Karnam Sekar, the Chairman of the Bad Bank, has resigned from his position due to disagreements over the structure and operations of the institution, according to a report by the Economic Times. His departure from the National Asset Reconstruction Company of India (NARCL) became effective on August 19, shortly after a proposal emerged advocating the merger of NARCL with the India Debt Resolution Company Ltd (IDRCL).

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NARCL's Managing Director, N Sunder, confirmed Sekar's resignation to the Economic Times and clarified that it was driven solely by personal reasons. Sunder stated, "While Karnam Sekar's resignation from NARCL's board is accurate, it was based entirely on personal grounds. We have no knowledge of any recommendations from IDRCL."

The idea of merging the two entities was put forth by IDRCL, led by former State Bank of India Managing Director Diwakar Gupta. The proposal, submitted to the Finance Ministry, underscores the potential benefits of such a merger in terms of enhancing business prospects and reducing costs.

However, as per the report, the Finance Ministry might not be inclined to endorse this proposal, suggesting that the current situation is likely to remain unaltered in the near future.

At present, NARCL assumes the position of the 'principal entity,' while IDRCL functions as a resolution agent. NARCL is tasked with acquiring and aggregating non-performing loan accounts from banks, while IDRCL specialises in managing the resolution process.

Additionally, CNBC-TV18 recently reported that two years after the government initiated a bad bank or the NARCL to acquire bad loans from banks, the track record doesn’t look great. The government had set a target of two lakh crore worth of NPAs to be acquired by NARCL as of FY22 end. However, to date, not even 10 percent of that target has been met.

Sources told CNBC-TV18 that NARCL so far has taken over seven NPA accounts, amounting to 18,218 crores of bad loans or less than 10 percent of the two-lakh crore aim. Also, NARCL has paid banks less than 4,500 crores for these bad loans, 75 percent lower than the original amount which is a significant haircut. Read more on this exclusive coverage here .

First Published:Aug 30, 2023 1:11 PM IST