First phase: Rs 89k-crore loans to be moved to NARCL

The government had announced additional assistance of up to 10 per cent of the outstanding credit as of February 29, 2020, to borrowers covered under ECLGS 1.0 as per the RBI guidelines.

By Ankur Mishra

Lenders have identified 22 stressed accounts, worth around Rs 89,000 crore, to be transferred to the proposed National Asset Reconstruction Company (NARCL) in the first phase. A much larger exposure — of an estimated Rs 2 lakh crore — is expected to be transferred over time.

The chairman of Indian Banks’ Association (IBA), Rajkiran Rai G, said banks have identified accounts which can go to the ARC in the first phase and have arrived at this number. “However, once the ARC is formed, the management will look at these assets and only if they find that it is worthwhile, they will make an offer,” Rai said.

Rai, who is also MD and CEO of Union Bank of India, said of the total amount, Union Bank had identified Rs 7,800-crore bad loans will be sent to NARCL. The lender will also pick up a 9% stake in the asset reconstruction company. Similarly, Punjab National Bank (PNB) MD and CEO SS Mallikarjun Rao on Saturday had said the lender had identified Rs 8,000-crore NPAs to be sent to NARCL.

“What we have done is a preliminary work to keep the ground ready so that when the ARC is registered, it can take off quickly,” Rai said. The accounts identified are those where the provision coverage is nearly 100% and the exposure is more than Rs 500 crore. The government’s plan, as outlined in the Union budget for 21-22, is to create an ARC and an AMC to take over and resolve bad loans.

Rai said the Indian Banks’ Association (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. Care Ratings had earlier said that that once the transfer of Rs 2 lakh crore was complete, the revised gross bad loan ratio could be around the same levels prior to the asset quality review exercise conducted by the Reserve Bank of India (RBI) in 2015.