RBI panel favours sale of stressed assets by lenders at early stage

A committee appointed by the Reserve Bank of India has proposed that sale of stressed assets by lenders must be done at an early stage to allow for optimal recovery by asset reconstruction companies.

The committee also recommended that if 66 per cent of lenders by value decide to accept an offer made by an asset reconstruction company (ARC) it should be binding on the remaining lenders and it must be implemented within 60 days of approval.

“Data shows that the performance of the ARCs has been lacklustre both in terms of ensuring recovery and revival of businesses. Bank and other investors could only about 14.29 per cent of the amount owed by borrowers in respect of stressed assets sold to ARCs during FY 2004 FY 2013 period. Similarly data shows that approximately 80 per cent of the recovery made by ARCs has come through deployment of measures of reconstruction that do not necessarily lead to revival of businesses”, the committee said.

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