Banks Can List SRs on Bourses
Banks will have the option of exiting the unsold portion of bad loans held as security receipts (SRs) on their books, a move that will help resolve India’s long-standing dud debt problem. Finance minister Arun Jaitley, in his Budget, allowed the listing of SRs on stock exchanges. When banks sell bad loans to asset reconstruction companies (ARCs), they get some cash. Against the balance amount, ARCs issue SRs, which are similar to bonds that can be redeemed over 5-7 years. Thus, in a way, bad loans sold to ARCs continue to be on the books of banks in the form of investments.