The Indian banking system has undergone a notable transformation, marked by a resurgence in both public and private sector banks. During the recent BT Best Banks & NBFCs Awards Jury Meet Pallav Mohapatra, CEO & MD of Arcil Ltd, highlights the transformative impact of the Insolvency and Bankruptcy Code (IBC) and the National Company Law Tribunal (NCLT). As India’s banking sector undergoes a cleanup, the government’s asset quality review and strategic recapitalization of PSU banks play a crucial role. Amidst rigid regulations, the Reserve Bank of India (RBI) emerges as a proactive force, turning troubled assets into opportunities.

US-based Avenue Capital-backed Asset Reconstruction Company (India) (Arcil) has bought nearly ₹400 Crore worth of bad loans or non-performing assets (NPAs) of Saraswat Bank with a haircut of nearly 86%. Saraswat Bank, one of the largest cooperative banks in the country, sold the NPA portfolio comprising retail and micro, small and medium enterprises (MSME) loans as a clean-up for future growth capital. The bank has concluded the sale of the NPA portfolio it had announced in the previous quarter. Initially planning to sell assets amounting to ₹410 Crore, Saraswat Bank later reduced the pool to ₹385 Crore, seeking bids on a 100% upfront cash basis as it wanted to clean up its loan book for future growth. BOB Capital Markets was the process advisor.
 

An Indian distressed assets investor backed by Avenue Capital Group LLC is looking for global partners to buy as much as 55 Billion rupees ($665 Million) of soured loans this year. “We are talking to a group of global investors including Cerberus Capital Management, Bain Capital, Oaktree and A B CarVal as they bring in strategic expertise to debt resolutions,” Pallav Mohapatra, chief executive officer of Asset Reconstruction Company (India) Ltd., said in an interview. This will help the company recover bad loans it buys and boost its income, he said. ARCIL, with assets of more than 162 Billion Rupees, is looking to acquire soured debt from “promising” sectors such as renewable energy, road, steel and logistics. It may bring Avenue Capital as a co-investor, Mohapatra said.

The Asset Reconstruction Company (India) Ltd (Arcil) is planning to empanel strategic investors with expertise in sectors such as steel, roads and power so that it can jointly submit resolution plans for stressed companies in these sectors to the Adjudicating Authority under the Insolvency and Bankruptcy Code (IBC). ARCIL will also team up with strategic investors to participate in the “Swiss Challenge” process (make counter bids) that will be run on National Asset Reconstruction Company Ltd’s anchor/ base bid to acquire stressed companies from lenders, said MD and CEO Pallav Mohapatra. Referring to RBI’s October 2022 guidelines, which allow Asset Reconstruction Companies (ARCs) to act as Resolution Applicants (RAs) under IBC, the ARCIL chief said: ”Now, if we want to become a RA, we will do it only when there is a strategic investor.

As deputy MD of State Bank of India's stressed asset division and then CEO of the bad loan-laden Central Bank of India, Pallav Mohapatra developed unparalleled expertise in dealing with non-performing assets. Now as CEO of Asset Reconstruction Company (India) (Arcil), Mohapatra has been on the buy side of the table for two years. In an interview with Joel Rebello, he talks about the opportunities and regulatory changes facing the industry. Edited excerpts:  The supply of corporate NPAs has come down. What is the outlook for the business?  There are still business opportunities in the corporate book because there are assets, which have slipped into NPA a few years back and are either still in the National Company Law Tribunal (NCLT) or about to go to NCLT or even things happening outside NCLT. We are looking at those assets wherever we see a good possibility of recovery. Fresh slippage is not happening at the rate it was happening earlier but those which have slipped into NPAs earlier have not been resolved 100% which is a segment where there is an opportunity.