‘Concerns over ARCs fronting for defaulters’

MUMBAI:

RBI

deputy governor M Rajeshwar Rao has raised

concerns

of

asset reconstruction companies

fronting for

defaulters

in purchasing businesses. Rao also called upon

ARCs

to bring in enough of their own capital to have ‘skin in the game’.
This is the second time that a senior central banker has hauled up ARCs. Earlier this month, deputy governor

Swaminathan

J had said that ARCs have been found to act as a conduit for ‘evergreening’ of

bad loans

.

Rao was speaking at a conference on Governance in ARCs in Mumbai. “There are concerns relating to the ARC route becoming a vehicle for entry of the ‘tainted’ promoters, who in the first place were responsible for the default of the underlying entity,” said Rao.