Do you know why banks pay you interest on money you deposit in an account?
Because they lend your MONEY to LARGE companies on high interest rates. Part of this interest is credited to your account.
But there are scenarios where a large company is unable to repay the bank loan.
A bank can go to court to claim the money. Given the speed of India’s legal system, any settlement would take years to come. This is where Asset Reconstruction Companies come in.
Asset Reconstruction in Simple Words:
Instead of going after companies, Banks can sell their BAD LOAN to Asset Reconstruction Companies.
These companies buy the bad loan at discount rates. This means an asset reconstruction company will pay the agreed amount to the bank.
In exchange, the asset reconstruction company (ARC) gets some control over the company.
The ARC has various options to recover the money it paid to the bank. This can include taking over some assets of the company or even the changing nature of its business.
This varies with each case. You may have read about some big Indian companies failing to pay debts. If you want to know which ARCs help such companies, here is the list.
Top 10 Asset Reconstruction Companies (ARCs) in India
These top 10 asset reconstruction companies are helping Indian firms and banks and play a very vital role in the national economy.
1. Reliance Asset Reconstruction Co Ltd
Reliance Asset Reconstruction Company Limited (Reliance ARC) is a topmost asset reconstruction company.
Reliance ARC is sponsored by the Reliance Group. Other shareholders in Reliance ARC include Corporation Bank, Indian Bank, General Insurance Corporation of India, Dacecroft and Blue Ridge.
Reliance ARC has adopted a buyer driven model for acquisition of Non-Performing Assets on the individual as well as portfolio cases in cash.
2. JM Financial Asset Reconstruction Co Pvt Ltd
JM Financial Asset Reconstruction Company Limited ranks among the topmost ARCs in India.
It is a securitization and reconstruction company, registered with the Reserve Bank of India (RBI), under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
JM ARC is in the business of acquiring non-performing financial assets from banks and financial institutions and resolving them to satisfaction of all parties.
3. Edelweiss Asset Reconstruction Co Ltd
Edelweiss Asset Reconstruction Company (ARC) comes in the list of topmost ARCs of India.
This company is sponsored by Edelweiss, one of the leading and diversified financial services conglomerate.
Edelweiss ARC acquires Non-Performing Assets from banks and financial institutions and resolves them through appropriate resolution strategies that find mention in the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act 2002.
4. Indiabulls Asset Reconstruction Pvt Ltd
Indiabulls Asset Reconstruction Company (IARCL) is sponsored by Indiabulls Ventures Limited (IVL)- a leading Non-Banking Financial Company in India.
IARCL holds the Certificate of Registration by the Reserve Bank of India to act as a securitization and asset reconstruction company.
It is playing a leading role since inception in 2017. Indiabulls ARC focuses on stressed assets and Non-Performing Assets in the real estate sector of India.
5. International Asset Reconstruction Co Pvt Ltd
India Asset Reconstruction Co Pvt Ltd is another top ARC in this country.
IARC is backed by some of the biggest players in the international and domestic financial sector, says the company website.
Stakes in IARC are held by large Indian and foreign companies. Majority shareholding is by Blackstone India and ARC SG FDI Holding (N.Q) Co. Pte Ltd of Singapore.
Other stakeholders include topmost Private Bank HDFC Bank and Tata Capital Financial Services Ltd. Sponsor shareholders are ICICI Bank and private investors.
IndiaRF is a joint venture between Piramal Enterprises Ltd and Bain Capital Credit.
The company’s objective is to invest capital in the form of debt and equity in distressed assets and special situations in India, creating positive turnarounds with benefits for all stakeholders.
Piramal Group is a diversified business conglomerate that operates in more than 30 countries and has a strong presence in over 100 markets worldwide.
Bain Capital Credit is an American company. It is a leading global credit specialist with nearly US$ 37 billion in Assets under Management.
7. CFM Asset Reconstruction Pvt Ltd
CFM Asset Reconstruction Pvt Ltd is an ARC-sponsored by Chartered Finance Management Limited (CFML).
It is the first ARC in India to function from Gujarat CFM ARC businesses includes acquiring assets across India.
However, the company focuses on asset reconstruction of companies in Maharashtra, Gujarat, Rajasthan and Madhya since they contribute over 30 percent of India’s Gross Domestic Product.
CFM looks at asset reconstruction for small and medium enterprises. It also takes Non-Performing Assets from smaller banks and cooperative banks in Maharashtra.
8. India SME Asset Reconstruction Co Ltd
India SME Asset Reconstruction Co Ltd is jointly owned by Small Industries Development Bank of India (SIDBI), SIDBI Venture Capital Ltd and two state-owned lenders-United Bank of India and Bank of Baroda.
Its focus is to provide asset reconstruction services to banks that have Non-Performing Assets (NPAs) in micro, small and medium enterprises in the country.
ISRAC uses innovative methods under the SARFAESI Act 2002 to resolve NPAs and provide asset restructuring to MSMEs.
Asset Reconstruction Company (India) Limited (Arcil) is India’s first and top asset reconstruction companies in the country.
It was established in 2002. The company has resolved over Rs.780 billion worth of Non-Performing Assets (NPAs) held by Indian banks and other Non- Banking Financial companies.
Arcil is sponsored by the Leading Nationalised Banks of India, State Bank of India (SBI), IDBI Bank, ICICI Bank and Punjab National Bank (PNB).
Arcil is based in Mumbai. This company is an associate member of the Indian Banks Association.
Arcil ranks among the first ARCs to capitalize upon rising NPAs in retail and SME segments.
Resolution of retail assets is done through its subsidiary, Arms, that operates at 17 locations across the country.
10. Pegasus Asset Reconstruction Pvt Ltd
Pegasus Assets Reconstruction Pvt. Ltd is a topmost ARC in India from the private sector.
The company has acquired dues of over Rs.75 billion of distressed loans and Non-Performing Assets (NPAs) from more than 50 Banks and financial institutions during the financial year 2017-2018.
The company has developed strong relationships with some of the leading national and international NPA investors over the past 12 years, says its website.
Also Read: Top 10 Most Reliable Foreign Banks of India
Reserve Bank of India lists 24 asset reconstruction companies in the country. All ARCs need a license from RBI to operate.
A study conducted by PricewaterhouseCoopers points that Indian asset reconstruction companies are yet to attain their full potential.
Several hurdles continue to plague Indian ARCs, the study found. The Indian government is likely to enact laws that make it easier for ARCs to function profitably.