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National Asset Reconstruction Company Ltd. (NARCL)

  • IAS NEXT, Lucknow
  • 31, Jan 2022
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Banks have finalised plans to transfer by the end of this fiscal year 15 Non-Performing Asset (NPA) accounts worth Rs. 50,000 crore to the National Asset Reconstruction Company Ltd. (NARCL), or the ‘bad bank’ set up to help resolve the stress.

National Asset Reconstruction Company Ltd. (NARCL)

  • Following up the Union Budget 2021 announcement, government has incorporated “National Asset Reconstruction Company Limited” (NARCL) under the Companies Act. 
  • It will acquire stressed assets worth about Rs 2 lakh crore from various commercial banks in different phases. 
  • Another entity — India Debt Resolution Company Ltd (IDRCL), which has also been set up — will then try to sell the stressed assets in the market. 
  • The NARCL-IDRCL structure is the new bad bank. 
  • To make it work, the government has provided Rs 30,600 crore to be used as a guarantee.
  • The broad features of the arrangement are that NARCL will acquire and aggregate the identified NPA accounts from the banks, while IDRCL, under the exclusive arrangement, will handle the debt resolution process.
  • The final approval and ownership for the resolution shall lie with NARCL as the principal. 
  • This arrangement will also be in full conformity with the provisions of the SARFAESI Act as well as outsourcing guidelines of the Reserve Bank.