India’s bad bank got formalised with the incorporation of the National Asset Reconstruction Co. Ltd (NARCL) in Mumbai on a paid-up capital of Rs 74.6 crore.

Incorporated on 7 July with an authorised capital of Rs 100 crore, NARCL will now approach the Reserve Bank of India (RBI) to seek an asset reconstruction company (ARC) licence.

NARCL has tapped State Bank of India’s Padmakumar Madhavan Nair to be the managing director while the other directors are Indian Banks’ Association (IBA) chief executive Sunil Mehta, SBI deputy managing director Salee Sukumaran Nair and Canara Bank’s representative Ajit Krishnan Nair.

NARCL, which was incorporated on 7 July with an authorised capital of Rs 100 crore, will now approach the Reserve Bank of India (RBI) to seek an asset reconstruction company (ARC) licence.

As reported earlier by Indianbankingnews.com, banks will initially transfer bad loans worth Rs 89,000 crore from 22 large value accounts to the NARCL.

An estimated Rs 2 trillion of soured loans is likely to be transferred in tranches to the bad bank, allowing banks to clean up their balance sheets and focus on their core lending activities.

NARCL will absorb bad loans of Rs 500 crore and above even as Indian banks are saddled with over Rs 7 trillion of non-performing assets (NPA).

The government had announced the setting up of the NARCL in the Union Budget for 2021-22 to resolve large value accounts that remained on the books of the banks.