ARCIL seeks powers to change management of defaulting firms

New Delhi, Apr 18 (UNI) In the absence of clear guidelines and powers by the Reserve Bank of India to the Asset Reconstruction Company India Ltd, the Non-Performing Assets (NPAs) worth over Rs 20,000 crore still remain unrealised at the end of fiscal 2005-06, ARCIL has said.

''Four years after the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) has come into effect, important powers available to the ARCs under the Act have not been made effective. NPAs over Rs 20,000 crore are already under ARCs. It seems that the 'wait and watch' by the RBI is being stretched too much as far as ARCs' powers are concerned,''ARCIL said in its newsletter.

Arcil had acquired 562 Non-Performing Loans (NPLs) from 31 banks/ financial institutions upto the end of financial year 2005-06, and completely exited 64 cases with total dues of Rs 2,010 crore. Also, 173 cases amounting to Rs 9,491 crore (52 per cent of total dues acquired) were resolved.

Highlighting that though the SARFAESI Act empowers ARCs with measures for change in or take over of the management of business of borrower as also for sale or lease of whole or part of borrower, the ARCIL report lamented these powers have not been made effective in absence of issuance of necessary guidelines by the central bank.

It suggested that suitable amendments to Section 5 SARFAESI Act can be explored for treating the agency under Section 10 on par with the acquisition under Section 5 so as to make the benefits available to ARC.

Section 7 may also be suitably amended to enable the ARC to raise money by setting up trusts for the purpose of agency rights in addition to acquisition of financial assets.

The report said acquisition, which is a significant part of ARCs business, is also plagued by issues like stamp duty and registration fee.

Stating that setting up of the central registry will duplicate the public record and consume time and resources of ARCs for filing requirements, the report also recommended to do away with the idea of such system.

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