MUMBAI (CU)_In early July this year, India got its own bad bank, as the National Asset Reconstruction Company (NARC) was registered with the Registrar of Companies (RoC) Mumbai. The organisation was set up by the Indian Banks’ Association (IBA), with the aim of cleaning up stressed assets on the books of public sector banks, by disposing them to alternative investment funds and other potential investors for eventual value realisation.
Now, the IBA has submitted an application to the Reserve Bank of India seeking license to undertake asset reconstruction business, which, according to sources may be granted over the next few weeks. Public sector banks, led by Canara Bank are expected to own 51 per cent stake in NARCL, while the equity participation of private banks will be in India Debt Management Company Limited (IDMCL).
P M Nair, a stressed assets expert from the State Bank of India has already been appointed as the managing director of the new bad bank. The other directors in the board include IBA chief executive Sunil Mehta, Canara Bank’s Chief General Manager Ajit Krishnan Nair and the Deputy Managing Director of SBI, S S Nair.
Last year, a proposal was submitted by the IBA to create a bank in order to resolve non-performing assets. This proposal was accepted by the government which recommended the establishment of an asset reconstruction company and asset management company model. Accordingly, 22 stressed accounts amounting to ₹890 billion will be transferred to NARC under the first phase. They will be taken over by the new bad bank by paying 15 percent in cash and 85 percent as security receipts, which will be backed by a government guarantee that will ensure their face value.
