SBI Identifies NPAs Worth Rs 20,000 Crore To Be Transferred To Upcoming 'Bad Bank': Report

by Swarajya Staff - Jun 11, 2021 12:45 PM +05:30 IST
SBI Identifies NPAs Worth Rs 20,000 Crore To Be Transferred To Upcoming 'Bad Bank': ReportIndian Banks - SBI and Federal Bank - Representative Image (Sanchit Khanna/Hindustan Times via Getty Images)

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.

Get Swarajya in your inbox everyday. Subscribe here.

An Appeal...

Dear Reader,

As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.

We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

Become A Patron
Become A Subscriber
Comments ↓
Get Swarajya in your inbox everyday. Subscribe here.

Latest Articles

    Artboard 4Created with Sketch.