After changes at the helm, NARCL goes on a bad-loan lapping spree
Asset Reconstruction Company (NARCL) has emerged as the most active player in the market for bad loans last two months following a change in leadership, said people from the banking industry.
In four months, the ARC has given binding offers for eleven companies to acquire over Rs 30,000 crore of stressed loans from commercial banks, more than double the amount it acquired since it started operations two years ago.
NARCL has been playing an active role after former State Bank of India managing director Diwakar Gupta took charge as its chairman in the first week of December 2023, replacing Karnam Sekar, banking industry officials said. Before this, Gupta was chairman of India Debt Resolution Company (IDRCL) — an agent for NARCL. Sekar resigned last August as chairman soon after IDRCL proposed to the finance ministry to merge NARCL with IDRCL, which did not materialise.
In the first week of January, Natarajan Sundar resigned abruptly as the managing director and chief executive of NARCL, and P Santhosh, who was chief general manager at Canara Bank, replaced him.
NARCL makes offers under the 15:85 structure wherein 15% of the consideration is cash and the balance 85% is security receipts. The government guarantees any shortfall in the recovery of money promised by the NARCL.
«Given this structure, NARCL has a competitive edge over other ARCs. Yet, since it started operations in January 2002, it acquired only a few accounts directly from banks until Gupta took charge as chairman,» said a senior bank official.
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