The National Asset Reconstruction Company (NARCL), which was supposed to start functioning in April, is yet to begin the process of acquiring stressed loans from banks.
Banking sources told The New Indian Express that no banks have begun the transfer of loans yet and the same is likely to start only by the end of the September quarter. In the first phase, the NARCL was supposed to acquire bad loans amounting Rs 50,000 crore by April 2022.
However, it seems the NARCL is taking much longer to get its operations in place than expected.
MD and CEO of Punjab National Bank (PNB) Atul Kumar Goyal while announcing the quarterly results of the bank told media that in the first phase PNB will be transferring eight accounts with bad loans amounting to Rs 2,486 crore will be transferred by the end of September quarter.
While he did not elaborate on the reasons for delay in transferring the loans to NARCL, he did say that now the bad bank is ready with the compliances and team in place and that most likely banks would start transferring bad loans by the end of the current quarter.
NARCL, which is also popularly called the bad bank, will acquire and aggregate the bad loans from the lenders and then transfer the same to India Debt Resolution Company (IDRCL) for resolution of those loans. It is likely to acquire Rs 2 lakh crore of stressed loans from the banking sector.
The lenders will receive 15% upfront cash payment and the rest in the form of security receipts (SRs) guaranteed by the government of India for their face value. The guarantee is for Rs 30,600 crore.
If the bad bank can’t sell the loan or sells them for a loss, the SRs guaranteed by the government will be used to make good the difference between what the lender was supposed to receive and what NARCL was able to raise.
The guarantee will be valid for a period of 5 years from the SR’s date of issue.
Banking sources told The New Indian Express that the necessary capital and the board for both NARCL and IDRCL are in place now. SBI veteran Sundar Natarajan has taken charge as Managing Director of NARCL and Avinash Kulkarni has taken charge of IDRCL.