Setting up of National Asset Reconstruction Company Ltd, the proposed bad bank for taking over stressed assets of lenders, was announced in the Budget for 2021-22.
Banks have identified around 22 bad loans worth Rs 89,000 crore to be transferred to the National Asset Reconstruction Company Ltd (NARCL) in the initial phase, according to Union Bank of India MD and CEO Rajkiran Rai G.
Setting up of NARCL, the proposed bad bank for taking over stressed assets of lenders, was announced in the Budget for 2021-22.
“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. I think the assessment in the first phase was of 22 accounts of about Rs 89,000 crore for the system,” Rai, who is also the chairman of IBA, told reporters on Monday.
He said banks have identified the accounts where there are almost close to 100 per cent provisions and are above Rs 500 crore in exposure.
“As banks, we have prepared the ground, identified accounts which can go to the ARC in the first phase and have arrived at this number,” he said.
He further said the 22 accounts are those where the lead banks have already conducted meetings with other banks and got an in-principle approval to transfer to the ARC whenever formed.
“Once the ARC is formed, the management will look at these assets and only when they find that it is worthwhile buying, they will make an offer. Let us not pre-empt the decision of ARC to buy these assets,” he added.
When asked whether banks will look at transferring more accounts after these 22 accounts, Rai said, “Definitely. The initial estimate that this company can take is about Rs 2 lakh crore of bad loans. These numbers are the estimates of IBA and the banking industry and once the ARC is formed, those calls will be taken by it.”
The Rs 2 lakh crore of NPAs will go in stages, he said.
Rai said his bank is likely to buy a 9 per cent stake in NARCL. The lender has identified 17 accounts worth Rs 7,800 crore for transferring to the proposed bad bank.