National Asset Reconstruction Company (NARCL) has acquired its first bad loan on October 27, 2022, with no counteroffer made for its bid for Jaypee Infratech. The government-promoted bad bank will only acquire loans Jaypee Infratech of owned by public sector banks.
In a Swiss challenge auction held on October 27, 2022, in response to NARCL’s Rs 3,570-crore offer for the Rs 9,234 crore of debt held by nine public sector banks, lenders failed to draw counterbids. In the days to follow, banks will issue a letter of intent to what is known as India’s bad bank, following which NARCL will pay 15% of the debt in cash. It will pay 85% of the bad loans in the form of government-backed security receipts. The transaction is expected to be closed by November first week.
For the uninitiated, a Swiss Challenge is a method of bidding in which an interested party makes a bid for a stressed asset. The details of bid are then made public to invite counterbids. The original has the right to match the best bid.
NARCL is an asset reconstruction company (ARC) set up by banks to aggregate and consolidate stressed assets for their subsequent resolution. PSBs maintain 51% ownership in NARCL. NARCL proposes to acquire stressed assets of about Rs 2 lakh crore in phases within extant regulations of the RBI.
NARCL’s bad loan acquisition plan leaves out nearly 62% of the claims which includes 24,000 homebuyers, private lenders and fixed depositors. They will have to wait for the National Company Law Tribunal for a final call on Suraksha Group’s winning bid. Suraksha Group was declared the winner of the company in June 2021, but the litigation is pending at the NCLT.
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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