Banks have identified 22 non-performing assets to be transferred to the National Asset Reconstruction Company Ltd (NARCL) in the first phase, the Chairman of Indian Banks Association (IBA) and CEO of Union Bank of India Rajkiran Rai said on Monday.
Over a period of time, the National ARC is expected to house bad loans of about Rs 2 lakh crore, Rai said during Union Bank of India's earnings concall on June 7.
According to banking executives in the know, these 22 accounts identified for transfer have over Rs 82,000 crore outstanding. The IBA Chairman, however, said the amount may be close to Rs 89,000 crore during the call.
“IBA has asked lead banks to call for meetings and keep an approval ready so that as soon as the ARC is formed, they can start the process. I think the assessment in the first phase was for 22 accounts of about Rs 89,000 crore," said Rai.
The National ARC was first announced in the Union Budget in February this year, after the proposal was made by bankers via the Indian Banks Association. The idea is for the NARCL to house bad loans of over Rs 500 crores each, which will be 100 percent provided by banks. The structure will include an asset management company as well, which will manage these bad loans once acquired by the ARC.
“We have broadly identified the accounts where there is almost close to 100 percent provision… This ARC will handle assets above Rs 500 crore and the main advantage of the NARCL is debt aggregation. They should be able to take the whole asset so that decision making will be quick," added Rai.
CNBC-TV18 had earlier reported that Padmakumar Nair of State Bank of India had been roped in as the Chief Executive Officer of the National ARC.
Public sector banks including State Bank of India, Punjab National Bank, Union Bank of India, Bank of Baroda and others, as well as public sector NBFCs like PFRC, REC are expected to hold up to 10 percent stake each in the NARCL.
A senior executive directly involved in the process told CNBC-TV18 on the condition of anonymity, “We are in the process of getting various approvals, registering the NARCL. After this we will seek RBI’s nod for the ARC. Banks also are individually getting board approvals to acquire stake in the NARCL.” This person added that it may take a month or longer before all this process is completed, and the bad loan transfer will happen only after that.
The legacy NPAs that have been identified among this list of 22 accounts to be transferred include Videcon Group overseas venture VOVL (formerly Videocon Oil Ventures Limited), Reliance Naval, Essar Power and others.
According to people in the know, State Bank of India has identified NPAs with Rs 17,000-18,000 crores outstanding to be transferred to the NARCL, but will continue working on their resolutions until such time that the actual transfer happens.
Punjab National Bank has identified Rs 8,000 crores worth of NPAs, and Union Bank of India Rs 7,800 crores of NPAs to be transferred to the National ARC.
In a note last month, Credit Suisse had said assuming banks transfer about Rs 1 lakh crores of NPAs into the NARCL, it would effectively result in a ~Rs 18,000 crores recap for the PSU Banks (without dilution), and raise their CET-1 by 20-90 basis points.
(Edited by: By Jerome Anthony)
First Published: IST