SACHIN KUMAR
Mumbai, February 22
FINANCIAL SERVICES FIRM IIFL
Finance is planning to make a
fresh start in the asset reconstruction business by setting up an
asset reconstruction company (ARC). IIFL is in the process of
applying for a licence from the
Reserve Bank of India (RBI) to
form an ARG, sources said.
The company had earlier set up
IIFL Asset Reconstruction and
applied fora licence from the banking regulator. However, it could not
obtain the same and the ARC
remained inactive int erms of acquiring clients and generating revenue.
IIFL has tried other ways as well
to re-enter the ARC sector. In a bid
to grow in organically, the company
tried to acquire stake in an existing
ARC. “The company wanted to
acquire stake in an existing ARC
and it also conducted due diligence, but negotiations failed due
to some disagreements over valuation,” said a source.
The idea behind acquisition of
stake was to get a quick entry into
the ARC business, he added. Applying for a fresh licence from the RBI
is time-consuming process as the
regulator carries out strong scrutiny
be fore according its approval. However, acquisition would have given
IIFL an instant start.
The focus of the new ARC will be
acquiring retail loans, according to
sources. Queries sent to the IIFL
group remain unanswered till the
time of going to the press.
The growing asset reconstruction sector, which currently has 27
players, has attracted a number of
companies in the past. The latest
player to enter this sector is Chennai-headquartered conglomerate
Shriram Group.
Aiming to strengthen the securitisation sector, the RBI in 2022 raised the minimum capital
requirement for setting up an ARC
t0 X300 crore from Rs100 crore.
AR Cshelp banks clean their balance sheets as they buy non-performing assets or bad loans from
them. Total dues acquired by ARCs
reached 9.4 trillion at the end of
December 2023, from 8.9 trillion
at the end of the September 2023
quarter, according to figures provided by the Association of ARCs in
India.
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