Banks miss Rs 50,000 crore bad loan transfer deadline of March 31 to NARCL

The March 31 deadline, which was set by State Bank of India (SBI) within which banks were to transfer Rs 50,000 crore of bad loans to the National Asset Reconstruction Co (NARCL), has been missed due to delay in financial due diligence.

A total of 38 non-performing accounts — amounting to Rs 82,845 crore — were identified for transfer to NARCL, in a phased manner.

Under Phase I, about 15 accounts, totaling Rs 50,335 crore, were expected to be transferred on or before March 31, State Bank of India (SBI) said in late January.

“The financial due diligence for some of the accounts took time, but now it has been completed,” said a top official aware of the development.

“It is a series of steps and that series of steps involves a huge number of stakeholders. RBI has to give its approval. The government has to clear the guarantees. So, all these things take time. And, if any one of these things gets stuck, then the entire process is delayed and the acquisition of assets gets delayed,” the official said.

Sources said the due diligence for the 14 accounts are getting over and banks will come up with binding offers in a month.

“The process took some time. For the first time, we are doing a structure like this (NARCL-India Debt Resolution Company or IDRCL). There are lots of rules and procedures to be followed. By March 31, all the capitalisation parts had to happen. Private banks needed some approvals to come in. The capital has come in and it (NARCL) is 100 per cent capitalised in accordance with the plan. 

Hopefully, we will be completing the first tranche by April end,” Union Bank managing director (MD) & chief executive officer (CEO) Rajkiran Rai told reporters, on the sidelines of an event on Wednesday. 

Rai also said the appointment of a full-time CEO at NARCL is likely to happen soon. 
 

Currently, PM Nair, chief general manager of SBI, is on deputation and is managing the affairs of NARCL.

Some of the loans that banks will sell to NARCL have become NPAs over eight years back. Banks have already made 100 per cent provision for these accounts. Any recovery from these accounts will boost the profits of the banks.

NARCL will acquire the identified assets on a 15:85 basis — 15 per cent in cash and 85 per cent security receipts (SRs). 

These SRs, issued in favour of transferring lenders, will be secured by government guarantee for its face value.

In February, SBI had said all requisite approvals for setting up of NARCL and IDRCL, including from RBI, were received and both the companies are ready to commence business.

IDRCL has been set up to resolve NPAs. NARCL will acquire and aggregate the identified NPA accounts from banks. IDRCL — under an exclusive arrangement — will handle the debt resolution process. This arrangement will be on a ‘principal-agent’ basis. Final approvals and ownership for the resolution will lie with NARCL, SBI had said.