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ARTICLE · 20 APRIL 2017

The Viewpoint: ARCs & Stressed Assets: A Glimpse Of A Better Tomorrow

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With the volume of stressed assets in India almost doubling in last five years, ARCs, which act as intermediaries between the borrower and the lender, have been bestowed with the imperative responsibility to clean-up stressed assets ...

IndiaFinance and Banking
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INTRODUCTION

With the volume of stressed assets in India almost doubling in last five years, Asset Reconstruction Companies (ARCs), which act as intermediaries between the borrower and the lender, have been bestowed with the imperative responsibility to clean-up stressed assets by adopting effective resolution and recovery mechanisms and relieve lenders from the mountainous burden.

Backed strongly by the RBI, ARCs are a creation of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002 more than a decade ago. Despite the RBI's encouraging measures towards promoting sale of stressed assets by banks to ARCs, the ARC sector is yet to mature in Indian jurisdiction. This can be witnessed from the fact that in the face of stressed assets verging on an alarming figure of close to INR 700 trillion, only 14 functional ARCs on date have a considerably minimal stressed asset portfolio.

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