Retail ARCs (Asset Reconstruction Companies) — Please onboard BBPS
Link to my Blog @ https://prashantnepayments.blogspot.com/2020/07/retail-arcs-asset-reconstruction.html
The typical products offered in the Indian retail banking segment are housing loans, consumption loans for the purchase of durables, auto loans, credit cards, and educational loans. The loans are marketed under attractive brand names to differentiate the products offered by different banks and NFBCs.
Retail Loans too can turn bad and the primary lenders may prefer to sell these bad loans to ARCs specialized in the recovery of the Retail loans.
The primary objective of ARCs is to recover the bad loans outstanding’s from the borrowers. This means each Loan Account will have a unique identifier and the borrower has to quote this unique identifier while paying the Loan outstanding amount.
Hence, it is apt that the ARCs onboard BBPS under ‘Loan Repayment’ Biller Category.
5 Advantages to ARCs on onboarding BBPs
Advantage 01) Pan-India collection network within no extra hassle
Advantage 02) The borrower is assured that the repayment amount is going to the correct institution/loan account
Advantage 03) Instant receipt to the borrower instead of provisional receipts and associated recon issues.
Advantage 04) The recovery agent need not collect cash/cheques and hand over to the linked office for further processing
Advantage 05) Contactless payment option 24*7, 365 days a year
ARCs can opt for the Free Format amount Option instead of Fetch n Pay. The borrower only has to input the unique identifier and the borrower name is displayed. The borrower can remit the decided amount only.
What are ARCs?
An Asset Reconstruction Company is a specialized financial institution that buys the NPAs or bad assets from banks and financial institutions so that the latter can clean up their balance sheets. Or in other words, ARCs are in the business of buying bad loans from banks.
ARCs clean up the balance sheets of banks when the latter sells these to the ARCs. Instead of going after companies, Banks can sell their BAD LOAN to Asset Reconstruction Companies.
These companies buy the bad loan at discount rates. This means an asset reconstruction company will pay the agreed amount to the bank.
Asset Reconstruction Companies (ARCs) have been created to bring about a system for recovering Non-Performing Assets (NPAs) from the books of secured lenders and unlocking the value of Non-Performing Assets (NPA).
Reserve Bank of India (RBI) provides license for ARCs and ARCs are empowered by the SARFAESI Act.
ARCs handle both corporate loans as well as retail loans.
List of Asset Reconstruction Companies (ARCs) registered with RBI (As on February 29, 2020)
S No Name of the company
1 CFM Asset Reconstruction Private Limited
2 Rare Asset Reconstruction Limited (Erstwhile Rare Asset Reconstruction Private Limited)
3 ANA ARC Private Limited
4 Omkara Assets Reconstruction Private Limited
5 MAXIMUS ARC Limited
6 Pridhvi Asset Reconstruction and Securitisation Company Ltd.
7 Aditya Birla ARC Limited
8 Ambit Flowers Asset Reconstruction Private Limited
9 ARCION Revitalization Private Limited
10 ASREC (India) Limited
11 Asset Reconstruction Company (India) Limited
12 Edelweiss Asset Reconstruction Company Limited
13 India Resurgence ARC Private Limited
14 India SME Asset Reconstruction Company Limited
15 Indiabulls Asset Reconstruction Private Limited
16 Invent Assets Securitisation & Reconstruction Pvt. Ltd.
17 JM Financial Asset Reconstruction Company Limited (Erstwhile JM Financial Asset Reconstruction Company Private Limited)
18 Lone Star India Asset Reconstruction Private Limited
19 Pegasus Assets Reconstruction Pvt. Ltd.
20 Phoenix ARC Private Limited
21 Reliance Asset Reconstruction Company Limited
22 Suraksha Asset Reconstruction Private Limited
23 International Asset Reconstruction Company Pvt. Ltd.
24 Alchemist Asset Reconstruction Company Limited (Erstwhile Dhir & Dhir Asset Reconstruction & Securitization Company Limited)
25 Assets Care & Reconstruction Enterprise Ltd. (Erstwhile Assets Care Enterprise Ltd.)
26 Encore Assets Reconstruction Company Private Limited
27 Prudent ARC Limited
28 UV Asset Reconstruction Company Limited
References:
RBI Circular — Fair Practices Code for Asset Reconstruction Companies @ https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11937&Mode=0
RBI Draft Report — Draft Comprehensive Framework for Sale of loan exposures dt. June8th, 2020