IBC provide opportunity for asset reconstruction companies: Jaitley

Vastavam web: Insolvency and Bankruptcy Code (IBC) and the government’s emphasis on resolution provide opportunity for asset reconstruction companies as stressed assets still have inherent value, Finance Minister Arun Jaitley said.During discussions with Asset Reconstruction Companies (ARCs) and Private Equity firms (PE) today, he said these non-performing assets (NPAs) were essentially productive assets which, if turned around, would not only create additional jobs but also contribute to national output.The internal advisory committee (IAC) of the RBI, after its meeting on June 13, had recommended 12 accounts totalling about 25 per cent of the gross NPAs of the banking system for immediate reference under Insolvency and Bankruptcy Code.

These accounts have an exposure of more than Rs 5,000 crore each, with 60 per cent or more classified as bad loans by banks as of March 2016.Pointing out various legislative and regulatory changes made over the last 18 months, he said, these have created an enabling and supportive operational environment for ARCs and for takeover of stressed assets by PE firms/special situation funds.”These include 100 per cent ownership by sponsors, higher ceiling of 100 per cent for FDI in ARCs, pass through status to ARC trusts for income tax, exemption from stamp duty, enabling trading of security receipts etc,” he said.As a result, a number of new ARCs have sought and obtained registration during recent months.The increasing number of players in the market was indicative of an increasing interest in the sector but also presented an opportunity for banks to offload stressed assets before fully provisioning for them, he said.