Bad Bank will start working soon.  State Bank of India (SBI) Chairman Dinesh Kumar Khara said on Friday that all necessary approvals have been received for setting up the National Bad Assets Company.  Addressing a virtual press conference, he said that 15 accounts will be transferred to NARCL in this financial year.  A total of 38 accounts worth Rs 830 billion have been identified to be transferred to the National Bad Bank.  Apart from this, all the properties being transferred have been fully provisioned.

Bad bank was mentioned in the last budget speech

Finance Minister Nirmala Sitharaman in her last budget speech had announced the creation of National Asset Reconstruction Company (NARCL) or Bad Bank to resolve NPAs.  The Union Cabinet had also approved a proposal to provide a government guarantee of Rs 30,600 crore for security receipts issued by NARCL for NPAs.

Public Sector Bank is working together with IDRCL

The bad bank comprises an Asset Reconstruction Company (ARC) controlled by a Public Sector Bank (PSB), which is acting as a bad bank with Bharat Debt Resolution Company Limited (IDRCL) as well as providing resolution to these NPAs.  Is.  RBI had expressed its objection regarding the dual structure as it has the power to regulate ARCs from the SARFAESI Act and there is no such provision for such set up.

Proposal between NARCL and IDRCL

The banks then proposed to the RBI a principal-agent link between NARCL and IDRCL.  As per the new arrangement, NARCL will enter into an agreement with IDRCL to outsource the resolution of NPAs.  However, the proposal of IDRCL shall not be binding on NARCL.