RBI licenses National Asset Reconstruction Company: CEO of Association of Indian Banks

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“Happy to share #RBI licensed #NARCL on 4.10.2021. The approval was granted under Article 3 of the #SARFAESI Act of 2002, ”tweeted Association of Indian Banks CEO Sunil Mehta.

On October 4, the Reserve Bank of India (RBI) granted a license to the National Asset Reconstruction Company Ltd.

NARCL was incorporated in July in Mumbai after its registration with the Registrar of Companies (RoC).

“Happy to share #RBI licensed #NARCL on 4.10.2021. The approval was granted under Article 3 of the #SARFAESI Act of 2002, ”tweeted Association of Indian Banks (IBA) CEO Sunil Mehta.

IBA, responsible for setting up the bad bank, has set up a preliminary board for the NARCL.

The company hired PM Nair, a stressed assets expert from the State Bank of India (SBI), as its managing director.

The other directors on the board are IBA CEO Mehta, SBI Deputy Managing Director SS Nair, and Canara Bank Managing Director Ajit Krishnan Nair.

Finance Minister Nirmala Sitharaman said in the 2021-2022 budget that the high level of provisioning by public sector banks to their stressed assets calls for measures to clean up the bank books.

“A limited asset reconstruction company and an asset management company would be created to consolidate and take over the existing stressed debt,” she said in the budget speech.

It will manage and sell the assets to alternative investment funds and other potential investors for possible valuation, she said.

Last month, Cabinet approved a proposal to provide a government guarantee worth 30,600 crore to security receipts issued by NARCL.

NARCL will pay up to 15% of the agreed value for bad debts in cash and the remaining 85% would be government guaranteed collateral receipts.

It will be 51% owned by public service bodies and the remainder by private sector lenders.

Last week, SBI, Union Bank of India and Indian Bank each took 13.27% stake in NARCL, while Punjab National Bank acquired around 12% stake.

NARCL will take over identified bad debts from lenders.

The lead bank with an offer in the hands of NARCL will go for a “Swiss Challenge”, in which other actors in the reconstruction of assets will be invited to improve the offer made by a chosen bidder to find a higher valuation high of a non-performing asset for sale.

The company will take over the assets that are 100% provided by the lenders. The banks have identified around 22 bad loans worth 90,000 crore to be transferred to NARCL in the initial phase.


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