RBI's Financial Stability Report: NPAs acquired by ARCs increase by 24.19%
In the Financial Stability Report (FSR) released on Thursday, Reserve Bank of India (RBI) said that that there has been consistent rise in number of Asset Reconstruction Companies (ARCs).
ARCs' primary goal is to manage and generate profitability from those assets which have been under-performing or in other word known as non-performing assets (NPA).
This ode gives an opportunity to banks to reduce their long hanging stressed or 'bad loans' by selling it to ARCs.
RBI data show that although the number of companies acquired by ARCs rose by only 2 from March 2015 to March 2016, the total consideration for the same increased from Rs 58,479 crore to Rs 72,626 crore in the same period, registering a rise of 24.19%.
RBI said, "This was because of the regulatory support extended to banks under the Framework to Revitalise the Distressed Assets in the Economy."
The central bank on August 08, 2016, approved licence of three more asset reconstruction companies namely - Delhi based Encore ARC, Ahmdabad-based CFM, backed by a chartered accountant and the Vishakapatnam headquartered Maximus ARC to float asset reconstruction companies.