RBI issues licence to first ARC

 ICICI Bank, IDBI and SBI hold 24.5 per cent each in the ARC which has an equity base of Rs 10 crore.

 HDFC and HDFC Bank hold 10 per cent each of the equity and the rest is held by a clutch of banks including Federal Bank and IDBI Bank.

 Starting with a Rs 5,000 crore asset base, it plans to acquire Rs 20,000 crore worth of assets by the end of fiscal 2004. It has already done the due-diligence and the valuation of the Rs 5,000 crore worth of assets.

 According to sources, the assets would be bought at around 60 per cent discount. In other words, Rs 5,000 crore assets would be bought at around Rs 2,000 crore.

 ICICI, IDBI and SBI will sell about Rs 2,000 crore worth of sticky assets while the rest will come from the entire banking industry.

 The ARC is being modelled on the lines of an asset management company of a mutual fund. After taking over assets, it will bundle the assets like a mutual fund and create asset portfolios.

 At the second stage, pass through certificates against these assets will be issued to banks and institutions as there is no qualified institutional buyer (QIB) in the market to buy junk bonds.