RBI gives nod for three asset reconstruction companies

RBI gives nod for three asset reconstruction companies

Following have been permitted by Reserve Bank of India, to start Asset Reconstruction Companies,

  • Delhi Based Encore ARC
  • Ahmedabad based CFM (backed by a Chartered Accountant) and
  • Vishakapatnam based Maximum ARC

Companies viz J.C Flowers, and Sudhir Walia were in the rejection list.  Out of the total of 14  companies who applied only three were short listed.  However, the RBI Governor Reghuram Rajan ascertained that shortly more applications will be given license let apart, policies and guidelines are being formulated to increase the efficiency and transparency of price discovery on banks’ sale of stressed assets to ARC.  More analysis reveals the following:

(1)Encore ARC are specialists in legal, accounting, book-keeping and auditing activities, apart from their expertise in tax consultancy, market research, business and management consultancy and lead through public opinion polling.

(2)CFM which is owned by Chartered Finances Management Consultants, is an accounting firm who are good at Accounting and Tax consultancy.  It is headed by A.C. Mahajan who is now the Chairman of Banking Codes and Standards Board of India.

(3)Maximum ARC was incorporated in 2015 and acts as a financial inter mediation agency.

(4)Statistics reveals, that ARCS have assimilated bad loans of face value Rs. 1.20 crores from banks, which is said to be lesser than one tenth of the stressed loans in the banking system.  The Gross NPA have gone upto Rs. 6 lakh crores as on March 2016, which excluded the standard restructured loans, in the bank books.

Many companies and entrepreneurs including Sudhir Valia, a promoter of Fortune Financial Services, J C Flower in partnership with Ambit Holdings, ICICI Bank in partnership with Apollo Global Management, India Infoline Finance and individuals like Vinod Kothari, were also in the prey for an ARC entry.

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