In a bid to clean up their books, Banks will be transferring 15 stressed assets aggregating about ₹50,000 crore by March-end 2022 to the National Asset Reconstruction Company Ltd (NARCL), according to State Bank of India (SBI) Chairman Dinesh Kumar Khara.

The aforementioned assets (above ₹500 crore each) are part of the 38 identified stressed assets aggregating ₹83,000 crore that Banks will be transferring to NARCL.

Overall, chunky stressed assets aggregating about ₹1.50 lakh crore are expected to be transferred to NARCL.

NARCL, which has already been set up by banks, will aggregate and consolidate select stressed assets in the financial system for their subsequent resolution. Public sector banks are holding 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 these stressed assets. Private sector banks are holding majority stake in the DRC.

Khara said: “The transfer (of stressed assets) will happen in a phased manner. In phase one, about 15 accounts aggregating to about ₹50,000 crore are expected to be transferred to NARCL.

“We are trying to have these accounts transferred within this financial year after completing all the required processes.”

Assets acquisition

The SBI Chief observed that NARCL will acquire the identified assets by paying the lenders 15 per cent of the acquisition value in cash and 85 per cent via Security Receipts/SRs. These SRs will be secured by Government of India guarantee for their face value.

What this means is that lenders will receive 15 per cent of the acquisition value upfront.

On the initial proposal that NARCL would acquire stressed assets of about ₹2 lakh crore in phases, J Swaminathan, Managing Director, SBI, said this was the universe of stressed assets that was identified for transfer to NARCL, but a few of them got resolved over the last one year.

He noted that so far Joint Lenders’ Meetings (JLMs) have met and taken a decision to transfer stressed assets aggregating about ₹83,000 crore to NARCL.

“Currently, the target is to transfer at least the initial set of 15 accounts aggregating Rs 50,000 crore.

“For the remaining accounts, the process still is on…and the transfer will probably happen over the next year…This universe does not include accounts that have been classified as fraud,” Swaminathan said.

Khara emphasised that in the case of other stressed accounts (besides the 38 accounts) also JLMs are going to meet to take a call on transferring them to NARCL.

“These are all moving parts. There would be a situation where some of the banks might be in a position to resolve some of assets which were originally identified for transfer.

“So, the final number will actually keep on moving. But we expect that it will be somewhere around Rs 1.50 lakh crore,” SBI Chief said.

The broad features of the arrangement are that NARCL will acquire and aggregate the identified stressed accounts from Banks, while IDRCL, under an exclusive arrangement, will handle the debt resolution process.

“This exclusive arrangement will be as per the scope defined in the debt management agreement executed between the two entities. The arrangement will be on principal-agent basis. The final approval and ownership for the resolution shall lie with NARCL as the principal,” Khara said.

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