SBI likely to transfer Rs 20,000 crore NPAs to National Asset Reconstruction Company

State Bank of India has identified bad loans worth Rs 20,000 crore that it plans to transfer to the National Asset Reconstruction Company (NARCL), sources close to the development told FE. These non-performing assets (NPAs) include Essar Power Gujarat, Coastal Energy and Reliance Naval. In all, banks have identified 22 stressed accounts worth around Rs 89,000 crore that they want to transfer to NARCL in the first phase. Over time, lenders are expected to move loans worth nearly Rs 2 lakh crore to the branch.
In an email response to FE, SBI said, “It is a policy of the bank not to comment upon individual accounts and its treatment. FE also learned that the operational guidelines for NARCL are in the final stages, but the value at which the assets will be transferred is yet to be decided.
Explaining the process at NARCL, a senior bank official said: “Suppose NPAs worth Rs 89,000 crore are transferred to NARCL at an 80% haircut, NARCL will buy the exposure at Rs 17,800 crore.” Of the Rs 17,800 crore, NARCL will provide upfront cash of 15% to the banks and issue security receipts (SR) for the remaining 85% or Rs 15,130 crore. The upfront cash that banks receive would result in a write-back of provision for the lenders.

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