State Bank of India’s (SBI) Padmakumar Madhavan Nair has been appointed as chief executive officer of a bad bank or National Asset Reconstruction Company (NARC), an entity proposed by the government that aims to take over bad loans from lenders.
Nair, who will likely be given a five-year term, was selected by a five-member committee appointed by the Indian Banks' Association (IBA), confirmed a person. The IBA is working on the finer details of the bad bank.
A career banker with India’s largest lender SBI, Nair was elevated to the post of chief general manager in the stressed assets resolution group in April 2020 from the position of general manager which he had been holding since October 2017.
Previously, Nair was CEO of the Los Angeles division of SBI and worked as senior vice-president and head of the SBI Capital Market’s regional office in New Delhi.
A commerce post-graduate from Kerala, Nair has been largely working in the corporate banking segment at SBI over the last two decades.
SBI executives have time and again been tapped to handhold private and public sector entities.
For example, in 2018, the finance ministry had appointed 10 new CEOs and MDs at various public sector banks, of which five were from SBI.
In January this year, SBI's J K Shivan was chosen to head Kerala-based Dhanlaxmi Bank after its shareholders voted out the previous CEO and managing director Sunil Gurbaxani in October within eight months of his appointment.
Last year, in a bid to rescue private lender Yes Bank from one of the largest debacles in the India banking ecosystem, SBI’s chief financial officer Prashant Kumar was selected to lead the lender.
In March 2021, US investor Avenue Capital-backed Asset Reconstruction Company (India) Ltd or Arcil hired former Central Bank of India CEO Pallav Mohapatra as its new head.
In February 2021, former chairman of SBI Rajnish Kumar joined Kotak Investment Advisors Limited as an exclusive adviser for its special situations fund, while in March 2020 his predecessor at SBI Arundhati Bhattacharya joined US cloud-based service provider Salesforce.com Inc as CEO of India unit after quitting the advisory role at homegrown private equity firm ChrysCapital.
To be set up largely by public sector lenders, the bad bank will aggregate non-performing assets (NPAs) from banks and transfer them to a step-down asset management company (AMC) which will manage the assets for resolution and sale. A separate CEO is likely to be appointed for the AMC.
The NARC will look to resolve stressed assets of Rs 2-2.5 lakh crore in around 70 large accounts.
First announced in the Union Budget for 2021-22 in February this year, the NARC is expected to be operational by June 2021, according to multiple media reports.
The move was announced after a lull in recovery of bad loans. Less than 30 asset reconstruction companies (ARCs) operational today account for around 26.7% of the total recovery since 2003-04 as compared with the Insolvency and Bankruptcy Code’s record of 45.5% recovery in the last four years, recent data by the Reserve Bank of India (RBI) showed.
In a report released in April 2021, RBI said, “The growth of the ARC industry has not been consistent over time and not always been synchronous with the trends in NPAs of banks and non-banking financial companies (NBFCs).”
Of the total assets under management (AUM) of all ARCs, 67% and 76% was held by the top-three and top-five ARCs in March 2020, respectively, it said.