The board of the new bad bank, named National Asset Reconstruction Company (NARCL), is likely to be expanded after the Reserve Bank of India (RBI) issues an ARC licence to the company. Chief executive of the Indian Banks’ Association (IBA) Sunil Mehta is likely to be appointed the non-executive chairman of NARCL, according to sources in the know.
“The next big step after incorporation will be the issue of the licence by the RBI. There are a few processes pending right now, after which NARCL will approach the regulator. That is the topmost priority at this stage,” said a banker close to the developments. The ARC is working hard to complete this leg of the process as soon as possible and it may approach the RBI during the current month, the banker said on condition of anonymity.
The new directors who join the board will likely be nominees from other shareholding institutions.
NARCL was incorporated on July 7 with a paid-up capital of Rs 74.6 crore, according to filings with the Registrar of Companies (RoC). The RoC website names Mehta, former State Bank of India (SBI) executive Padmakumar Madhavan Nair, SBI Deputy Managing Director Salee Sukumaran Nair and Canara Bank’s Ajit Krishnan Nair as directors in the bad bank. Padmakumar Madhavan Nair is set to take charge as the managing director of NARCL.
Banks have so far identified 22 loan accounts worth a total outstanding of Rs 89,000 crore to shift to NARCL. The establishment of the NARCL was announced in the Union Budget for 2021-22 for aggregating the chunky bad assets in the banking system that still remain unresolved. Assets with an exposure of Rs 500 crore or more will be moved to the ARC, which will work in conjunction with an asset management company.
Last month, IBA Chairman Rajkiran Rai G had said that the number of accounts indicated above includes those where lead banks have been able to hold discussions with other consortium banks. What NARCL eventually buys will depend on its own appetite, he had said.
“What we have done is preliminary work to keep the ground ready so that when the ARC is registered, they can start the process. We have broadly identified accounts where there are close to 100 percent provision and which are accounts above Rs 500 crore,” Rai said, adding that for these accounts, lead banks have been asked to call for meetings with other consortium members and keep approvals ready. Eventually, assets worth Rs two lakh crore could move to the bad bank, Rai said.
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