NARCL has been set up with a paid-up capital of ₹80.5 lakh on an authorized capital of ₹50 crore
Arvind Sadashiv Mokashi has been appointed on the board as SBI's nominee director
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The government has set up the India Debt Resolution Company Ltd (IDRCL), an asset management company (AMC) that will work in tandem with the National Asset Reconstruction Company Ltd (NARCL) to clean up bad loans, according to documents available with the Registrar of Companies (RoC).
IDRCL has been set up with a paid-up capital of ₹80.5 lakh on an authorized capital of ₹50 crore.
Arvind Sadashiv Mokashi has been appointed on the board as State Bank of India’s (SBI’s) nominee director. The other directors are Narayan Keelveedhi Seshadri and Anilraj Chellan.
Shareholders of IDRCL include Bank of Baroda (BoB), Punjab National Bank (PNB), Bank of India (BoI), Bank of Maharashtra, SBI, Union Bank of India, Canara Bank, Indian Bank and IDBI Bank. BoB, SBI, Union Bank of India, Indian Bank, and IDBI Bank have subscribed to 99,000 equity shares each of ₹10, while PNB has subscribed to 90,000 shares, and Bank of India and Bank of Maharashtra have taken 50,000 shares each. Canara Bank has taken the maximum of 120,000 shares, according to documents available with the RoC.
The primary objectives of the company are to undertake all kinds of debt management, operational management, resolution advisory, support and consultancy services in relation to debt resolution, and insolvency resolution.
Other objectives include providing advisory services relating to debt resolution, managing the affairs of the corporate debtor or person and assisting asset reconstruction companies (ARCs) to act and execute “in the name and on behalf of the corporate debtor or person of all deeds, receipts and other documents", according to the company’s memorandum of association.
The government had earlier said the aim is to create a bad bank to house toxic loans of ₹500 crore and above, in a structure that will contain an ARC and an AMC to manage and recover dud assets. Banks will initially transfer 22 bad loan accounts of ₹89,000 crore to NARCL. The aggregate amount of bad loans likely to be transferred in tranches will be ₹2 trillion. Last week, the government also cleared a guarantee of ₹30,600 crore for security receipts issued by NARCL.
Lenders sell stressed loans to ARCs at a discount, either in exchange for cash or a mix of cash and security receipts. These receipts are redeemable as and when the ARC recovers the specific loan. That apart, ARCs charge an asset management fee of 1.5-2% of the asset every year.
Union finance minister Nirmala Sitharaman has laid a lot of emphasis on the professionals managing the assets, she said in a recent interview with Hindustan Times. The government has thus set up IDRCL along with NARCL.
“It (IDRCL) will have panels of experts, because the assets belong to various categories. These panels will deal with assets in domains in which they have expertise. With that kind of specialized application of mind on each of these assets, we think they will be made up in such a way and valued in such a way that the market will find it interesting. Bank officials do not have that kind of specialization," Sitharaman said.
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