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Asset Reconstruction Companies (ARCs)
Why is it in news?
- The RBI set up a committee to undertake a comprehensive review of the working of asset reconstruction companies (ARCs).
Details:
- The six-member committee will be headed by Sudarshan Sen, former executive director, Reserve Bank of India (RBI).
- The committee would also recommend suitable measures for enabling ARCs to meet the growing requirements and measures to improve efficacy of ARCs.
- It will review the role of ARCs in the resolution of stressed assets, including under the Insolvency and Bankruptcy Code (IBC).
- It will give suggestions for improving liquidity in and trading of security receipts.
About ARCs:
- It is a specialized financial institution that buys the NPAs or bad assets from banks and financial institutions and attempts to recover the debts by itself.
- The ARCs take over a portion of the debts of the bank that qualify to be recognised as Non-Performing Assets.
- ARCs are registered under the RBI and regulated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002.
Significance of ARCs:
- ARCs clean up the balance sheets of banks when the latter sells these to the ARCs.
- This helps banks to concentrate in normal banking activities.
Source: The Hindu.