Non-banking finance company (NBFC) Kotak Mahindra Finance Ltd (KMFL) has drawn up plans to reorganise its asset reconstruction division (ARD) in the light of the recent Ordinance on Securitisation and Reconstruction of Financial Assets and Enforcement of Securities' Interest.
Venkattu Srinivasan, vice-president (ARD) at KMFL, said the division, which was involved in recovering bad loans of NBFCs and banks, is likely to acquire sticky assets and sell them to third parties.
Towards this end, the NBFC, which is expected to become a bank in early 2003, is planning to set aside a sum for the asset acquisition business.
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To start with, KMFL will look at the assets of finance companies -- NBFCs, banks and the financial institutions. But in the long term it is planning to buy and sell assets of manufacturing companies as well.
Said Srinivasan: "The new ordinance has given more powers to the creditors to recover their bad assets. A secondary market for assets to be disposed of by financial entities will now come into being and we with our experience of the past three years will be able to take part in that."
Many banks and financial institutions are not efficient in recovering bad loans. Hence, even though the Ordinance will aid the recovery process, they will have to seek the help of third parties.
"We are already giving advisory services to a host of NBFCs and a handful of banks. We are expected to play a bigger role now," Srinivasan said.
He also pointed out that KMFL has a negligible amount of bad loans in its books. Hence the ARD will not have to bother much about managing its own resources, thereby enabling it to devote more time to recovering other assets.
KMFL started the ARD in 1999. In the last financial year, around eight per cent of the company's profit was contributed by this division.