What is ARC?
What is ARC? Asset reconstruction company (ARC). They buy NPA (Bad loans) from Banks and try to extract maximum money out of it=profit. They’ve to register with Reserve Bank of India. Examples: ARCIL (India’s first and largest asset reconstruction company (ARC)) Reliance Asset Reconstruction Company Limited by Anil Ambani In our example, SBI has NPA worth Rs.40 crores. ARC will buy the NPA file from SBI at a lower rate say 35 crores. (well, SBI is making loss, yes, but something is better than nothing.) Besides, banks have hundreads of bad loan cases, they donot have time or manpower to pursue individual case, sometimes no bidders are interested in auction. All the filework and donkey labour, In such cases, it’s better for bank to transfer NPA to ARC. But that doesn’t mean ARC will give 35 crores to the SBI from its own pocket! Then how will the Asset reconstruction company (ARC) arrange for the money?= via Security Reciepts. What are Security Reciepts (SR)? In above example, ARC...