SBI, PNB, Canara Bank, 5 others take a stake in the bad bank

According to the latest documents filed by the company, Canara Bank has purchased 12 million shares of ₹10 each, Bank of Baroda (BoB), State Bank of India (SBI), Union Bank of India and Indian Bank bought 9.9 million shares each; Punjab National Bank (PNB) and Bank of India bought 9 million shares each. Bank of Maharashtra bought 5 million shares.

Their combined investment is ₹74.6 crores.

A person familiar with the development said these were the initial investors and the pool would grow as more lenders join NARCL, including private sector lenders. As part of the bad bank, an asset management company (AMC) will also be created. “Private lenders will join the Asset Reconstruction Company (ARC) as well as AMC as investors. However, they are currently in the process of obtaining board approvals. We will have enough capital to fight bad debts, ”said the person quoted above.

mint reported last week that NARCL was registered in Mumbai with paid-up capital of ₹74.6 crore and will soon apply for a license from the central bank to operate as a CRA.

Documents have shown that some of the objectives of NARCL include the acquisition, investment, transfer, sale, assignment or negotiation of securitized debt, asset-backed securities or mortgage-backed securities or asset-backed securitized receivables, among others.

Once fully functional, the failing bank should help clean the bad debt pile from bank balance sheets, giving lenders more room to lend and jumpstart the flow of credit. As of March 31, 7.5% of all bank loans had gone bad.

mint reported on March 8 that state-owned banks leading efforts to create India’s first bad bank want private entities to take a 51% stake in AMC. Meanwhile, public sector banks are likely to hold a majority in ARC. The bad bank will be led by Padmakumar Madhavan Nair, an expert in stressed assets at SBI.

An email sent to the Association of Indian Banks went unanswered until going to press.