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Business News/ Industry / Banking/  20% of NPAs set for bad bank resolved
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20% of NPAs set for bad bank resolved

Under the new structure approved by the regulator, the bad bank, NARCL will acquire and aggregate the bad loan accounts from banks, while IDRCL will handle the resolution process under an exclusive arrangement

Under the new structure approved by the regulator, the bad bank, NARCL will acquire and aggregate the bad loan accounts from banks, while IDRCL will handle the resolution process under an exclusive arrangement. Photo: MintPremium
Under the new structure approved by the regulator, the bad bank, NARCL will acquire and aggregate the bad loan accounts from banks, while IDRCL will handle the resolution process under an exclusive arrangement. Photo: Mint

MUMBAI : About 20% of the non-performing assets (NPAs) of banks that were to be transferred to National Asset Reconstruction Co. Ltd (NARCL) in two tranches has been resolved, said a person aware of the development. “Almost 40,000 crore of bad loans have been resolved since the annou-ncement was first made, and by the time the NARCL starts operating more NPAs may get resolved," he said seeking anonymity.

In February 2021, finance minister Nirmala Sitharaman said that the government planned to set up a bad bank. Subsequently, bankers said about 2 trillion of bad loans will be transferred to NARCL. However, there were delays after the Reserve Bank of India (RBI) expressed its reservations on the proposed structure of the bad bank. Banks then presented a revised proposal, which was approved by the banking regulator.

Under the new structure the bad bank will acquire and aggregate bad loan accounts from banks, while India Debt Resolution Co. Ltd will handle the resolution process under an exclusive arrangement.

However, even after NARCL was set up, it is still saddled with delays and has time till 30 June to initiate the first transaction to meet RBI’s licensing regulations. “The identification of accounts and due diligence is almost done. They are in the final lap of getting approvals ready and making binding offers to the banks. We expect that (it is) a couple of weeks away," Swaminathan Janakiraman, managing director, State Bank of India, said on Friday.

There are global parallels to taking the bad bank route to clean up stressed assets. But an earlier bid by India to address non-performing assets issue had limited success when the government had set up the Stressed Asset Stabilization Fund (SASF) in 2004 to hive off stressed assets of IDBI Ltd.

ABOUT THE AUTHOR
Shayan Ghosh
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Updated: 13 May 2022, 11:02 PM IST
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