Key Proposal In 2021 Budget Gets Regulatory Approvals

A key proposal announced in 2021 Budget, a bad bank to deal with stressed assets in the loss-laden banking system, has received all regulatory approvals.

What is the structure of the bad bank?

NARCL will acquire and aggregate the identified NPA accounts from banks, while IDRCL, under an exclusive arrangement, will handle the debt resolution process, State Bank of India Chairman Dinesh Khara said.

Padmakumar Nair, a Chief General Manager from SBI’s Stressed Assets vertical, will manage NARCL, while Manish Makharia, Head of Alternate Investment Fund, SBI Funds Management Pvt Ltd, will head IDRCL.

Subrata Biswas, the nominee director on the Board of NARCL, will be the interim Chairman, and Diwakar Gupta will continue as the Chairman of IDRCL.

Majority-owned by state-owned banks, the NARCL will be assisted by the India Debt Resolution Company Ltd (IDRCL), in turn majority-owned by private banks, in resolution process in the form of a Principal-Agent basis.

How will the bad bank work?

NARCL and IDRCL will have an exclusive arrangement that will be as per the scope defined in the ‘Debt Management Agreement’ to be executed between these two entities.

This arrangement will be on a ‘Principal-Agent’ basis and final approvals and ownership for the resolution shall lie with NARCL as the Principal.