RBI committee to help ARCs realise their full potential

RBI will constitute a committee to review the working of Asset Reconstruction Companies (ARCs) and help them realise their full potential, RBI Governor Shaktikanta Das said recently. The bank has proposed to constitute a panel to recommend suitable measures, enabling such entities to meet the growing requirements of the financial sector.

The announcement from RBI came at a time when the government has announced setting up an ARC and an Asset Management Company (AMC) to help public sector banks dealing with bad loans. “ARCs play an important role in the resolution of stressed assets. Their potential, however, is yet to be fully realised,” Shaktikanta Das stated.

Dinesh Khara, Chairman, SBI, said that the idea of setting up a committee to review the working of ARCs could open up new vistas of faster resolution.

Similarly, RK Bansal, MD, Edelweiss ARC, remarked that the committee by RBI would be beneficial as the ARC industry was never examined or considered for a fresh look. “The major issue is that what is the future, and business model for ARCs? Initially, it was a fee-based business model, slowly it is becoming fund-based business model,” Bansal added.

Market participants are also expecting more clarity on ARC regulations from RBI.