ARCs Seek RBI Approval to Raise Equity Capital for Market Listing

ARCs petition RBI for market listing to increase liquidity and net worth by 2026.

In order to increase their liquidity and net worth, Asset Reconstruction Companies (ARCs) have petitioned the central bank for regulatory action that would enable them to raise equity capital from the market.

The ARCs' most recent appeal to the Reserve Bank of India (RBI) comes as banks are demanding that these worried debt aggregators only submit cash bids, and the government-backed National Asset Reconstruction Co. (NARCL) is becoming a bigger rival.

According to industry leaders, ARCs will be able to increase their net worth and raise equity from the markets to make larger purchase if they are permitted to list. Since stock listing is not mentioned or addressed in the SARFAESI Act or the RBI regulations for ARCs, ARCs are asking the regulator for clarity.      In a letter to the regulator, ARCs also stated that "ARCs will be more accessible, come under more public scrutiny, and disclose more information once they go public", and this will result in greater transparency.  As per the latest RBI data, the total book value of the assets acquired by ARCs increased by 22% in FY24, from ₹8.39 lakh crore to ₹10.25 lakh crore. According to RBI data, as of March 2024, ARCs had given security receipts of ₹2.83 lakh crore to purchase these assets.

The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act of 2002 gave rise to Arcil, which was supported by some of the biggest banks in India, including State Bank of India, ICICI Bank, Punjab National Bank, and IDBI Bank. This marked the beginning of the ARC business in India.