India Banking - NARCL-IDRCL Structure Progressing Affirmatively; Resolution Will Be Key: ICICI Securities
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ICICI Securities Report
The progressive developments with respect to the resolution of existing stressed assets under National Asset Reconstruction Company Ltd.-Indian Debt Resolution Company Ltd., structure will be positive for the banking sector (in general) and public sector undertaking banks (in particular).
How it will benefit banks:
realisable value received in the form of cash will lead to provisioning write-backs,
no risk of mark-down of security receipts due to guarantee cover; however, delayed resolution may deteriorate time value;
cash receipts can be further leveraged for lending;
sovereign guaranteed security receipts will attract zero risk weights for five years, thereby, freeing capital on less than fully provisioned bad assets.
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