By Ankur Mishra
The State Bank of India (SBI) has identified bad loans worth Rs 20,000 crore that it plans to transfer to the National Asset Reconstruction Company (NARCL), sources familiar with the development told FE. These non-performing assets (NPAs) include Essar Power Gujarat, Coastal Energy and Reliance Naval.
In total, the banks have identified 22 stressed accounts worth around Rs 89,000 crore that they wish to transfer to NARCL in the first phase. Over time, lenders are expected to transfer loans worth almost Rs 2 lakh crore to the wrong bank.
In an email response to FE, the SBI said, “It is the policy of the bank not to comment on individual accounts and their handling.”
FE has also learned that NARCL’s operational guidelines are in the final stages, but the value at which the assets will be transferred has not yet been decided.
Explaining the process to NARCL, a senior bank official said: “Suppose NPAs worth Rs 89,000 crore are transferred to NARCL at 80% haircut, NARCL will buy the exposure at Rs 17 800 crore. ” On the Rs 17,800 crore, NARCL will provide an initial amount of 15% to the banks and issue Guarantee Receipts (SR) for the remaining 85% or Rs 15,130 crore. The initial cash out that the banks receive would result in a repossession. provision for lenders.
“In the event that the payback is higher, assuming it is 40%, the lenders will get the benefit through collateral receipts,” the bank official said.
Accounts that banks have chosen to transfer to NARCL must be fully provided by lenders, as instructed by the Association of Indian Banks (IBA). NPA accounts also do not need to be categorized as fraud or close to resolution to be eligible to be sent to NARCL.
IBA Chairman Rajkiran Rai G said the banks had identified NPA accounts of Rs 89,000 crore that could go to the ARC in the first phase. Rai added that only if CRA management finds these assets attractive would they make an offer to the banks.
Rai, who is also the managing director and CEO of Union Bank of India, said that out of the total amount, Union Bank identified 7,800 crore of bad loans to send to NARCL. Likewise, the Managing Director and CEO of Punjab National Bank (PNB) SS Mallikarjun Rao said that the lender had identified NPAs of Rs 8,000 crore to be sent to NARCL.
In her budget speech, Finance Minister Nirmala Sitharaman announced the creation of an ARC and an Asset Management Company (AMC) for the resolution of stressed assets.