Arms, a pioneering initiative of Asset Reconstruction Company of India Ltd (Arcil), has recently acquires over Rs 1,200 crore worth of distressed consumer loans including housing and auto portfolio. This recovery mainly includes housing loans of Rs 1,000 crore given by National Housing Board and ICICI Bank. Arcil has sticky assets of around Rs 10,000 crore which have been acquired from other banks and financal institutions during the last three years
S Khasnobis, managing director and CEO, Arcil, said, ?This is the first time that an organised pan-India attempt is being made to recover distressed consumer retail loans. Arms would focus on resolution through dialogue and borrower co-operation, thereby fostering the culture of responsible borrowing and repayment.?
Khasnobis said the resolution strategy for retail assets that would be acquired by Arms would be quite different from corporate assets? recovery practice adopted by Arcil. In the retail loans segment, a recovery solution would be arrived at after thoroughly assessing the borrowers? paying capacity and the values of the collaterals. However, the company would not acquire unsecured loans like credit and personal loan. ?Though we would acquire them, at a much later stage, we will have to deal with them indirectly as it may involve the same borrowers. We will try to work out a resolution for retail assets,? he said.
Arcil?s latest initiative assumes significance as a rough estimate by Crisil puts the size of bad loans in the retail segment as on March 31, 2008, at around Rs 15,000 crore. This corpus includes housing as well as auto loan defaults in the country. Bankers believe the delinquencies in home and auto loan portfolios may rise further in the current fiscal due to the escalated interest rates, after the regulators took a tough stance in its latest monetary policy in a bid to tame the spiraling inflation. According to the figures released by the Reserve Bank of India, as of May 2008, the total outstanding housing loans in India was estimated at Rs 2,62,486 crore.