Mumbai:
The proposed
Asset Reconstruction Company (ARC) for taking over bad
debts is not a disguised mechanism to put public money
into the balance-sheet of banks, but one that was designed
to play a vibrant and energetic role in handling distressed
debt, Finance Minister Yashwant Sinha has said.
Explaining the concept
of ARC, Sinha said: We are not engaged in window-dressing.
The ARC will strike at the root of the structural problem
by consolidating debt that is scattered, engaging in innovative
corporate finance (such as mergers or sale of brands or
plants), injecting new capital, converting a distressed
company into a profitable one and even taking it for an
IPO.
Addressing
a gathering of bankers at the Banking Summit 2002, organised
by the Confederation of Indian Industry here, Sinha said
ARC is partly a question of specialisation, and certain
entities, banks and non-banks, can build a specialised
competence in processing
distressed debt that other creditors can choose to outsource
the handling of distressed debt by selling of loans or
bonds to these specialists.
Referring to
priority-sector lending, the finance minister said the continuing
social responsibility of a bank to lend 40 per cent towards the
priority sector will continue. I believe that it will be
undesirable for banks to veer away from this social obligation. It
is not entirely a bad business proposition as the self-help group
experience has shown us.
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