DFS appoints SBI Chairman to Lead Committee for Transfer of NPA Accounts to NARCL

The Department of Financial Services (DFS) in the Finance Ministry has announced the formation of a new committee, led by State Bank of India (SBI) Chairman C S Setty, to prepare a fresh list of accounts for transfer to the National Asset Reconstruction Company Limited (NARCL), also known as the ‘Bad Bank.’ This decision was made during a review meeting chaired by DFS Secretary M Nagaraju, focused on improving the efficiency of NARCL and the National Company Law Tribunal (NCLT) in resolving stressed assets.

NARCL, which was established in mid-2021, has so far acquired 22 accounts with a total exposure of ₹95,711 crore. The Finance Ministry had previously set a target to transfer ₹1 lakh crore worth of stressed assets to NARCL by March 2025.

A ‘Bad Bank’ consolidates non-performing assets (NPAs) from various banks and works to resolve or liquidate these distressed assets to recover maximum value. NARCL acquires these loans by paying 15% of the total amount in cash and the rest in government-guaranteed security receipts (SRs). Banks can use these SRs during the resolution or liquidation process.

During the review, DFS Secretary M Nagaraju urged banks to closely monitor cases in NCLT, minimize delays, and avoid seeking adjournments. In December last year, Finance Minister Nirmala Sitharaman had directed NARCL and banks to hold regular meetings to speed up the onboarding of stressed accounts. This was done to address the gap between NARCL’s efforts and banks’ reluctance to transfer assets, ensuring the Bad Bank does not become a failed initiative.

Banks have been hesitant to transfer stressed assets to NARCL due to disagreements over pricing, with banks expecting higher offers than NARCL has provided. In September 2021, the government introduced a ₹30,600 crore guarantee facility for the SRs issued by NARCL to build confidence and encourage the acquisition of distressed assets.