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Asset Reconstruction Companies in India – Challenges and Opportunities
EXCERPTS
THE ARCs’ BUSINESS
Asset Reconstruction Company of India Limited (ARCIL) was the first ARC formed under the SARFAESI Act. It was promoted by ICICI Bank, State Bank of India (SBI), Industrial Development Bank of India (IDBI), and Punjab National Bank (PNB) with stakes of 29%, 19.9%, 19.9%, and 10% respectively . The remaining stake of 21.2% was held by Karnataka Bank, Karur Vysya Bank, Citi Corp, Federal Bank, and South Indian Bank . Since its establishment, ARCIL had been active in purchasing NPAs from banks... |
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CHALLENGES AND OPPORTUNITIES
In August 2014, the RBI increased the upfront fees to be paid by ARCs on the acquisition price to 15% from 5%. This increased the demand for capital in the sector. As per the industry analysis, the total capitalization of ARCs as on October 31, 2015, was estimated at US$5 billion (Rs.335,100 million) . With an increase in the upfront fee, the total net worth of ARCs would only enable them to acquire NPAs of value US$3.3 billion (Rs. 221,166 million). It was estimated that the total value of stressed assets in Indian banks was 14% of the gross advances (US$161 billion/Rs.107,90,220 million)...
EXHIBITS
Exhibit I: Trends in Gross NPA to Gross Advances in Indian Banks
Exhibit-II: Important Provisions of SICA
Exhibit-III: Top 5 ARCs in India according to Assets under Management (As on March 31, 2015)
Exhibit-IV: Recovery Process of ARCs
Exhibit-V : Trend in Pending and Recovery Cases
