The current financial year was a good one for Asset Reconstruction Company (India) Limited, or Arcil, in terms of acquisitions and recoveries. Speaking to Manojit Saha & Subrata Panda in an interview, The business model which is good for the asset reconstruction companies (ARCs) on a longterm sustainable basis is “acquire and recover”. When one follows this model, then you are making money on the acquisition and on the redemption also. Hence, your return goes up. However, if you keep the asset for a longer time, they may make money on accrual basis. However, since after eight years 100 per cent provisions have to be made if one has not recovered the outstanding, so accruing the income and then reversing it after eight years doesn´t make a good business model. In FY22, we (ACRIL) did an acquisition of Rs 2,400 Crore and recovered Rs 2,200 Crore.

Asset reconstruction companies are improving their technology and building partnerships with resolution agencies to service capital-intensive retail and micro, small and medium-sized enterprise loans.  “We are putting up an information technology platform, which we will be using on a subscription or a usage basis. It will have end-to-end seamless integration. If ARCs acquire retail and small ticket-size SME loans, they have to have a robust information technology system. They cannot use the same mechanism that they were using for servicing corporate loans,” said Pallav Mohapatra, MD and CEO, Asset Reconstruction Company (India). “The field collection can either be done by our own resources or by outsourcing. I have come to the conclusion that it is not cost effective for ARCs to do everything in-house. So, why not engage resolution agencies who are in this field. That is more cost effective and you can expand your base without bothering about whether you have the branch outfits or not,” Mohapatra added.

The Reserve Bank of India's (RBI’s) revised norms for asset reconstruction companies (ARCs) will raise the bar for governance and disclosures, and may also trigger a shake-up in the ARC industry comprising 29 players due to enhanced capital requirements and stringent diligence.

Public sector bank (PSB) major, Punjab National Bank(PNB) on Thursday decided to sell its entire stake in Asset Reconstruction Company (India) (ARCIL) at an agreed price. PNB currently holds a 10.01% stake in ARCIL. The bank plans to divest its stake in the ARC by December 2022-end. On the completion of divestment, PNB will cease to be a sponsor/shareholder in ARCIL as the shareholding will be NIL after the stake sale. The transaction will be carried in cash. The bank will divest about 3,25,06,486 equity shares or 10.01% shareholding in ARCIL.

The Supreme Court has set aside the ruling of the National Company Law Appellate Tribunal (NCLAT) rejecting Asset Reconstruction Co (India) Ltd’s claim in Tulip Star Hotels’ insolvency case. The appellate tribunal had accepted the hotel operator’s claim that the ARC filed its case against the company under the Insolvency and Bankruptcy Code (IBC) after the limitation period of three years from the date of declaring the asset as non-performing.