Open An Account            
Register for Mobile Trading
Asset Management
Opportunity
Mechanism
Exit Options
Home Asset Management Opportunity
Opportunity
  • Extensive funding to industrial units by Financial Institutions and Banks in last 2-3 decades.
  • In economic recession phases, industries became sick and were not able to pay their dues to the lenders. Rehabilitation efforts by the Government to revive these units were also ineffective and proved to be failure.
  • Though these loans became Non Performing Assets in the books of Banks and Financial Institutions, they had underlying securities of immovable properties but enforcement was difficult.
  • With expansion of cities, industrial units in outskirts became prime located properties of the city and with appreciation of real estate prices, the value of these securities escalated manifold.
  • Government also made changes in regulatory framework with introduction of SARFAESI Act, 2002 to expedite acquisition and selling of security and realisation of loan proceeds. Also it opened the window of assignment of debt in favour of ARC and other Banks.
Historic Background
  • The past decade has witnessed several financial and economic crises worldwide, crippling the economies of the affected countries. In most cases, crises in the financial sector culminate into non-performing assets (NPA’s). A high level of NPAs in the banking system can severely affect the economy in many ways: Management and financial resources of the banking system are diverted to resolution of NPA problems causing an opportunity loss for more productive use of resources. The banks tend to become risk averse in making new loans, particularly to small and medium sized companies. Thus, large scale NPAs when left unattended cause continued economic and financial degradation in the country. Solution resulted in the creation of Asset Reconstruction Companies (ARCs), which typically act as debt aggregators and engage in acquisition of NPA’s. Thus ARC’s take away the distraction by isolating NPA’s from the banking system and act as the "bad bank". This leaves the rest of the banking system free to act as a "good bank" and return to equity markets and normal banking business. Governments encourage transfer of assets to ARC’s through creation of a supportive environment. Governments may also provide special powers to ARC’s that are not otherwise available to the banking system.
Asset Reconstruction
  • ARC are formed to acquire NPAs from banks and financial institutions with the objective of focused management and optimal recovery, thereby relieving banks and financial institutions of the burden of NPAs and allowing them to focus on core activities.
  • The Narsimham Committee-I envisaged the setting up of a central Asset Reconstruction Fund with money contributed by the Central Government, which was to be used by banks to shore up their balance sheets to clean up their non-performing loans. This idea never worked: so Narsimham Committee-II thought of asset reconstruction companies and to keep the tune the same as the original idea of asset reconstruction fund, private capital was used to provide funds to the ARCs.
Securitisation Framework
  • The Parliament of India enacted and passed the SARFAESI Act, 2002, to regulate securitisation and reconstruction of financial assets and enforcement of Security Interest and for matters connected therewith. The Act provides for setting up of Securitisation Company/Reconstruction Company (SC/RC). The Act enables the banks and financial institutions to realize long term Assets, and improve recovery by exercising powers to take possession of security, sell them and reduce NPAs by adopting measures for recovery within the prescribed framework. The SC/RCs acquires NPAs from banks, financial institutions and housing finance companies by raising funds from Qualified Institutional Buyers by issue of Security Receipts representing undivided interest in such financial assets. Like banks, financial institution and housing finance companies, the Act also enables SC/ RC to take possession of secured assets of the borrowers including right to transfer and realize the secured assets. SC/RCs act as debt aggregators and are focused in the resolution of NPAs.
Indian Scenario
  • The problem of recovery from NPA’s, in the Indian banking system, was recognized by the Government of India (GOI) as far back as in 1997, when the "Narasimhan Committee" was appointed. The Narasimhan Committee Report mentioned that an important aspect of the continuing reform process was to reduce the high level of NPA’s as a means of banking sector reform. It was expected that with a combination of policy and institutional development, new NPA’s in future could be lower. However, the problem of a huge backlog of existing NPA’s remained. This impinged severely on banks performance and their profitability. The Report envisaged the creation of an "Asset Recovery Fund" to take the NPA’s off the lender's books at a discount. Unlike in some countries where ARCs have been set up post financial crises and for the purpose of bailout, in India, the GOI proactively initiated certain measures to control NPAs. In order to regulate and control the NPAs and quicken recovery, the GOI set up Debt Recovery Tribunals and Debt Appellate Tribunals under the "Recovery of Debts Due to Banks and Financial Institutions Act, 1993". As a corollary to this and to speed up the process of recovery from NPAs, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, was enacted by the GOI for regulation of securitization and reconstruction of financial assets and enforcement of security interest by secured creditors, including Securitization or Reconstruction Companies (SC/RC). The RBI has already issued guidelines / directives to ARC’s, banks and financial institutions for transfer of assets to ARC’s, defining prudential guidelines for ARC’s and permitting Indian banks and financial institutions to participate in papers issued by ARC’s.

Attention Investors : Prevent Unauthorised transactions in your account --> Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile/email at the end of the day .......... Issued in the interest of investors" …………..NSDL/CDSL-Prevent Unauthorized Transactions in your demat account --> Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from NSDL/CDSL on the same day..............issued in the interest of investors."

"No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

KYC- - "KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary."

“Investments in securities, Commodities & Mutual Fund are subject to market risk, Investors are recommended to read the Risk Disclosure Document, Scheme Documents carefully and seek professional advice before investing their money. We are only distributors of Mutual Funds”