NARCL acquires first stressed account

Recently, the National Asset Reconstruction Company Ltd (NARCL) acquired its first stressed asset — Jaypee Infratech — from lenders. 

• It acquired its exposure aggregating about Rs 9,200 crores at a 55 per cent haircut.

What is National Asset Reconstruction Company Ltd (NARCL)?

• NARCL has been incorporated under the Companies Act and has applied to the Reserve Bank of India for a license as an Asset Reconstruction Company (ARC). 
• NARCL has been set up by banks to aggregate and consolidate stressed assets for their subsequent resolution. PSBs will maintain 51% ownership in NARCL.
• NARCL will house bad loan accounts of Rs.500 crores and above.
• Establishing NARCL is part of the government’s efforts to clean up the financial system, which is sitting on one of the biggest piles of bad assets in the world.
• It is expected that the warehousing of bad loans by NARCL will allow banks to cut losses and renew lending.