New Delhi: Indian lenders have been instructed by the Finance Ministry to sell at least three accounts – Rainbow Papers, Mittal Corp, and Consolidated Construction Company to government-backed bad bank National Asset Reconstruction Co Ltd (NARCL) by October end.
NARCL officials and senior bank officials held a meeting on Tuesday evening during which a decision on the sale of distressed loans was taken. Sanjay Malhotra, secretary, department of financial services, chaired the meeting, which was attended by State Bank of India chairman Dinesh Khara.
Additionally, lead banks will seek member banks’ permission to sell another 15 shortlisted accounts, including Jaypee Infratech, Srei Infrastructure Finance, Srei Equipment and a few Future Group companies, to the bad bank, three people aware of the development told Economic Times.
During the two-hour meeting, Malhotra directed banks to hold a joint lenders’ meeting (JLM) next week to consider selling at least 15-18 accounts to NARCL. Moreover, he directed banks to sell eight accounts in the first tranche and 10 accounts in the second tranche, according to people who attended the meeting.
NARCL, which was announced in the Union Budget in February 2020, has not closed a single transaction despite being in operation for nearly a year. The Reserve Bank of India (RBI) issued an ARC licence to NARCL in October last year. As per the RBI rules, an ARC must conclude at least one trade within a year of its operation.
NARCL will make binding offers for Rainbow Papers, Mittal Corp and CCC in the coming days. The bad bank had earlier offered Rs 80 crore for Rainbow Papers, which has outstanding debt of Rs 1,136 crore, Rs 232 crore for Mittal Corp which has ₹1,587 crore debt, and Rs 80 crore for CCC which has Rs 2,426 crore debt.
Lenders rejected these offers since the pricing was below their expectations.
Once lenders receive binding offers from NARCL, they will seek their credit committee’s nod to sell the loans under the 15:85 structure. Here, NARCL will pay 15 per cent of the consideration upfront and the balance 85 per cent will be paid in the form of security receipts (SR) to be payable on recovery of loans.
