K.R. Srivats | New Delhi, June 6 |
The first set of accounts to be transferred to NARCL from banks during July 2022
On Monday, Finance Minister Nirmala Sitharaman reviewed the progress in setting up the National Asset Reconstruction Company Ltd (NARCL), which is popularly referred to as the “bad bank” as it is intended to take over large value NPA accounts (over ₹500 crore ) from the banks.
“The Finance Minister was apprised of the progress achieved and took note of the approvals and permissions received for both #NARCL and #IDRCL from the government and regulators. The Boards of both #NARCL and #IDRCL, including MDs, are in place, “ said a tweet from Finance Ministry.
With the account-wise due diligence nearing completion, the first set of accounts is expected to be transferred during July 2022. The remaining accounts are proposed to be taken over within the third quarter of the current financial year, according to the Finance Ministry.
It may be recalled that the Union Cabinet had last September approved a government guarantee of ₹30,600 crore for securities and receipts issued by NARCL. NARCL is expected to pay up to 15 per cent of the agreed value for the loans in cash, and the remaining 85 per cent would be government guaranteed receipts. These guarantees can only be invoked by banks on resolution or liquidation of the said assets.
NARCL will take up 100 per cent of provided bad loans from lenders worth ₹2 lakh crore, of which ₹90,000 crore will be transferred in the first phase.
Sitharaman had in her 2021-22 budget speech announced the creation of NARCL, or “bad bank,” to resolve large cases of stress. Public sector banks have 51 per cent ownership in NARCL, which was incorporated in August 2021.
Along with NARCL, a debt resolution firm, India Debt Resolution Company Ltd (IDRCL), has now been set up. IDRCL is a service company or an operational entity that will manage assets and bring in market professionals and turnaround experts. Private lenders own a majority shareholding in IDRCL.