NARCL And IDRCL Are Going To Merge To Streamline The Resolution Of Bad Loans

The government is planning the merger of National Asset Reconstruction Company Ltd (NARCL) and India Debt Resolution Company Ltd (IDRCL) as a measure to simplify the bad bank system.

According to a report by Economic Times on 24 March 2026, the idea is to merge the processes of asset acquisition and resolution into a single, streamlined mechanism.

Why Is The Merger Being Planned?

At present, India's bad bank system is implemented through two different organisations:

• NARCL, which buys the stressed assets of banks, supported by a government guarantee

• IDRCL, which takes care of resolution and recovery

This arrangement was put in place in order to allocate different tasks; however, it has caused problems in coordination, and decision-making has become slower.

By one entity being responsible for both functions, only one decision-making body would be required. Hence, the execution would be quicker, and accountability would be clearer in resolving bad debts.

The merger is expected to be completed within nine months, once the regulatory approvals are in place. Officials believe the move will help streamline processes and remove duplication of roles between the two organisations.

What Is India’s Bad Bank Model?

The bad bank framework was launched in 2021 to deal with the problem of large non-performing assets (NPAs) in the banking sector. At its peak, bad loans had risen to around 16% in March 2018, but later came down to 2.3% by March 2025, thanks to write-offs, recoveries, and regulatory steps.

The framework was designed to:

• clean up the banks' books of accounts

• improve credit availability in the economy

• speed up the resolution of large default cases

At the start, nearly ₹2 lakh crore worth of bad loans were planned to be moved to NARCL. So far, ₹1.63 lakh crore has been taken over as of December 2025. Banks get 15% in cash upfront, and the remaining amount comes as security receipts, which they continue to hold.

Although the NARCL has acquired several stressed assets, the pace of resolution has been slower than initially expected due to operational complexities between the two entities. This is what the merger hopes to remove and help make recoveries faster.

Also Read - HDFC Bank Shares Bounce Back After Sharp Correction

What Is The Expected Impact On Banks?

This change could help banks deal with bad loans more quickly and recover dues faster. Because NPAs lock up a large amount of funds, a faster resolution means banks can lend more to other borrowers. A stronger bad bank setup will also help in improving asset quality and boost overall credit growth.

Source:

ET