NEW DELHI: Banks are likely to transfer about 80 large NPA accounts for the resolution to National Asset Reconstruction Company Ltd (NARCL), which is expected to be operational by next month.
NARCL is the name coined for the bad bank announced in the Budget 2021-22. A bad bank refers to a financial institution that takes over the bad assets of lenders and undertakes resolution.
The size of each of these NPAs accounts is over Rs 500 crore and the banks have identified about 70-80 such accounts to be transferred to the proposed bad bank, sources said.
It is expected that NPAs over Rs 2 lakh crore will move out of the books of the banks to the bad bank, they added.
Letters to the editor dated May 19, 2021
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For an effective NARCL
Apropos ‘For a good ‘bad bank’ (May 19), an NARCL funded jointly by the government and Indian banks would take away the independence and objectivity of the former in the selection of the assets to be acquired. A privately funded company, on the other hand, would only take over the easily liquidable NPAs, leaving many PSBs still saddled with huge bad loans.
In the circumstances, the proposed setting up of an entity that would take over the stressed assets of banks, by funding them 15 per cent of the value and providing security receipts for the balance, fully guaranteed by the government, seems to be a feasible solution, provided the existing recovery mechanisms like the IBC are made more effective.
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NARCL to further Govt’s agenda of disinvestment of IDBI Bank, privatisation of PSBs
May 12, 2021
Once chunky stressed assets are out of the books, banks’ valuation will improve
The National Asset Reconstruction Company Ltd (NARCL), currently being put together by banks and other lenders, may structurally alter the balance-sheets of banks in such a way that it will further the Government’s agenda of divesting its stake in IDBI Bank and privatising two public sector banks (PSBs).
Once chunky stressed assets are out of the books, the valuation of these banks will improve, making them more saleable, opine market experts.
Padmakumar Nair to take charge of NARCL
May 11, 2021
State Bank of India’s Padmakumar Madhavan Nair is set to take charge as the chief of the National Asset Reconstruction Company Ltd (NARCL), which is being set up by banks, especially from the public sector, to tackle stressed assets.
Nair is currently Chief General Manager with SBI’s Stressed Assets Resolution Group.
The Indian Banks’ Association (IBA) is spearheading the formation of NARCL in consultation with the Finance Ministry and the Reserve Bank of India. Stressed assets with principal outstanding of ₹500 crore and above, aggregating about ₹1.50 lakh crore, are expected to be transferred to NARCL. Like other ARCs, NARCL too will have to invest in at least 15 per cent of the Security Receipts (SRs) it issues to acquire stressed assets, according to industry experts. Further, the Government may give a guarantee for SRs.