Index Investing News
Saturday, May 24, 2025
No Result
View All Result
  • Login
  • Home
  • World
  • Investing
  • Financial
  • Economy
  • Markets
  • Stocks
  • Crypto
  • Property
  • Sport
  • Entertainment
  • Opinion
  • Home
  • World
  • Investing
  • Financial
  • Economy
  • Markets
  • Stocks
  • Crypto
  • Property
  • Sport
  • Entertainment
  • Opinion
No Result
View All Result
Index Investing News
No Result
View All Result

ARCs must be allowed to acquire bad assets of mutual funds, AIFs

by Index Investing News
September 29, 2023
in Opinion
Reading Time: 3 mins read
A A
0
Home Opinion
Share on FacebookShare on Twitter


Indian Asset Reconstruction Companies, or ARCs, have had existential issues to combat over the past few years. Hopes of a thriving distressed assets market remain unmet, and the recent significant bad debt clearances by Indian banks means that their challenge of boosting business is now even more severe.

Perhaps that may have also prompted the industry body representing Indian ARCs to lobby the Reserve Bank of India (RBI) for authorization to buy assets from local mutual funds and alternative investment funds (AIFs). ARCs say that their acquisition of bad assets of mutual funds or AIFs will ensure swifter recovery besides providing an exit option to these investment vehicles. That may not be a bad idea. For one, the ticket size of some of the assets which have gone sour for mutual funds in debt oriented schemes may not be significant compared to the big boys in the industry such as banks or other investment institutions. And many fund houses may not have the capacity unlike banks to engage and deal directly with buyers of distressed debt on their portfolios.

As of August, India’s burgeoning mutual fund sector boasted Assets under Management (AUM) totalling ₹46.94 trillion. Within this, debt schemes account for just under a fifth of the industry’s entire asset pool. This segment is primarily driven by institutional investors such as banks, who significantly invest in liquid, money market, and debt schemes, highlighting them as seasoned investors.

However, before allowing ARCs to acquire these assets from mutual funds, it would be wise for both financial regulators – the RBI and the Securities and Exchange Board of India (Sebi), which supervises mutual funds – to establish clear guidelines. This would ensure transparency in such acquisitions and set recovery benchmarks, akin to the protocols for bank bad loan acquisitions. The existing framework used by banks, which includes board approvals, could serve as a model here, placing the responsibility on the trustees of asset management companies to sanction such distressed asset purchases. This approach might pave the way for a fresh revenue stream for ARCs, reminiscent of their recent endorsement to function as Resolution Professionals or IRPs.

It is likely that ARC’s will resist any possible stiff norms for such entry having been restricted for long to buying out bad loans of only banks and other financial institutions. But the shadow of the income tax raids on a few ARCs which had colluded with borrower groups involving dummy firms and funding by some promoter groups and the subsequent special audit by the RBI would mean that regulators are likely to tread far more cautiously. That too with the RBI having tightened corporate governance norms and their capital adequacy framework a while ago effectively crimping their operational efficiency.

Opening up the buyout of bad assets of mutual funds may be welcome but more than that small slice of business or revenue stream, it is the business models of Indian ARCs which is being put to test. Over the last few years, banks have preferred negotiated settlements unhappy with the pricing of assets put up for auctions by ARCs who have to reckon with higher cost of funds and capital needs when lenders insist on cash sale. Banks on the other hand are unwilling to take steep hair cuts given the over reach by Indian agencies over the past few years. There is also the fresh challenge in the form of the bad bank – the National Asset Reconstruction Company, or NARCL, which has the backing of the sovereign which guarantees the security receipts issued by the latest buy out company in the business.

India certainly needs a thriving and deep secondary market for distressed debt. ARCs have as much stake as the regulators and the government in enhancing the efficiency of this market.



Source link

Tags: AcquireAIFsAllowedArcsAssetsbadFundsmutual
ShareTweetShareShare
Previous Post

Cara Delevingne Sparks Backlash With Topless Pic as She Shows Off New Apparently Misspelled Tattoo

Next Post

The Biggest Challenge is not Allowing Ukraine to Lose this War

Related Posts

Authorities-Assisted Suicide Is Spreading Throughout The Western World – FREEDOMBUNKER

Authorities-Assisted Suicide Is Spreading Throughout The Western World – FREEDOMBUNKER

by Index Investing News
May 24, 2025
0

Is it humanitarian empathy, or a nihilistic demise cult that wishes a authorized rationale for inhabitants management?  The legislative push...

The issue with utilizing the phrase ‘plantation’ –
Las Vegas Solar Information

The issue with utilizing the phrase ‘plantation’ – Las Vegas Solar Information

by Index Investing News
May 24, 2025
0

Saturday, Could 24, 2025 | 2 a.m. The biggest remaining antebellum plantation mansion within the South has burned to the...

Local weather hysterics groom our children to affix the left’s crusades

Local weather hysterics groom our children to affix the left’s crusades

by Index Investing News
May 24, 2025
0

Excessive privilege and fame have by no means been a recipe for emotional stability, however in the present day’s Hollywood...

China’s Two-Decade International Metal Growth “Has Now Ended” – FREEDOMBUNKER

China’s Two-Decade International Metal Growth “Has Now Ended” – FREEDOMBUNKER

by Index Investing News
May 23, 2025
0

In Goldman's newest world metal outlook, analysts Aurelia Waltham, Eoin Dinsmore, and others spotlight a key inflection level: China's share of worldwide...

The Aziz-Dube saga: A sleight of copyright?

The Aziz-Dube saga: A sleight of copyright?

by Index Investing News
May 24, 2025
0

Artist Anita Dube lately discovered herself in the midst of an issue after she used traces from activist and poet...

Next Post
The Biggest Challenge is not Allowing Ukraine to Lose this War

The Biggest Challenge is not Allowing Ukraine to Lose this War

Bitcoin Surge Above ,000 May Not Last, Here’s Why

Bitcoin Surge Above $27,000 May Not Last, Here's Why

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

RECOMMENDED

How to Talk to Clients about Inflation

How to Talk to Clients about Inflation

September 7, 2022
6 Practical Tips For How To Stay On Budget

6 Practical Tips For How To Stay On Budget

March 9, 2024
The Subsequent Cryptocurrency Halvings: What You Want To Know | by Pantera | The Capital | Aug, 2022

The Subsequent Cryptocurrency Halvings: What You Want To Know | by Pantera | The Capital | Aug, 2022

August 14, 2022
Bitmain, Anchorage Expected to Take Equity in CORZ as Part of Bankruptcy Plan

Bitmain, Anchorage Expected to Take Equity in CORZ as Part of Bankruptcy Plan

August 8, 2023
Is The Bitcoin Bear Market Right here? This On-Chain Indicator Suggests So

Is The Bitcoin Bear Market Right here? This On-Chain Indicator Suggests So

February 16, 2025
“They’re both in very similar positions”

“They’re both in very similar positions”

October 22, 2022
Improvements and Dangers – 7 Issues to Watch in Cyber-Tech in 2025

Improvements and Dangers – 7 Issues to Watch in Cyber-Tech in 2025

December 31, 2024
Argentina’s Milei will get World Financial institution backing for financial agenda

Argentina’s Milei will get World Financial institution backing for financial agenda

October 24, 2024
Index Investing News

Get the latest news and follow the coverage of Investing, World News, Stocks, Market Analysis, Business & Financial News, and more from the top trusted sources.

  • 1717575246.7
  • Browse the latest news about investing and more
  • Contact us
  • Cookie Privacy Policy
  • Disclaimer
  • DMCA
  • Privacy Policy
  • Terms and Conditions
  • xtw18387b488

Copyright © 2022 - Index Investing News.
Index Investing News is not responsible for the content of external sites.

No Result
View All Result
  • Home
  • World
  • Investing
  • Financial
  • Economy
  • Markets
  • Stocks
  • Crypto
  • Property
  • Sport
  • Entertainment
  • Opinion

Copyright © 2022 - Index Investing News.
Index Investing News is not responsible for the content of external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In