In a landmark move, a consortium of 25 banks led by State Bank of India (SBI) has executed the transfer of ₹ 12,700 crore worth stressed loans belonging to Jaiprakash Associates Ltd (JAL) to National Asset Reconstruction Company Ltd (NARCL), which is known as country’s ‘bad bank’.

The completion of the transfer done in a 15:85 model means that the banks will, this quarter, get cash amounting to ₹1,905 crore that could be taken to their profit and accounts this quarter. The consideration for the balance amount (₹10,795 crore) would come as security receipts (SRs) issued by NARCL to these banks, sources close to the development said. JAL’s resolution professional (RP) remained unavailable for comments.

The total outstanding including over dues and interest and penalties was over ₹55,493.33 crore as on February 20, 2025. 

This development marked a significant breakthrough and a possible resolution of the debt-ridden company that is witnessing one of the longest corporate insolvency proceedings in the country, sources added.

Insolvency process

Meanwhile, insolvency process of Jaiprakash Associates will continue and the deadline for Expression of Interest (EOI) submission has been extended to March 25. Final recovery for banks from SRs depends on outcome of the resolution, economy watchers said. 

JAL was categorised as a non-performing asset (NPA) in 2016 and was admitted to bankruptcy court last year. 

In January, NARCL had emerged as the sole suitor to acquire Jaiprakash’s stressed loan. 

Some of the lenders with high exposure to JAL include SBI with nearly ₹15,500 crore, ICICI Bank with ₹10,000-odd crore, IDBI Bank with ₹8,700 crore, Axis Bank with ₹3000 crore, among others. Other lenders include Punjab & Sind Bank, Standard Chartered, LIC, Indian Overseas Bank, Bank of India, Bank of Baroda, Central Bank of India, Karur Vysya Bank, Yes Bank, Standard Chatered, among others. Some of the other non-banking lenders include Srei Equipment Finance, etc.

Interestingly, over half-a-dozen asset reconstruction companies (ARCs) had initially expressed interest in acquiring lenders’ exposure to JAL on an all-cash basis, but no firm offers were received to challenge the government-backed bad loan aggregator.

Jaiprakash businesses covers diverse sectors including real estate, engineering and construction, cement and hospitality. The last date for submission of resolution plans ( as a single unit) now stands at June 9,2025.

A banker noted that one of the advantages of selling loan exposure to NARCL is that any future upside is also shared with banks. “That is advantage for lenders to part asset with NARCL”, the banker said.