- An asset reconstruction company is a special type of financial institution that buys the debtors of the bank at a mutually agreed value. It attempts to recover the debts or associated securities by itself. The required funds to purchase such debts can be raised from Qualified Buyers. Obviously this helps banks to concentrate in normal banking activities.
- Instead of going after the defaulters by wasting their time and effort, Banks can now sell the bad assets to the ARCs at a mutually agreed value.
- Now RBI panel is likely to permit these ARCs to buy stressed loans and cut more deals, which is the recommendation of the committee appointed for drafting new rules for ARCs and activate the struggling bad loan market.
Following article gives more details about the details on lower payment for all cash deals, and letting ARCs hold 100% in defaulting companies which is expected to activate stressed asset market