Banks Likely To Transfer Over Rs Two Lakh Crore Worth NPAs To Upcoming 'Bad Bank': Report

With the stage set for the operationalisation of a 'bad bank' called National Asset Reconstruction Company Limited (NARCL) by next month, the banks are said to be gearing up for transfer of about 70-80 large non-performing assets (NPAs) to the new entity, reports Economic Times.

The size of all 70-80 of the each of the NPA accounts to be transferred by the banks to NARCL is said to be over Rs 500 crore. The NARCL will serve as a financial institution that will take over these NPAs of the lenders and undertake their resolution.

NARCL was announced by Union Finance Minister Nirmala Sitharaman earlier this year when she tabled the Union Budget 2021-22 before the Parliament on 1 February. It is expected that due to the formation of the NARCL, NPAs to the tune of over Rs 2 lakh crore will move out of the books of the banks.

After taking over the NPAs, the NARCL will then manage and dispose off the assets to alternate investment funds and other potential investors for eventual value realisation.

Meanwhile, it should be noted that NARCL will pick up only those assets that are 100 per cent provided for by the lenders. Also, the Reserve Bank of India (RBI) had said that loans classified as fraud can not be transferred to NARCL.