RBI MAKES BAD LOAN DEALS TOUGHER FOR ARCS (has asked ARCs to invest up to five percent in the security receipts)

RBI MAKES BAD LOAN DEALS TOUGHER FOR ARCS (has asked ARCs to invest up to five percent in the security receipts). Check it out:

(India Business Insight Via Thomson Dialog NewsEdge) Reserve Bank of India (RBI) has asked asset reconstruction companies (ARCs) that deal in bad loans to invest up to five percent in the security receipts (SR) issued by them to banks against the acquisition of bad loans. By forcing ARCs to invest in SRs, RBI is asking ARCs to participate in the risks involved in the bad loan market. Until now, instead of paying cash against the bad loans, ARCs used to float special purpose vehicles that issue SRs to the banks to acquire bad assets from the banks. According to RBI, ARCs will have to invest in the SRs issued by their trust within six months.

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The ICICI-promoted Asset Reconstruction Company of India Ltd (Arcil) has outstanding SRs worth Rs4,000 crore. It will have to buy back up to Rs200 crore from the banks. Other ARCs include UTI-promoted Asrec and IFCI- promoted Asset Care Enterprise.

Copyright 2006 Silverline Information Systems Pvt. Ltd. Source : Financial Times Information Limited

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September 25, 2006 6:32 AM

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