The State Bank of India (SBI) has recognised bad loans amounting to Rs 20,000 crore and is set to transfer the same to the National Asset Reconstruction Company (NARCL), the upcoming 'bad bank'.
Essar Power Gujarat, Reliance Naval along with Coastal Energy are some of the non-performing assets (NPAs) reportedly included in SBI’s speculated list.
As many as 22 stressed accounts with NPAs accounting to Rs 89,000 crore have been identified by various banks that are likely to be transferred to the NARCL in the initial phase. In the long term, the banks will move bad loans worth around Rs 2 lakh crore to the NARCL.
The Indian Banks’ Association’s (IBA) directives mandate that the lenders will have to comprehensively provide for the accounts that will be moved to the NARCL. Moreover, for being eligible to be sent to NARCL, the NPA accounts should not be categorised as fraud or nearing a resolution, reports Financial Express.
Additionally, the operational guidelines of the NARCL are in its conclusive stages. However, the value of the assets at which they will be transferred has still not been zeroed upon.
“Suppose NPAs worth Rs 89,000 crore are transferred to NARCL at an 80 per cent haircut, NARCL will buy the exposure at Rs 17,800 crore,” one of the senior bank officials was quoted by the Financial Express as saying.
The NARCL will pay 15 per cent of this amount to the banks in cash upfront and issue security deposits (SR) for the rest of the 85 per cent, i.e. Rs 15,130 crore in this case. This cash will be a write-back of provision for the banks and they can also benefit through SRs if the recovery rate is on the higher side, the bank official explained.
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