NARCL Full Form
What is the Full Form of NARCL?
A government-created organization called the National Asset Reconstruction Company Limited (NARCL) was established to address India's problem with hard assets through the asset reconstruction process. It was established in July 2021 by the Companies Act (with the Registrar of Companies), and it is awaiting an Asset Reconstruction Company (ARC) license from the RBI. The formation of an ARC-AMC (Asset Reconstruction Company- Asset Management Company) structure consisting of two entities, namely the National Asset Reconstruction Company Limited (NARCL) and India Debt Resolution Company Limited (IDRCL), was announced by the Hon. Finance Minister in the Union Budget 2021. This structure will aggregate and resolve non-performing assets (NPAs) in the banking industry.
Background
NARCL, a government organization, was incorporated on July 7, 2021, with Canara Bank serving as the sponsor bank and public sector banks holding most of the stock and the remaining shares going to private banks. According to the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002, it is registered as an Asset Reconstruction Company with the Reserve Bank of India.
Role Of NARCL
The new structure requires banks to combine and consolidate their stressed assets with NARCL for resolution. In NARCL, public sector banks will own 51% of the company. By submitting an offer to the lead bank in a group of lenders, NARCL could purchase fully funded stressed assets. After the offer is accepted, NARCL will work with India Debt Resolution Company Ltd. (IDRCL) to manage and resolve the stressed assets. IDRCL will continue to be owned by private companies to a ratio of 51% to the remainder by the government.
It’s Structure
NARCL, which was incorporated in Mumbai in July 2021, would launch with an initial capitalization of Rs 6,000 crore. As managing director, NARCL has appointed PM Nair, a State Bank of India (SBI) expert in stressed assets. The board includes IBA (Indian Banks Association) Chief Executive Mehta, SBI Deputy Managing Director SS Nair, and Canara Bank Chief General Manager Ajit Krishnan Nair. Each of the three banks has acquired a 13.27 percent share in NARCL: SBI, Union Bank of India, and Indian Bank. Punjab National Bank has purchased 12% of the company.
Frequently Asked Questions (FAQs)
Following its incorporation under the Companies Act, NARCL has requested an Asset Reconstruction Company license from the Reserve Bank of India. To gather and consolidate stressed assets for later resolution, banks established NARCL. In NARCL, PSBs ( Public Sector Banks)will continue to own 51%.
With a total value of roughly 2 lakh crore, the NARCL is designed to address stressed loan assets above 500 crores each. About Rs. 90,000 crores worth of fully provisioned assets are anticipated to be transferred to NARCL in phase I, while the remaining assets with smaller provisions would be transferred in phase II.
NARCL would be capitalized through equity from banks and non-banking financial institutions (NBFCs). As necessary, it will also issue new debt. The GoI ( Government Of India) guarantee will lower the need for up-front capital.
By presenting the main bank with an offer, the NARCL will purchase assets.
It will encourage more rapid action to resolve stressed assets, resulting in higher value realization. Additionally, this strategy will enable bank staff to devote more time to boosting revenue and credit expansion. Banks will profit because they are the owners of these SRs ( Security Receipts) and stressed assets. Additionally, it will improve bank valuation and increase their capacity for raising market money.