Reliable sources in the finance ministry said they will have to wait for the passage of the comprehensive banking reforms Bill that has been in the making for some months now. Though the draft Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Bill was approved by the Cabinet towards the end of the Budget session, the ministry went slow on introducing it in order to avoid any chance of its being referred to the standing committee, they added.
Thus the ARC will for the present have to confine its activities to the private domestic and foreign banks. Sources said these banks too are saddled with ample non-performing assets, except that they are not much talked about because, not being state-owned their information control systems are tighter.
Defending the ARC concept, they said an entity focusing all its energy and expertise only on recovery of assets is more likely to deliver results. In banks, recovery is only one of the multifarious services they extend and cannot afford to deploy large numbers of personnel for redeeming outstanding dues.
Explaining the rationale behind ICICI setting up an ARC, senior finance officials said it is in tune with its thinking that a nodal agency should be assigned the task in each segment of financial services to address prominent concerns which it sees as most capable of handling.
Thus, while ICICI was asked to pilot the ARC movement, HDFC was entrusted with the task of coordinating credit information bureau and Infrastructure Development Finance Company with administering the infrastructure equity fund mooted in the Budget 02-03.
ICICI has recently set up an ARC with a capital of Rs 5 crore under the Companies Act, the first of its kind in the country. Likewise, HDFC plans to bring in foreign expertise to channel and effectively disseminate the database proposed to be generated once the credit information bureau gets going full-time, officials said, adding work is also apace on the equity fund.