RBI governor Raghuram Rajan on Wednesday sought suggestions from asset reconstruction companies (ARCs) and private equity (PE) firms on reviving stressed assets. Those who attended the meeting said Rajan suggested banks the need to find ways to realistically price bad loans.
The meeting held at RBI’s office was attended by bankers, ARCs and PE chiefs, including Sanjay Nayar of KKR and Renuka Ramnath of Multiples Alternate Asset Management.
One of the main demands of the ARCs was removal of cap on a sponsor’s investment. At present, it has to remain below 50%. “The governor said the central bank will not be able to change it and the issue has to be taken up with the government as it needed ammendment in the Sarfaesi Act,” said sources.
Last month, bankers and ARCs had met Hasmukh Adhia, the secretary, department of financial services (DFS), to look into ways of reviving stressed assets.
ARCs pointed out that unless they are allowed to raise funds from various avenues, they will not even be able to buy stressed assets. Vinayak Bahuguna, Arcil MD and CEO, had recently said all the ARCs put together have a capital base of Rs 3,000 crore, whereas the total bad loans in the public sector banks (PSBs) are around Rs 2.67 lakh crore.
He said it is difficult to raise local capital as the level of sophistication required by domestic players to understand risks and opportunities in the sector (asset reconstruction) is absent.
Though banks have been selling bad loans to ARCs at discounted price, the discounts depend on the underlying value of the asset from which the recovery is to be made. Meanwhile, lenders could sell non-performing assets (NPAs) worth Rs 20,000 crore to asset reconstruction companies (ARCs) in FY15 out of more than Rs 90,000 crore of assets put on sale.
In FY14, banks had offered assets worth Rs 40,000 crore and ARCs bought loans worth Rs 22,000 crore.
