Mumbai : Asset Reconstruction Companies (ACRs) have called upon the banks to sell them bad loans in early stages so that the chances of recovery become brighter.
With the bad loans becoming older, the possibility of recovery goes down, so feel the experts.
“The accounts being sold to the ARCs are at a dead end. There is nothing left when we buy and chances of revival are minimum,” said Pradeep Goel, Chairman,
Assocham National Council for Stressed Assets, and MD, Prudent ABC.
“In fact, the expectations of the lenders and investors in security receipts from ARCs are unrealistic. It is very easy to blame the ARCs saying that they were not doing anything, he added.
After all, the ARCs are concentrating on reviving viable cases for value maximisation and contribution to the economy of the country, said Raj Kumar Bansal, Chairman, Association of ARCs in India and MD & CEO, Edelweiss ARC.
The recovery rate of bad loans is very much higher if Non-Performing Assets (NPAs) are sold to ARCs early. The practice has been that the banks first exhaust all the means at their command to recover bad loans and they hand over NPAs to the ARCs. But by this time, their value erosion has already taken place and chances of recovery are down, Bansal opined.
Instead of spending time in loan recoveries and exhausting all remedies before handing over the bad loans to ARCs, the banks should concentrate on their core business of increasing credit growth, thereby contributing to the growth of the economy, experts said.
According to RBI figures, on March 31, 2023 the total book value of assets acquired by 28 ARCs increased to Rs 8,48,119 crore as against Rs 6,38,008 crore in the previous year.
