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ASSET RECONSTRUCTION COMPANY, sells loan higher price - Coggle Diagram
ASSET RECONSTRUCTION COMPANY
About
FI
buys bank debtors
mutually agreed value
attempts recover debts itself
except loss
Narsimham Committee
envisaged
central asset reconstruction fund
facil. banks improve balance sheet - cleaning bad loan
bad loan criteria
what is bad loan
amount owned creditor
creditor not willing
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unlikely paid
RBI
commer. loan > 180 days overdue
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agri. loans
interest or principal
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Asset Reconstruction Company (India) ARCIL
1st ARC (2004)
incorp. company
companies act
regis.
Rbi
SARFAESI Act 2009
many ARC existence
still bad loan problem
GOVnt solu.
new ARC
most banks
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existing ARC thinly capitalised
Slow Resol,
commercial loans granted mostly 8-10 banks
some banks oppose resolution process - slowing
mandates
main. mini. Rs100 crore
CAR 15% risk weighted asset
IBC 2016
allow ARC
convert debt into equity
not allow ARC
bid
stressed company directly
need
consol. bas loans
single exclus. entity
gross NPA
7.5% sep 2020
expec. >13.5% sep 2021
comple. IBC
provi. one time exceptional resolution mechanism
Ease bank burden
freeing up provisional funds a/st bad lo.
cleaner balance sheet
better banking
Boost Economy
builds entrepreneur confide.
provi. alternate a/st filing insolvency
challenges
mere shift
bad loans
bad assets govnt owned PSBs - govern. backed ARC
may not
ease bad loan crisis - PSBs
PSBs managed
bureaucrat
no incentive
ensure lender profitability
no redressal root problem
way ahead
past experiments bad loans failure
cause
crucial design imperatives ignored
New ARC address existing issue
Malaysian experi. post asian crisis
crucial design imper.
Effective Mana.
ARC ctrl
seasonal distressed mgmnt profe.
Fair price for asset purchases
ensure
no resolu. impair.
no supernormal profits stakeholder
support from Stakeholders
ARC
ARC pre-defined, limited self life
closing regu. gap
SARFAESI & IBC
amend. sarfaesi
ARC acquire equity
directly comp. sold under IBC
allow dist. com.
reci. reso. plans
Setting distressed loan sales trading platform
better price discovery
governance reforms
conduct & oper. risk mgmnt
FI, auditors, boards, rising agencies, indpnt analysts, reg. supervisors
PSB
profe. autonomy
news
Union budget 2021-22 proposed new ARC
sources
Visionias CA feb 2021
sells loan higher price
profit