A bad bank is set up to take over the bad loans of other banks that have high NPAs at a market price. This bad bank- National Asset Reconstruction Company Limited (NARCL) received legal recognition earlier this month.
Eight public sector banks have so far invested in the first round. Canara Bank purchased approximately 12 million shares for Rs 10 in the bad bank, according to the most recent corporate filing. Along with Canara Bank, Union Bank of India, Bank of Baroda, State Bank of India, and Indian Bank also purchased 99lakh shares.
Punjab National Bank purchased 90lakh shares. The Bank of Maharashtra, on the other hand, has purchased 50lakh shares.
Hence, the total investment made by the eight public banks is estimated to be Rs 74.6crore. With 12% of the investment, Canara Bank will be the main sponsor, followed by the State Bank of India with a 9.9% stake, according to the sources.
Along with PSU banks some private banks like HDFC Bank, ICICI Bank Limited, Axis Bank Limited, IDBI Bank are also expected to join the process of purchasing shares.
Following the Reserve Bank of India’s (RBI) approval, the banks have pledged to increase NARCL’s capital base to Rs 6,000crore.
Sunil Mehta, the chief executive of IBA, SS Nair, the deputy managing director of SBI, and Ajit Krishnan Nair, the chief general manager of Canara Bank, are some of the directors on its board.
The public sector will own 51 percent of the NARCL, while private sector banks could own the other 49 percent.
According to the sources, these are the just beginning of investments. In addition, a large number of additional investors, including all private banks, can join the NARCL Company.
The private banks will become partners in the asset reconstruction company (ARC) as well as investors in its asset management business (AMC).
Please be advised that NARCL has been established in Mumbai. It has an initial paid-up capital of Rs 74.6crore and will soon apply to the central bank for a license to function as an ARC. According to these documents, NRCL’s goals include acquiring bad banks and investing in telecommunications.
