By Ankur Mishra
State Bank of India (SBI) has identified negative loans worth Rs 20,000 crore that it plans to transfer to the National Asset Reconstruction Company (NARCL), sources close to the development told FE. These non-performing assets (NPAs) consist of Essar Power Gujarat, Coastal Energy and Reliance Naval.
In all, banks have identified 22 stressed accounts worth about Rs 89,000 crore that they want to transfer to NARCL in the very first phase. Over time, lenders are anticipated to move loans worth almost Rs 2 lakh crore to the negative bank.
In an e-mail response to FE, SBI mentioned, “It is a policy of the bank not to comment upon individual accounts and its treatment.”
FE also discovered that the operational recommendations for NARCL are in the final stages, but the worth at which the assets will be transferred is but to be decided.
Explaining the method at NARCL, a senior bank official mentioned: “Suppose NPAs worth Rs 89,000 crore are transferred to NARCL at an 80% haircut, NARCL will buy the exposure at Rs 17,800 crore.” Of the Rs 17,800 crore, NARCL will provide upfront money of 15% to the banks and problem safety receipts (SR) for the remaining 85% or Rs 15,130 crore. The upfront money that banks obtain would outcome in a create-back of provision for the lenders.
“In case the recovery is higher, assuming it to be 40%, the lenders will get the benefit via security receipts,” the bank official mentioned.
The accounts that banks have selected to transfer to NARCL should really be fully offered for by the lenders, as per the Indian Banks’ Association (IBA) directions. The NPA accounts should really also not be categorised as fraud or nearing a resolution for getting eligible to be sent to NARCL.
IBA chairman Rajkiran Rai G has mentioned banks have identified Rs 89,000-crore NPA accounts which could go to the ARC in the very first phase. Rai added that only if the ARC management finds these assets worthwhile, it would make an give to the banks.
Rai, who is also the MD and CEO of Union Bank of India, mentioned, of the total quantity, Union Bank has identified Rs 7,800-crore negative loans to be sent to NARCL. Similarly, Punjab National Bank (PNB) MD and CEO SS Mallikarjun Rao had mentioned the lender had identified Rs 8,000-crore NPAs to be sent to NARCL.
In her Budget speech, finance minister Nirmala Sitharaman had announced setting up of an ARC and asset management firm (AMC) for the resolution of stressed assets.