Banks have sold Rs 2.44 trillions of bad loans to 23 asset reconstruction companies (ARCs) and despite a surge in stressed assets to around 15 per cent, there was a slowdown in transactions in recent months, says a report. “Around Rs 2.44 trillion worth of gross NPAs have been sold to ARCs till now,” the report by industry lobby Assocham and Edelweiss ARC held today. Even as opportunities are enormous the report has estimated total stock of stressed assets in the system at 15 per cent or Rs 11.80 trillion — the pickups by ARCs have suffered since 2015-16, it said. High incidence of stressed assets, which includes 9.84 per cent gross NPAs and 4.2 per cent in restructured assets, is a “matter of concern for the economy”, the report said.
One of the reasons for the slowdown is the price mismatch between the anticipation of ARCs and the banks under the 15:85 structures, where banks are paid 15 percent of the agreed amount on an asset in cash and the rest is paid later through security receipts, it said. Resource constraints at ARCs are also another prime reason for the plunge in the sales, it said. The number of ARCs kept growing with a complete liberalisation on foreign holding caps and have now touched 23, it said.
It said there have been a surge in capital among ARCs and several new high-profile players are expected to commerce business in fiscal 2018. The report also called for a level-playing field for ARCs with banks when it comes to converting debt into equity and incentives for banks to sell dud loans to ARCs so that an ARC can aggregate the entire stock quickly.