State Bank of India’s Padmakumar Madhavan Nair is set to take charge as the chief of the National Asset Reconstruction Company Ltd (NARCL), which is being set up by banks, especially from the public sector, to tackle stressed assets.

Nair is currently Chief General Manager with SBI’s Stressed Assets Resolution Group.

The Indian Banks’ Association (IBA) is spearheading the formation of NARCL in consultation with the Finance Ministry and the Reserve Bank of India. Stressed assets with principal outstanding of ₹500 crore and above, aggregating about ₹1.50 lakh crore, are expected to be transferred to NARCL. Like other ARCs, NARCL too will have to invest in at least 15 per cent of the Security Receipts (SRs) it issues to acquire stressed assets, according to industry experts. Further, the Government may give a guarantee for SRs.

Union Finance Minister Nirmala Sitharaman, in her union budget speech on February 1, 2021, observed that the high level of provisioning by public sector banks on their stressed assets calls for measures to clean up their books.

In this regard, she said an Asset Reconstruction Company and an Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds (AIFs) and other potential investors for eventual value realisation.

“We need to look at various aspects like regulations, different approvals needed, and processes. There are multiple things that need to be looked at,” said Rajkiran Rai G, MD & CEO, Union Bank of India. Rai is also the Chairman of IBA.

At a recent press meet, Rakesh Sharma, MD & CEO, IDBI Bank, said large public sector and private sector banks will be investing in NARCL, with each bank taking less than 10 per cent stake. IDBI Bank will also consider investing in the company.

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