After review, RBI was satisfied that ECL Finance and Edelweiss ARC have taken the necessary remedial actions and committed to comply with regulatory guidelines on an ongoing basis.
Several asset reconstruction companies are struggling, a few are dead and some are set to die amid limited availability of bad loans to source and a regulatory requirement to increase their net worth.
ARCs have to become members of all credit information companies and submit requisite data to them in prescribed format.
Less than a fortnight back, RBI had imposed business curbs on two Edelweiss group entities, including Edelweiss ARC, for regulatory breaches and allegations of evergreening of loans.
RBI urges asset reconstruction companies to follow better governance, risk management and compliance; stresses on need for responsible conduct in recovery process.
After launch of one-time settlement regulation on October 2022, ARCs started following measured steps to ensure realisations; recovery timelines can get stretched by three to four quarters, according to India Ratings and Research.
For Indian banks, retail and MSME segments could see rise in bad loans even as they flag high growth rates, SBI managing director Ashwini Kumar Tewari said.
AUM of ARCs is expected to grow almost 10% this fiscal to Rs 1,19,000 crore after a period of relative stagnation, according to a Assocham-Crisil report.
Small ARCs may find it challenging to bring in additional capital to meet higher minimum net-owned fund requirement; this may eventually lead to consolidation.
About fourth of restructured MSME loans could slip into NPAs while absolute quantum of bad loans in retail segment may rise. Corporate loans for ARCs are at a cyclical low.
RBI raises minimum capital requirement for ARCs while allowing them to act as resolution applicants under IBC.
India’s biggest ARC is making the market shift from corporate to retail acquisition of stressed assets. Why are many other ARCs also following this trend? How will Yes Bank’s deal with JC Flowers and setting up of a bad bank impact the stressed market?
Yes Bank signs term sheet with JCF ARC LLC and JC Flowers Asset Reconstruction for strategic partnership to sell stressed loans aggregating to Rs 48,000 crore.
State Bank of India, which reported its highest quarterly net profit of Rs 8,431.9 crore for the October-December period, has decided to sell six NPA accounts to ARCs.
RBI’s permission to lenders to sell their ‘fraud’ loans to ARCs is set to trigger recovery efforts for dodgy assets worth Rs 4 trillion.
