The government’s plan, as outlined in the Union’s budget for 21-22, is to create an ARC and AMC to take over and resolve bad debts.
Par Ankur Mishra
The lenders have identified 22 stressed accounts, worth around Rs 89,000 crore, to be transferred to the proposed National Asset Reconstruction Company (NARCL) in the first phase. A much larger exposure – of an estimated crore of Rs 2 lakh – is expected to shift over time.
The President of the Association of Indian Banks (IBA), Rajkiran Rai G, said that the banks have identified accounts that can go to the ARC in the first phase and have arrived at this number. “However, once the CRA is formed, management will look at these assets and only if they find it worthwhile, will they make an offer,” Rai said.
Rai, who is also managing director and CEO of Union Bank of India, said that about the total amount, Union Bank has identified bad loans of Rs 7,800 crore which will be sent to NARCL. The lender will also take a 9% stake in the asset reconstruction company. Likewise, the managing director and CEO of Punjab National Bank (PNB) SS Mallikarjun Rao said on Saturday that the lender had identified NPAs of Rs 8,000 crore to be sent to NARCL.
“What we’ve done is preliminary work to keep the pitch ready so that when the ARC is registered it can take off quickly,” Rai said. The accounts identified are those where the provision coverage is close to 100% and the exposure is greater than Rs 500 crore. The government’s plan, as outlined in the Union’s budget for 21-22, is to create an ARC and AMC to take over and resolve bad debts.
Rai said the Association of Indian Banks (IBA) has asked major banks to call meetings and have approval ready so that as soon as the ARC is formed, they can begin the process. Care Ratings previously said that once the Rs 2 lakh crore transfer is complete, the revised gross bad debt ratio could be at about the same levels ahead of the asset quality review exercise conducted by the Reserve Bank. of India (RBI) in 2015.
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