Though bank can take legal recourse against defaulters, it is not feasible always. This is where an asset reconstruction company (ARC) becomes relevant. An ARC is a specialist institution that buys the debtors of the bank at a mutually agreed value and initiates their recovery. ARCs are registered and regulated under the relevant statute (SARFAESI Act, 2002). The Capital requirement of ARC’s are met through private equity or public funding. As of July 16, 2020, there are 28 ARCs operating in India.
The National Asset Reconstruction Company (NARC) set up by public sector lenders, popularly called “The Bad Bank”, is the recent addition. NARC was to be launched by 31st March 2021. However till the time of uploading this article (4th May 2021) there is no official announcement on this. The initial equity capital of around Rs.7000 cores will be shared by the participant institutions, public sector banks and state-run NBFCs. The government backing makes NARC the first among equals.