The bad bank plans to recruit as many as 50 professional executives for the asset management company (AMC) — India Debt Resolution Company Ltd (IDRCL) — to begin with, said people familiar with the matter. The bad bank’s regulatory framework is being worked out.
“We are currently busy setting up the infrastructure as we aim to generate write-backs for lenders by the end of this financial year,” one of the senior executives involved in the matter told ET.
The assets spread across industries such as power, road construction, infrastructure and manufacturing include Castex Technologies, Lavasa Corporation, , GTL and Reliance Naval.
“The bad bank will bring more efficiency and expertise under one roof as the whole objective is to resolve distressed assets,” said Ashutosh Khajuria, executive director and CFO at Federal Bank. “Realistic valuation will likely ensure lower haircuts increasing chances of higher recovery.”
More than three months ago, the government set up the IDRCL and the National Asset Reconstruction Company (NARCL), both of which will work in tandem. The ARC is likely to be regulated by the Reserve
and could be run by bankers/executives on deputation.
Discussions are ongoing over the AMC’s regulator as it is not an entity in line with mutual fund houses, sources said. The AMC, primarily owned by private banks, will engage in the resolution and maintenance of distressed assets. State-owned banks are majority shareholders of NARCL, which will bundle sticky assets acquiring them from lenders.
“Loans transferred to the bad bank, which have the potential for revival through debt restructuring, will certainly find investor interest,” said Ankit Thaker, business head from SC Lowy India. “Distressed funds have an appetite to invest in turnaround cases and are looking at types of loans being transferred to the bad bank.”
“As an ARC we too can engage with the NARCL/ AMC in buying or resolution of assets,” said R K Bansal, MD at Edelweiss ARC. “To add fillip to the bad bank move, lenders should also include cases that banks didn’t find a solution among themselves as it involved fresh funding and/or restructuring. It would evince more interest from investors.”
The process of valuation of assets is not yet fixed. The ARC should acquire it from lenders against a combination of cash and security receipts (SRs) in the ratio of 15:85. New Delhi will provide a guarantee of 30,600 crore for SRs to be issued by NARCL.
While the identified assets are all likely from the Insolvency and Bankruptcy Code (IBC) network, the next sets of such assets may be outside of it.