India’s Bad Bank Take Shape With SBI Executive As First Chief
- ByAyushi Ray | July 13, 2021
India’s Bad bank takes shape with SBI executive as first chief . The National Asset Reconstruction Co. Ltd (NARCL), or the so-called bad bank, has been registered in Mumbai with a paid-up capital of ₹74.6 crore, according to filings with the Registrar of Companies (RoC). The bad bank will be headed by Padmakumar Madhavan Nair, a stressed assets expert from State Bank of India (SBI), as the managing director. The other directors are Indian Banks’ Association (IBA) chief executive Sunil Mehta, SBI deputy managing director Salee Sukumaran Nair and Canara Bank’s representative Ajit Krishnan Nair. Touted as a one-stop solution to India’s burgeoning bad loan menace, NARCL was set up on 7 July with an authorized capital of ₹100 crore and has been classified as a “Union government company”, the RoC filings showed.
The setting up of the bad bank is part of the government’s efforts to clean up India’s financial system, which is sitting on one of the biggest piles of bad assets in the world. Transferring soured loans to NARCL will allow banks to cut their losses and renew lending. “Now that the company has been set up, we have to seek an ARC licence from the Reserve Bank of India (RBI) and are preparing the documents for that. Depending on when the approvals come, NARCL will shortly start operations,” said a person aware of the development, seeking anonymity. Initially, state-run banks will transfer 22 bad loan accounts worth ₹89,000 crore to NARCL. Total bad loans worth ₹2 trillion are likely to be transferred in tranches. As announced in the budget for FY22, NARCL will house bad loan accounts of ₹500 crore, or more, in a structure that will contain an asset reconstruction company and an asset management company (AMC) to manage and recover dud assets. The AMC is yet to be set up.
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