The National Asset Reconstruction Company Ltd (NARCL) has bettered its offer to buy Rainbow Papers from ₹90 crore to ₹110 crore.

This comes in the wake of a consortium of eight banks led by Indian Overseas Bank rejecting NARCL’s earlier offer of ₹90 crore as it was considered too low vis-a-vis their collective exposure of about ₹900 crore.

Bankers are now in a dilemma. On the one hand, the Finance Ministry wants them to show some urgency in selling dud assets to NARCL, on the other they are wary that a huge haircut will attract harsh criticism.

“Even if NARCL buys the asset at ₹110 crore, it will only be a slight improvement over its earlier ₹90-crore offer. So, instead of 90 per cent, the haircut will marginally come down to about 88 per cent. We will carefully weigh the offer,” said a banker.

He said other asset reconstruction companies (ARCs) will be given an opportunity to make a counter-offer to NARCL’s offer under the so-called “Swiss Challenge”.

In case there is no improvement in the counter-offer price or there is no counter-offer, NARCL’s offer will become the final offer.

Gujarat-based Rainbow Papers is engaged in sales of paper and paper products. The products manufactured by the company are primarily used for industrial, packaging, stationery and text book purpose.

NARCL has been set up by banks to aggregate and consolidate select stressed assets (above ₹500 crore each) in the financial system for their subsequent resolution. Public sector banks hold majority stake in the ARC.

Along with NARCL, a service company/ operational entity, India Debt Resolution Company Ltd (IDRCL), has also been floated for resolving stressed assets. Private sector banks hold majority stake in the DRC.