Banks may sell Rs 1 lakh crore of dodgy loans to NARCL

Mumbai: Banks could offload nearly Rs 1 lakh crore of accounts with known fraudulent activities to National Asset Reconstruction Company Ltd (NARCL) and other ARCs after the Reserve Bank of India allowed lenders to sell such loans, industry estimates show.

In the last three years, banks have declared loan frauds amounting to Rs 3.95 lakh crore, according to RBI data. The move by banks is expected to help NARCL meet its target of acquiring Rs 2 lakh crore of loans.

ET reported in June that banks and asset managers had sought the central bank's approval to allow the sale of such accounts to asset reconstruction companies, something the banking regulator was averse to.


"Those large-value loans which have large bank consortiums are likely to be offloaded to NARCL. The new RBI rules will help NARCL identify their leftover kitty," said a banker in the know. "Since there is a government guarantee, banks don't have to fully provide for loans which don't have total provision cover, unlike incremental provision for sale to ARCs."