India’s asset reconstruction companies (ARCs) have witnessed very high growth in recent times, riding on business opportunities emanating from higher non-performing assets (NPAs) in the banking sector. Their assets under management (AUM) have increased four-fold to Rs.42,000 crore in the year to June 30, 2014.
However, this growth is expected to moderate to 30 per cent in the following 12 months because of the amendments to regulations announced by the Reserve Bank of India on Tuesday.
This is because, CRISIL believes that in the near term, ARCs will find it challenging to align their pricing with the expectations of the asset-selling banks, given that the minimum investment requirement has been increased significantly. In the long term, however, the new rules will bolster price-discovery.