The NARCL will pay up to 15% of the agreed value for the cash loans and the remaining 85% would be government-guaranteed security receipts.
“We have addressed issues in the banking sector that were staring us in the face in 2015,” Sitharaman said.
Banks have recovered more than Rs 5 lakh crore in last six financial years, of which Rs 3.1 lakh crore has been recovered since March 2018, she added. The FM also said that Rs 99,000 crore has been recovered from written-off assets such as Bhushan Steel, Essar Steel.
In the FY22 Union Budget, FM Sitharaman had announced the proposal comprising of an asset reconstruction company and an asset management company to consolidate and take over the stressed debt of Indian banks.
Indian banks’ gross non-performing assets are likely to exceed Rs 10 lakh crore by March 2022, as per a joint study by Assocham and Crisil. NPAs are expected to rise to 8.5-9% by March 2022 due to slippages in retail, MSME accounts, and some restructured assets.
State-run Canara Bank will be the lead sponsor of NARCL with a 12% stake, while public sector banks will together hold 51% of NARCL.
The govt plans to set up India Debt Resolution Company, the FM said today. Under the proposed model, NARCL will acquire assets. The debt management company, set up under the dual structure, will manage them and raise institutional funding through alternate investment funds (AIFs).
Padmakumar Nair of SBI has been selected as the head of the NARCL and IBA chief executive Sunil Mehta will be its non-executive chairman.
Banks have identified 22 bad loan accounts in the first phase aggregating to about Rs 89,000 crore that will be transferred to NARCL. The bad bank will only take up stressed assets worth Rs 500 crore or more. There are around Rs 3 lakh crore worth of bad loans that meet this condition.