The central government has appointed Padmakumar M Nair as the Chief Executive Officer (CEO) of recently-made the National Asset Reconstruction Company (NARC), according to a report in CNBC-TV18. Nair is currently chief general manager at the State Bank of India.
Finance minister Nirmala Sithataman proposed formation of the National Asset Reconstruction Company — the Indian version of a bad bank — in the Union Budget 2021. Public sector and non-bank lenders are expected to be the major shareholders in the NARC. CNBC-TV18 had earlier reported that the Indian Banks Association (IBA) is working with banks to identify bad loans to be transferred to the ARC. “We have identified about Rs 1.50-2 lakh crores of non-performing assets across banks that will be transferred to the National ARC, but this will be done in one or more tranches,” added one of the people closely involved.
“All accounts that are being transferred to the ARC will be 100 percent provided by this quarter (ending March 31, 2021). Whatever provisioning is left will be competed by banks in this quarter itself,” said the head of a large public sector bank, according to CNBC-TV18.
The banks will use a ‘Swiss Challenge Method’ to transfer the assets. The ARCs work with the RBI-mandated 15:85 model, wherein the ARC pays 15% to banks in the form of cash, and 85% in the form of Security Receipts (SRs).
The NARC has to apply for a licence from the Reserve Bank of India to be fully operational, according to sources.