ICICI Bank to acquire 5% stake in NARCL

Industry:    2 months ago

ICICI Bank on Friday announced that the private lender has signed an agreement on March 10, 2022 for investment in National Asset Reconstruction Company Limited (NARCL). NARCL is an asset reconstruction company, which was incorporated on July 7, 2021.

The bank will acquire up to 5% equity holding in NARCL with total cash consideration of up to 137.5 crore in tranches. Equity investment would be in tranches with first tranche of equity investment of 704.5 million expected to be completed by March 31, 2022, ICICI Bank announced in an exchange filing today.

Finance Minister Nirmala Sitharaman had in her Budget 2021 speech announced the creation of National Asset Reconstruction Company (NARCL) or bad bank to resolve large cases of stress. NARCL has been set up by banks to aggregate and consolidate stressed assets for their subsequent resolution. Public sector banks (PSBs) will maintain about 51% ownership in NARCL.

A bad bank is a corporate entity that alienates illiquid and risky assets held by banks and financial institutions or a group of banks. It is created to help banks clean their balance sheets by transferring their bad loans so that the banks can focus on their core business of taking deposits and lending money.

In January this year, India’s proposed bad bank received all regulatory approvals, and lenders plan to transfer at least 50,000 crore of toxic assets to it by 31 March, 2022, State Bank of India (SBI) chairman Dinesh Khara had said.