ARC's suggestions sought by RBI for NPA revival

The cap has to be below 50% as per the ARC demand which could not be changed by the RBI. The issue is due to be taken up with the government since it needed to be amended in the Sarfaesi Act.

Banks need to find measures in order to price bad loans in a realistic way, said RBI governor Raghuram Rajan in a meeting at RBI’s office, attended by bankers, ARCs and PE chiefs, including Sanjay Nayar of KKR and Renuka Ramnath of Multiples Alternate Asset Management.

The governor sought suggestions from rom asset reconstruction companies (ARCs) and private equity (PE) firms on reviving stressed assets.

The cap has to be below 50% as per the ARC demand which could not be changed by the RBI. The issue is due to be taken up with the government since it needed to be amended in the Sarfaesi Act, said a Financial Express report.

Earlier in a report, the ARCs had mentioned that buying stressed assets would not be possible unless they are permitted to raise funds from various avenues.

The capital base of all ARCs is  Rs 3,000 crore, whereas the total bad loans in the public sector banks (PSBs) are around Rs 2.67 lakh crore. Owing to deficient sophistication required by domestic players to understand risks and opportunities in the asset reconstruction sector, raising local capital is difficult, said Vinayak Bahuguna, Arcil MD and CEO, in the FE report.