NARCL Goes On A Bad-loan Lapping Spree Following Changes At The Helm
The National Asset Reconstruction Company (NARCL), which is owned by the government, has become the most active player in the market for bad loans in the last two months due to a change in leadership, stated insiders from the banking industry. NARCL has given binding offers for eleven companies to purchase over Rs 30,000 crore of stressed loans from commercial banks in just four months. This is more than double the amount it acquired since it started operations two years ago.
Officials from the banking industry state that NARCL started playing an active role after Diwakar Gupta, a former managing director of State Bank of India, became its chairman in the first week of December 2023, replacing Karnam Sekar. Gupta was previously the chairman of India Debt Resolution Company (IDRCL), an agent for NARCL. Sekar resigned last August as chairman soon after IDRCL proposed to the finance ministry to merge NARCL with IDRCL. However, this merger did not happen.
In the first week of January, Natarajan Sundar resigned abruptly as the managing director and chief executive of NARCL. He was replaced by P Santhosh, who was the chief general manager at Canara Bank.
NARCL offers are made under the 15:85 structure, where 15 per cent of the consideration is cash, and the remaining 85 per cent is security receipts. The government guarantees any shortfall in the recovery of money promised by the NARCL. A senior bank official stated that NARCL has a competitive edge over other Asset Reconstruction Companies (ARCs) due to this structure.
However, since it began operations in January 2002, it only acquired a few accounts directly from banks until Gupta took charge as chairman. Between December 2023 and now, NARCL has given binding offers for or is in the process of acquiring, distressed loans amounting to Rs 30,168.7 crore.
Since January 2022, it has acquired six accounts with a debt of Rs 14,100 crore from banks. Furthermore, it has acquired the debt of bankrupt Srei Infrastructure Finance and Srei Equipment Finance, which amounts to Rs 32,700 crore, under the Insolvency and Bankruptcy Process.
