Accelerated asset transfers to bad bank, IBA tells lenders

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The Association of Indian Banks (IBA) has asked lenders to intensify internal deliberations and finalize a list of major stressed assets within 15 days for onward transfer to the National Asset Reconstruction Company (NARCL).

The IBA, which had spearheaded the NARCL initiative, has asked the major consortium banks to expedite deliberations on the issue of selling assets to NARCL at joint lenders’ forum meetings, banking sources said. to FE.

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The move comes at a time when an informal deadline for the sale of significant non-performing assets (NPAs) of Rs 50,000 crore to NARCL in the first phase has seen repeated extensions – from March to June to September now. This is despite the fact that NARCL was announced in the FY22 budget and the government declared a sovereign guarantee on security receipts issued by the so-called bad bank in September last year. The guarantee is estimated to cost the Treasury Rs 30,600 crore over five years. Some bankers blamed the slowness of identifying stressed assets and resolving some procedural issues for the delay.

NARCL recently made an offer to the banks for two assets, an important step towards starting its operations. However, no sale of assets has yet been completed.

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Lately, some banks have started finalizing the list of assets to be transferred to NARCL. The Punjab National Bank (PNB), for example, has focused on eight NPA accounts worth Rs 2,486 crore. The bad bank is expected to start operations by September, IBA Chairman and PNB MD AK Goel said recently. Indian Bank has also identified stressed assets worth Rs 2,500 crore to be transferred in two phases.

According to the plan, NARCL will acquire the bad assets by making an offer to the main bank. Once its offer is accepted, the India Debt Resolution Company, which is being set up as an asset management company under the NARCL, will manage the bad debts, value them and eventually sell them. In total, it is estimated that large NPAs worth Rs 2 trillion will be transferred to NARCL over five years.

Credit Restructuring Process Validation Panel
Separately, the IBA has also decided to set up a panel of experts led by former Canara Bank Chairman, TN Manoharan, on top of a similar committee in each bank, as an initiative led by the industry to validate various restructuring processes for large loans above 500 crore. . Manoharan was a member of the RBI’s Expert Panel on Covid-19 Stress Resolution Framework.

PV Bharathi, former MD and CEO of the former Corporation Bank, will be the alternate chairman of the expert panel. The committee will also include Keshav Kumar, former Deputy Managing Director of State Bank of India; MR Biswal, former Executive Director of Union Bank; and Gopal Murli Bhagat, IBA Deputy Director General (Secretary Member).

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