NARCL appoints Diwakar Gupta as new chairman to expedite resolutions

Diwakar Gupta is set to take the helm as the new chairman of the National Asset Reconstruction Company Ltd (NARCL) starting December, following his departure from India Debt Resolution Company Ltd (IDRCL) and receiving the green light from the Reserve Bank of India. Gupta’s appointment comes at a critical juncture for NARCL, commonly referred to as the ‘bad bank,’ which has been grappling with slower-than-expected progress in acquiring and resolving non-performing assets (NPAs).

The state-owned ‘bad bank’ was envisioned to consolidate and restructure distressed debt in the banking sector, but has thus far only managed to secure six acquisitions totaling ₹14,166 crore. This figure falls short of the ambitious ₹82,845 crore target set by State Bank of India’s chairman Dinesh Khara. NARCL’s strategy for purchasing NPAs involves a 15% upfront cash payment to banks, with the balance being covered by security receipts. These receipts are backed by a government guarantee valid for five years.

However, NARCL’s operations have faced several roadblocks. Renewals of government guarantees have been delayed, and valuation disputes have arisen, impeding the acquisition process. Additionally, internal disagreements within the organization came to light following Karnam Sekar’s departure. Sekar resigned amidst discussions over a potential merger between NARCL and IDRCL.

Gupta’s experience with both NARCL and IDRCL positions him uniquely to bridge gaps between the two entities and steer NARCL towards its intended goal. His dual familiarity is anticipated to improve coordination and accelerate the resolution processes within NARCL, addressing the current lag in its operational efficiency. The banking sector is closely monitoring these developments, as a successful turnaround of NARCL could significantly impact the recovery of bad loans and enhance the overall health of India’s financial system.

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