NEW DELHI: The National Asset Reconstruction Company Ltd (NARCL) may not be able to achieve the target of acquiring Rs 2 lakh crore assets by the end of the current financial year.
According to sources in the finance ministry, the Rs 2 lakh crore target is not sacrosanct. Many of the assets identified to be taken over by the NARCL have already been resolved, and therefore, it is not necessary that the target has to be achieved, a finance ministry official told TNIE.
NARCL, which is known as Bad Bank, has so far acquired around Rs 93,000 crore worth of stressed assets. The asset reconstruction company, which was set up in 2021, had the target of acquiring stressed assets of about Rs 2 Lakh crore in phases within extant regulations of RBI. It intends to acquire these through 15% Cash and 85% in Security Receipts (SRs).
The government has set aside Rs 30,600 crore to back SRs issued by NARCL for acquiring these assets. The guarantee will be valid for 5 years. The condition precedent for invocation of guarantee would be resolution or liquidation. The guarantee would cover the shortfall between the face value of the SR and the actual realisation.
The finance ministry source also added that it is not that the NARCL would be wound off after acquiring Rs 2 lakh crore assets. It would continue to exist as an asset reconstruction company. “New stressed assets would continue to come up for acquisition,” he added.
The official, however, reiterated that government guarantee is only for resolution of stressed asset cases, and not for other purposes. For example, NARCL last acquired SREI Infrastructure Finance and SREI Equipment Finance through a competitive bidding process under the Insolvency and Bankruptcy Code (IBC). The official said that no guarantee has been provided for such acquisitions.
The NARCL had acquired the two SREI Group NBFCs by making an upfront payment of Rs 14,660 crore to creditors. The resolution plan of NARCL also has a provision of offering 20% stake in SREI Infrastructure Finance to financial creditors.
NARCL has been set up by banks to aggregate and consolidate stressed assets for their subsequent resolution. PSBs will maintain 51% ownership in NARCL.