Team Blitz India
NEW DELHI: The RBI’s Deputy Governor,J Swaminathan pointed out thatasset reconstruction companies (ARCs) have been conduits to the evergreening of distressed assets. He also said that some of them have usedinnovative structures to circumvent regulations. Directing ARCs to adopt a regulation-plus approach, Swaminathan said that ARCs’ performance is less than optimal.
“During our onsite examinations, we have come across instances where ARCs have been used or allowed themselves to be used, if I may say so, as a conduit to evergreen distressed assets,” Swaminathan stated.
He also pointed out that their supervisory team has found that some ARCs are acquiring assets on their books but the selling bank does the recovery. “We have also come across instances where ARCs have warehoused the stressed assets while the originator has continued to remain responsible for the collection and custody of the security provided by the borrower,” Swaminathan said.
