Would the ARCs to any “reconstruction” or merely realisation?
On the face of it, it is difficult to see the ARCs doing substantially more than mere realisation of bad loans. Even the definition of the word “asset reconstruction” in the Ordinance talks of mere relisation and not reconstruction. As ARCs would anyway not have the capital to do any further funding of bad loans, it is difficult to see them doing any such “reconstruction” to qualify for that term. Why Asset management companies or ARCs? Asset management companies have been set up in various countries internationally as an answer to the global problem of bad loans. Bad loans are essentially of two types: bad loans generated out of the usual banking operations or bad lending, and bad loans which emanate out of a systematic banking crisis. It is in the latter case that banking regulators or governments try to bail out the banking system of a systematic accumulation of bad loans which acts as a drag on their liquidity, balance sheets and generally the health of banking. So, the idea of AMC
