As the procedure to set up a new national asset reconstruction business (ARC) gathers steam, Punjab National Bank (PNB) has begun the procedure to exit Asset Reconstruction Company (India), also identified as Arcil. The bank’s investment arm on Monday sought expressions of interest from possible purchasers in a public notice.
“PNB has initiated a sale process to offer its holding of 3,25,06,486 equity shares i.e. 10.01% of the paid-up equity share capital of ARCIL (“proposed transaction”). PNB Investment Services Limited is the advisor to PNB (referred to as “PNBISL”/ “advisor”) for the proposed transaction,” PNBISL mentioned in the notice.
Arcil’s other sponsors are: Avenue India Resurgence, State Bank of India, IDBI Bank and ICICI Bank. Arcil is an associate member of the Indian Bankers’ Association. In November 2018, US-based Avenue Capital purchased a 27% stake in the business for an unspecified quantity as investors IDFC Bank, Ashmore Capital, FirstRand Bank, Barclays, Singapore’s GIC and Karur Vysya Bank exited it.
There has been small clarity so far on how the new ARC, proposed in the Budget, will be funded. While some government officials have mentioned that it will be up to banks to place in seed dollars, it is not but clear which banks will essentially invest. A detailed framework for the ARC is in the performs, monetary services secretary Debasish Panda mentioned earlier this month, adding that the government will not be placing in any dollars.
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FE had reported in January that bankers strategy to seek two exemptions for the new ARC. First, relaxation of the September 1, 2016 circular which correctly demands banks to provide for an asset assigned to ARCs as if it had been nonetheless on the bank’s books. The other would be to exempt the new ARC from producing future provisions for assets it buys.
In a current report, SBI’s financial analysis wing mentioned public sector banks (PSBs) now have a provision coverage ratio of about 86% (up from 62% in FY18). “This implies that the PSBs would have provided for most of the bad assets and a wholesale transfer of the bad assets to the bad bank is just a technical issue and the process of recovery and resolution could be carried out much better,” the report mentioned.