Banks to transfer 15 Non-Performing Assets accounts worth Rs 50,000 crores to NARCL in FY22.

February 4, 2022

Why in news?

As per SBI Chairman Dinesh Kumar Khara,National Asset Reconstruction Company Ltd (NARCL) or bad bank and India Debt Resolution Company Ltd (IDRCL) are ready to commence operations.
A total of 38 Non-Performing Asset(NPA) accounts worth Rs 82,845 crore have been identified to be transferred to NARCL initially.
In Phase I, 15 stressed assets (i.e. Non-Performing Asset accounts) worth Rs 50,000 crore will be transferred to NARCL in the current financial year.

About NARCL AND IDRCL

The National Asset Reconstruction Company Ltd or NARCL is the name of the asset reconstruction company incorporated to take over and dispose of the stressed assets of commercial banks.
Stressed assets of commercial banks worth Rs 2 lakh crore have been identified to be taken up in the first phase by the NARCL.
NARCL will be starting with a total capital of Rs 6,000 crore.
In October 2021, NARCL received the RBI’s license to enable it to commence operations as a ‘bad bank’.
Public Sector Banks (PSBs) have a 51% ownership of NARCL.
Banks will aggregate and consolidate stressed assets with NARCL for resolution.
NARCL’s Managing Director is PM Nair, a stressed assets expert from the State Bank of India (SBI).
NARCL will acquire fully provisioned stressed assets by making an offer to the lead bank in a consortium of lenders; once the offer is accepted, NARCL will engage with India Debt Resolution Company Ltd. (IDRCL) for management and resolution of the stressed assets.
IDRCL is an operational entity/service company that would manage the assets and engage professionals and turnaround experts in the process.
PSBs and public FIs would hold a maximum of 49% stake in IDRCL while the remaining 51% will be vested with private lenders.
Stressed assets acquired by NARCL will be managed by IDRCL for price discovery and value addition.