Industry Scenario

The regulatory framework for ARCs is expected to undergo significant changes during the year. In April 2021, RBI has constituted a committee on Asset Reconstruction Companies under the chairmanship of Mr. Sudarsan Sen, Former Executive Director, Reserve Bank of India. The Committee is mandated to review the legal and regulatory framework to improve efficacy of ARCs. The terms of reference include review of business models and matters relating to transparency and governance in ARCs. Further, the committee will review the role of ARC under IBC. It will also examine the issues around listing of Security Receipts (SR) and improving liquidity in SR trading. The Committee is expected to submit its report by August 2021. ARCs look forward to this development, which may redefine ARC business and bring in new opportunities for growth.

Another major development is the setting up of a National ARC Ltd (NARCL), popularly known as bad bank, as announced in Budget 2021. The ARC, with banks as stakeholders, has been incorporated. As per reports, it will focus on fully provided for assets with ticket size of Rs 500 crore and above, where 75% lenders agree to sell the assets, so that NARCL gets aggregated debts in one go. As per estimates, debts totaling of Rs 2 lac crore has been identified by banks for possible transfer to NARCL.

2021 will be a milestone year for ARCs. The industry will have new challenges, new threats. Adaptability to changing environment will be the key to sustainability.