First NARCL transfer case: Lenders await govt guarantees for SR

While the National Asset Reconstruction Company (NARCL) is working on about a dozen cases, lenders are looking to the government to provide guarantees for securities receipts (SRs) for the first stress asset Jaypee Infratech.

The NARCL offered just more than Rs 3,500 crore for debts of over Rs 9,200 crore held by state-owned banks.

There was no counter-offer under the Swiss Challenge about a month ago, paving the way for the transfer of a lender exposure to the NARCL.

The process of Swiss Challenge was over last month.

After the first few cases, as lenders and the government become familiar with the arrangement, the time taken will be much less for processing subsequent cases.

This is the first case and hence lenders as well as the ARC were particular about following due process, senior bank executives said.

All the offers made by the NARCL are backed by government guarantees for SRs issued by it. This puts the ARC at an advantage over any other bidder. Any party interested in making a competing offer has to pay in cash.

Public-sector bank executives said some cases being considered for transfer to the NARCL include Future Retail, Rainbow Papers, and Srei Infrastructure Finance.

The first formal target for the NARCL was articulated in January 2022, where banks were to transfer 15 non-performing assets worth Rs 50,000 crore by March 2022. The entity could not reach the target because equity and guarantees came close to year-end (FY22). The next target date for transfer indicated was the end of the first quarter (June 2022).

There have been delays in comparison to the initial timelines for starting their functioning and the amount for resolution has also declined.

Assets of Rs 40,000-50,000 crore could be transferred in the first phase before the end of Q3FY23 with the amount of transfer at Rs 90,000 crore in FY23 if the system functions smoothly.