Asset reconstruction funding
An asset reconstruction means acquisition by an ARC of any right or interests of any Bank or Financial Institution in any financial assistance for the purpose of realisation of such financial assistance.
Role of Asset Reconstruction
An asset reconstruction company is a special type of financial institution that buys the debtors of the bank at a mutually agreed value and attempts to recover the debts or associated securities by itself. … The ARCs take over a portion of the debts of the bank that qualify to be recognised as Non-Performing Assets.
Asset reconstruction companiesare in the business of buying bad loans from banks. For instance, if a bank lends money to a person or company, they expect to receive periodic payments of principal and interest. … If they are able to recover the money, they make a profit, if not they lose the money.
What type of debts can the ARC take over?
The ARC can take over only secured debts which have been classified as a non-performing asset (NPA). In case debentures / bonds remain unpaid, the beneficiary of the securities is required to give a notice of 90 days before it qualifies to be taken over.