This refers to the report "Banks put Rs 21k-cr NPAs on block in 3 months" (June 23). The banks' way of transferring stressed assets (and now, even standard assets) to asset reconstruction companies (ARCs) is the soft option to clean up their books. If the chances of realisation through such sale to ARCs is good, why should lenders transfer such assets? Such disposals have two handicaps. First, only five per cent of the sale value is paid in cash and the rest is converted into security receipts. Second, stressed assets are sold at steep discounts, thereby forcing the banks to write-off huge sums in their books. In all such sales, ARCs have a better bargaining power since lenders approach them for relief. ARCs have been promoted by the private sector, so one can clearly see how the public sector lenders suffer at the hands of the private sector.
Once the lender washes its hands from the sale of stressed assets to ARCs, the accountability issue disappears. The sale of stressed assets is clearly a lose-win scenario for lenders and the ARCs.
K V Rao Bangalore
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