Monitoring NCLT and NARCL Cases to Minimise Delays

Monitoring NCLT and NARCL Cases to Minimise Delays

Sub :Eco

Sec: Monetary Policy

Key Directives from the Finance Ministry

• Close Monitoring of NCLT and NARCL Cases:
  • Banks have been instructed by the Finance Ministry to closely track cases involving:
    • National Company Law Tribunal (NCLT)
    • National Asset Reconstruction Company Limited (NARCL)
  • Objective: To minimise procedural delays and adjournments for faster resolution of stressed assets.

Integrated Portal Development

• Ministry of Corporate Affairs Initiative:
  • An integrated portal is being developed to facilitate seamless information sharing with banks regarding NCLT cases.
  • Aim: Streamlined updates to enhance efficiency in case monitoring.

Bad Bank- A bad bank is an entity created to purchase and manage non-performing assets (NPAs) or bad loans from financial institutions. It provides banks with the opportunity to clean their balance sheets and focus on healthy lending.

It was first proposed in the 2016 Economic Survey. National Asset Reconstruction Company Limited (NARCL), established in 2021, is India’s first bad bank.

NARCL – India’s Bad Bank

• Objective:
  • Tackle large-value bad loans (over ₹500 crore).
  • Facilitate resolution and liquidation through a structured mechanism.
• Structure:
  • NARCL: Aggregates and purchases NPAs from banks.
  • IDRCL: Handles the resolution process under an arrangement with NARCL.
• Funding:
  • Pays 15% of loan value in cash; 85% in government-backed security receipts.
  • State-owned banks hold a 51% stake; private banks own the rest.

National Company Law Tribunal (NCLT)

• Nature: A quasi-judicial body handling corporate disputes of civil nature.
• Established: June 1, 2016, under the Companies Act, 2013.
• Recommendation Basis: Formed based on the recommendations of the Balakrishna Eradi Committee, which suggested reforms in insolvency and company winding-up procedures.