The bad bank plans to recruit up to 50 professional executives for the asset management company (AMC) – India Debt Resolution Company Ltd (IDRCL) – as a first step, people familiar with the matter said. The regulatory framework for bad bank is currently being drawn up.
“We are currently busy putting the infrastructure in place as we aim to generate takeovers for lenders by the end of this fiscal year,” said one of the senior executives involved in the deal.
Assets spread across sectors such as energy, road construction, infrastructure and manufacturing include Castex Technologies, Lavasa Corporation, GTL and Reliance Naval.
“The bad bank will bring more efficiency and expertise under one roof, as the overall goal is to solve distressed assets,” said Ashutosh Khajuria, executive director and chief financial officer of Federal Bank. “A realistic appraisal will likely guarantee weaker haircuts, thus increasing the chances of a higher recovery.”
Over three months ago, the government created the IDRCL and the National Asset Reconstruction Company (NARCL), which will work in tandem. ARC is likely to be regulated by the Reserve
and could be led by bankers / delegated executives.
Discussions are ongoing over the AMC regulator as it is not a mutual fund company compliant entity, sources said. The AMC, owned primarily by private banks, will engage in the resolution and maintenance of distressed assets. State banks are majority shareholders of NARCL, which will consolidate fixed assets by acquiring them from lenders.
“Loans transferred to the bad bank, which have potential for recovery through debt restructuring, will certainly find interest from investors,” said Ankit Thaker, CEO of SC Lowy India. “Distressed funds are eager to invest in turnaround cases and are looking at the types of loans being transferred to the wrong bank. ”
“As an ARC, we can also engage with NARCL / AMC in the purchase or resolution of assets,” said RK Bansal, Managing Director of Edelweiss ARC. “To add spice to the bad bank movement, lenders should also include cases where banks have not found a solution between themselves because it involved new funding and / or restructuring. This would generate more interest from investors.
The asset valuation process is not yet set. The CRA is expected to acquire it from lenders against a combination of cash and collateral receipts (SRs) in the 15:85 ratio. New Delhi will provide a guarantee of 30,600 crore for SRs issued by NARCL.
While the identified assets are all likely to originate from the Insolvency and Bankruptcy Code (IBC) network, the next sets of these assets may be outside of it.