The National Asset Reconstruction Company Ltd.—the Indian version of a bad bank—now has a chief executive.
Padmakumar M Nair, chief general manager at State Bank of India, will take over the post on a deputation basis at first, according to two people with direct knowledge of the matter. The Indian Banks' Association, which is working on building the National ARC, issued a letter appointing Nair to the post on Tuesday, the first of the two people quoted above said. Once the board of the National ARC is set up, it will have to reaffirm the appointment, which would allow Nair to take over as a full-time CEO.
Nair, who currently works in the stressed asset vertical of SBI, will be responsible for kick-starting the NARCL, which can then begin the process of taking over stressed assets from the banking system. The ARC will purchase these assets at steep discounts and pay banks through a mix of cash and security receipts. These assets will be first aggregated and then will go through a process of resolution under the ARC. Once the resolution is complete, the banks holding security receipts may redeem them for returns.
The government is expected to provide a 20% credit-loss guarantee against the security receipts which the NARCL would issue to banks. On May 6, BloombergQuint reported that the government's role could be lower than previously expected.
The NARCL has to apply for a licence from the Reserve Bank of India to be fully operational. According to the two people quoted above, the entity may not be fully operational before September.
Public sector and non-bank lenders are expected to be the major shareholders in the NARCL. Currently, the IBA is working on the legal paperwork to establish the NARCL as a corporate entity. Staff appointments will follow.
Nair did not respond to a message seeking confirmation of his appointment. Sunil Mehta, chief executive, IBA did not immediately respond to an email sent on Tuesday.
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