IBA Seeks License Of The Bad Bank From RBI

IBA seeks license of the bad bank from RBI, may get approval in September or October.

The Indian Banks’ Association (IBA) has applied to the Reserve Bank for a Rs 6,000-crore National Asset Reconstruction Company Limited (NARCL) or bad bank license.

NARCL was formed last month after registering with the Registrar of Companies (ROC).

Sources said that after raising an initial capital of Rs 100 crore and completing other legal formalities, the company has applied to the Reserve Bank for a license for the asset reconstruction business.

In 2017, the Reserve Bank had increased the capital requirement to Rs 100 crore from the earlier Rs 2 crore.

The Reserve Bank had taken this step in view of the need for more cash to buy bad loans. Sources said that the Reserve Bank has its own procedure for granting licenses for such business.

It may take a few weeks to get its license from the regulator. Sources said that the approval of the Reserve Bank for this can be obtained in September or October.

The services of Legal Advisor AZB & Partners have been engaged to carry out various regulatory clearances and other legal formalities.

IBA has been entrusted with the responsibility of setting up a bad bank. He has made the starting board for NARCL.

The company has appointed PM Nair, a specialist in stressed assets from the State Bank of India, as its Managing Director.

Other board members include IBA chief executive Sunil Mehta, SBI deputy managing director SS Nair and Canara Bank chief general manager Ajit Krishna Nair.

Finance Minister Nirmala Sitharaman had announced the formation of the National Asset Reconstruction Company (ARC) in the budget presented on February 1.

It will buy their bad loans (NPAs) from banks. Such a bank is also called a bad bank. The reason for this is that it buys its bad loans from banks.

It will be the holding company of the Asset Management Company (AMC). This AMC will sell NPAs of banks to funds that have expertise in handling stressed assets.

IBA seeks the license of the bad bank from RBI: NPA makes the economy sick.

Non-performing assets i.e. NPAs are considered a burden for any economy. This makes the country’s banking system sick.

There has been a huge increase in bad loans and bad assets in the last few years. Bad loans affect the profits of banks and make it difficult for them to give loans.

This leads to a reduction in their investments and adversely affects the growth rate of the economy.

According to government data, the total bad loans of banks at the end of March this year stood at Rs 8.34 lakh crore.