The National Asset Reconstruction Company (NARCL) better known as bad bank will soon bring more directors on board for better corporate governance. The move aims to ensure fair representation of shareholders as well, sources close to the developments informed.

In the beginning of this month, the Reserve Bank of India (RBI) had given licence to the 6,000 crore NARCL led by public sector banks with 51 per cent stake in the entity. There would be shareholders’ representation from the private sector banks’ side, which will have 49 per cent, sources said. Besides, the central bank of India has asked NARCL to submit details of the full board soon, sources added.

The Indian Banks’ Association (IBA), entrusted with the task of setting up the bad bank, has put a preliminary board for NARCL in place. The company has hired P M Nair, a stressed assets expert from State Bank of India (SBI), as the managing director.

The other directors on the board are IBA CEO Mehta, SBI Deputy Managing Director S S Nair and Canara Bank’s Chief General Manager Ajit Krishnan Nair.

In September, the Cabinet cleared a proposal to provide government guarantee worth 30,600 crore to security receipts issued by NARCL.

Soon after the Cabinet clearance; SBI, Union Bank of India, Indian Bank picked up 13.27 per cent stake each in the NARCL, while Punjab National Bank (PNB) acquired about 12 per cent stake.

The NARCL will pay up to 15 per cent of the agreed value for the bad loans in cash and the remaining 85 per cent would be government-guaranteed security receipts.

The bad bank will take over identified bad loans of lenders. The lead bank with an offer in the hand of NARCL will go for a ‘Swiss Challenge’, wherein other asset reconstruction players will be invited to better the offer made by a chosen bidder for finding a higher valuation of a non-performing asset on sale.

The company will pick up those assets that are 100 per cent provided for by the lenders. Banks have identified around 22 bad loans worth 90,000 crore to be transferred to NARCL in the initial phase.

Finance Minister Nirmala Sitharaman had in Budget 2021-22 said that the high level of provisioning by public sector banks of their stressed assets calls for measures to clean up bank books.

“An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt,” she had said in the Budget speech.

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