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Punjab National Bank to buy stake in bad bank

By Beena Parmar

  • 07 Jun 2021
Punjab National Bank to buy stake in bad bank
Credit: VCCircle

Government-owned Punjab National Bank (PNB) on Saturday said it will acquire a stake in the soon-to-be-set-up National Asset Reconstruction Company Ltd (NARCL).   

The New Delhi-based lender has already identified non-performing assets (NPAs) worth Rs 8,000 crore to be transferred to the proposed bad bank for resolution, said S S Mallikarjuna Rao, CEO and managing director of PNB, in a post-results media interaction.

Formally proposed in the Union Budget for the fiscal year 2021-22, the bad bank will take over large bad assets or loans worth over Rs 500 crore from lenders for resolution. This will help public sector banks clean their balance sheets faster.

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"NARCL is being formed by all the banks whereupon some of the NPA advances will be transferred to that ARC for recovery...NARCL is constituted to be promoted by 51% share from the public sector space. We are the second largest public sector bank after State Bank of India (SBI)," Rao was quoted as saying in a report by the Press Trust of India.

All the bigger banks are contributing but the stake of each will be less than 10%, he said.

Various reports suggest that the promoters of NARCL are likely to be power finance companies while public sector banks will hold the remaining equity stake in the bad bank. State-owned banks also want participation from the private sector but most lenders have not made any decision public.

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The NARCL, which will be led by SBI chief general manager Padmakumar Madhavan Nair, is expected to be operational by next month.

“We are expecting that by June 30, everything will be put in place. Things would start working from July 1," Rao told mediapersons.

According to Rao, approximately Rs 84,000 crore worth of NPAs have been identified mostly by public sector banks, to be transferred to NARCL.

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In the first tranche, PNB alone has estimated to transfer roughly Rs 8,000 crore worth of loans identified to be transferred to NARCL which will also help the bank lower its outstanding credit.

Overall, the NARC will look to resolve stressed assets of Rs 2-2.5 lakh crore in around 70 large accounts.

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