National Asset Reconstruction Company Gets RBI Nod
The Reserve Bank of India, on Monday, cleared the license for National Asset Reconstruction Co., dubbed as India's bad bank. The license was approved under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
Indian Banks' Association Chief Executive Sunil Mehta, via a statement on his Twitter page, said the regulator had provided the license. Now NARCL will be allowed to buy stressed assets from banks and other lenders, against part cash payment and security receipts.
Union Finance Minister Nirmala Sitharaman had announced last month that the government would guarantee security receipts worth Rs 30,600 crore issued by the company.
The NARCL will buy up to Rs 2 lakh crore worth bad loans from lenders and will try to resolve them within five years. In the first phase, lenders have shortlisted bad loans worth nearly Rs 90,000 crore, she had said.
Debasish Panda, finance secretary, said that the NARCL had completed the valuation process for the Rs 2 lakh crore worth bad loans shortlisted for sale.
"The valuation also the NARCL has done...where there is an 18% weighted average which has been accorded to this whole thing," Panda had said.
The first list includes large corporate accounts such as Videocon Oil Ventures Ltd., Amtek Auto Ltd., Castex Technologies Ltd., Jaypee Infratech Ltd. and Reliance Naval & Engineering Ltd., BloombergQuint had reported in June.
The assets would be held by NARCL and managed by the India Debt Resolution Company Ltd, which will be appointed as an asset manager. While NARCL will be largely owned by public sector lenders, the IDRCL will be largely owned by private sector investors. The exercise is expected to clean up bank balance sheets and free up capital.