Bad bank chief quit as RBI nod never came

MUMBAI Pradip Shah, the veteran of the financial sector who was appointed chairman of the National Asset Reconstruction Co. Ltd (NARCL) on 1 November 2021, had to resign on 28 January as the Reserve Bank of India (RBI) approval for his appointment was not obtained. in time, said two people who were aware of the matter.

While Subrata Biswas, a deputy chief executive of the State Bank of India, was subsequently appointed interim chairman, the RBI has so far not published its position on Shah’s appointment.

“I had no opinion, nor did I try to find out if the RBI approval was probable or unlikely. It had not come to the date I resigned,” Shah said in response to Mint’s emailed questions.

Shah, founder of Crisil’s CEO, is known for his role in forming mortgage lender Housing Development Finance Corp. Ltd. The 69-year-old had also founded corporate finance and private equity advisory, IndAsia Fund Advisors, 1998.

Although the RBI did not inform lenders why his appointment was not ratified, the fact that Shah holds senior positions on the boards of many companies could have gone against him because it could lead to a conflict of interest, said one of the persons seeking anonymity.

Shah is a board member of 17 company boards, according to information from the Registrar of Companies.

“The idea of ​​having an external expert as chairman was intended to strengthen NARCL’s process of buying into stressful assets,” said the person quoted above, adding that it is better to have a non-banker as chairman of the bad bank.

The other person, who also sought anonymity, said Shah was initially reluctant, but decided to take the role after several requests from lenders.

Email questions sent to an RBI spokesman and Padmakumar Nair, CEO, NARCL remained unanswered until press time.

The Indian Banks’ Association (IBA) has also applied for the position of NARCL’s CEO.

Although incumbent Nair may also apply for the post, new applications must be invited as public entities have a mandate to carry out an open selection process.

The plan to create a bad bank was first announced in the Union’s budget for FY22. However, the central bank was initially not satisfied with the proposed structure, which led to a delay. Subsequently, the lenders submitted a revised proposal before the Banking Authority and NARCL were finally set up, and 38 accounts worth 82,845 crore was identified for transfer to the device.

But the central bank recently put its weight behind the idea of ​​a bad bank. Referring to success stories from other countries, RBI said that if logistical and financial challenges are navigated carefully, experiments with bad banks have had more hits than misses.

Under the new structure, the bad bank will acquire and aggregate the bad loan accounts from banks, while India Debt Resolution Co. Ltd (IDRCL) will handle the reconstruction process according to an exclusive arrangement.

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