Asset Reconstruction Companies to scale up operations in Indian banks

• The country’s banking system, with a huge pile of stressed assets, has provided a huge business opportunity for Asset Reconstruction Companies (ARCs) in India.

• The primary reasons for spurt in stressed assets include aggressive lending practices, wilful default, loan frauds, corruption in some cases, and economic slowdown.

• Private banks have been the most aggressive on asset sales. Public sector banks lagged in asset sales, mainly owing to large haircuts and various management issues.

• During 2017-18, the acquisition cost of ARCs as a proportion to the book value of assets increased, indicating better realisations by banks on sale of stressed assets.

• On the