keep NPAs and loans of up to Rs 1 lakh in the agricultural sector out of the ambit of the ARCs. While bankers estimate that NPAs in the agriculture sector stand at around Rs 7,500 crore, no estimates are available for small loans.
Finance ministry officials said the decision to exempt farm loans was taken because these could not be mortgaged and the government did not want recovery agencies to harass small farmers.
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