Thursday, May 15, 2014

RBI comes up with uniform accounting rules for asset reconstruction companies

The Reserve Bank of India has come up with some uniform accounting rules for asset reconstruction companies or ARCs. In the wake of deteriorating credit quality, banks have of late started selling bad loans to ARCs, which acquire them from lenders and try recovering pending dues from defaulting borrowers. In between companies earn commissions. Such transactions can take place in a combination of security receipts or SRs and cash. SRs are securities to be subscribed by select qualified institutional buyers including banks and traded in the secondary market. As and when ARCs recover loans, it repays back to those SR holders.

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