What is 'Bad Bank', Details & Features of NARCL

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Wednesday, 15 September 2021

What is 'Bad Bank', Details & Features of NARCL

BAD BANK or National Asset Reconstruction Company Ltd (NARCL) is the future entity which will eventually take over most legacy non-performing assets (NPAs) worth over Rs 2 lakh crore from the various Public Sector Banks. NARCL, owned by state-owned banks, was registered with the Registrar of Companies (RoC) in Mumbai on July 7. 

Bad bank will look after the kind of assets which cannot be effectively resolved through the existing resolution mechanism. 

NARCL will resolve these, backed by the government on the SR (security receipt) component NARCL, also known as a bad bank, has eight public sector banks as its shareholders. According to the Articles of Association of the company, filed with the RoC, while SBI, Union Bank of India, Bank of Baroda and Indian Bank own 99 lakh shares each, Canara Bank owns 1.2 crore shares. Other shareholders include — Punjab National Bank (90 lakh shares), Bank of India (90 lakh shares) and Bank of Maharashtra (50 lakh shares). The authorized share capital of the company is Rs 100 crore divided into 10 crore shares of Rs 10 each. 

The company has four directors on its board — Padmakumar Madhavan Nair (CGM, SBI), Salee Sukumaran Nair (DMD, SBI), Nair Ajit Krishnan (CGM, Canara Bank) and Sunil Mehta (chief executive, Indian Banks’ Association). Sources said the company will hire more people in senior management and operational roles shortly. 


As per the objectives of the company, it will carry the business of an asset reconstruction company. Besides dealing in financial assets, it will also manage, enforce, sell or realise any property or asset that may come into its possession, among others. As the mechanism for transfer of stressed assets to ARCs is already in place, NARCL is expected to start functioning soon. 


“The Reserve Bank of India, being the regulator of asset reconstruction companies (ARCs), has already prescribed a regulatory framework for the functioning of ARCs and there are well-laid norms for transfer of stressed assets by banks and non-banking finance companies to ARCs,” Minister of State for Finance Bhagwat Karad said.

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