NARCL misses deadline for first tranche of NPA acquisition; Rs 50,000-crore pool of 15 assets may be transferred by April

The National Asset Reconstruction Company (NARCL) has missed its March 31, 2022 deadline for acquiring the first tranche of large stressed assets from banks, according to two bankers. The Rs 50,000-crore pool of 15 assets is now likely to be transferred to the bad bank only by the end of April.

Rajkiran Rai G, MD & CEO, Union Bank of India, said the process of setting up the bad bank with all requisite approvals and funding commitments in place took some time. Banks are working with such a structure for the first time and a number of rules and procedures had to be followed. “For capital infusion, private banks needed some approvals. That capital has come in and (the entity) is capitalised as per the plan. The appointment of CEO is also likely to happen anytime soon. Hopefully, we will be completing the first tranche by April end,” Rai said.

One of the reasons for the delay in the process was reservations the Reserve Bank of India (RBI) had expressed late last year with respect to the dual structure of the bad bank. Eventually, the regulator’s objections were taken into account by establishing a principal-agent relationship between NARCL and its partner India Debt Resolution Company (IDRCL).

Other bankers that FE spoke to said officials at NARCL are still in the process of carrying out due diligence of the assets that have been identified for sale. Once that process is completed, NARCL will send in its bids for the assets. Thereafter, banks will have to obtain internal clearances from their board and carry out Swiss challenge auctions. An additional layer of process might be added if the Swiss challenge attracts bids from other ARCs. In that case, NARCL will be given time to re-evaluate their bid to see if it would like to match the new bid from the other ARCs. All of this may take more than a month, said a senior banker.

The repeated delays in asset transfer may even result in the set of identified assets changing. “It’s a fluid situation because an asset that was eligible was six months ago may not be best resolved via the bad bank anymore. So, we may need to repeat the process for some new assets that get identified,” the second banker quoted above said.

The interviews for the position of the NARCL MD & CEO have been completed and a decision on the new chief is awaiting the approval of the board. At present, State Bank of India (SBI) chief general manager Padmakumar Nair is on secondment as NARCL’s chief executive. His term ends in May.

Last month, a number of banks, including HDFC Bank, ICICI Bank and Punjab & Sind Bank, infused capital into NARCL.

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