Report: Arcil to raise $600m distressed fund for India

Asset Reconstruction Company of India is reportedly seeking to buy non-performing assets from Indian banks and financial institutions.

Asset Reconstruction Company of India (Arcil) will launch a $600 million fund focused on acquiring distressed bank assets, according to the Economic Times.

“The fund will be used for cash purchases of non-performing assets from banks,” S Khasnobis, the managing director and CEO of Arcil, told the paper. The company will contribute 20 percent of the fund’s capital with the remainder being raised from investors both domestically and overseas.

The fund will be launched within the next three months.

Many bankers in the country have expressed concern over the impact of the economic downturn on the quality of their assets and they expect an increase in non-performing assets, the report noted. Various industries in India such as textiles, logistics and gems and jewellery have been hit hard by the global economic slowdown and they are likely to be large contributors in the rise of such non-performing assets.

Established in 2002, Arcil says it is the first asset reconstruction company in India to acquire non-performing financial assets from Indian banks and financial institutions.

It buys non-performing assets along with underlying securities mortgaged by the borrowers. These include manufacturing facilities such as land, buildings, plants and machinery, current assets and personal property. The assets are then sold through a process which is in conformity with the Securitisation Act of 2002 and Reserve Bank of India guidelines.

Some of the company's shareholders are the State Bank of India, IDBI Bank, ICICI Bank, Lathe Investments, Punjab National Bank and Infrastructure Development Finance Company.

Arcil did not respond to a request for comment.