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Asset reconstruction companies have faced a tough time in getting business in recent years due to bad loans written-off by banks. All is set to change as almost 3% of bank loans may be classified as NPAs for year ended 31st March 2012.

 

"Gross non-performing assets of banks have come down from above 10% in 2001-02 to 2.4% in 2010. I expect that it would be above 3% for the last fiscal," said P Rudran, MD & CEO, Asset Reconstruction Company of India (Arcil).

Arcil business received a setback last year after RBI did not agree with its accounting practices and it had to restate its results reducing profits sharply. Mr. Rudran said, the rules are still in a state of evolution and Arcil as the largest asset reconstruction company is working with the regulator in drawing up norms.

Most of the ARCs are set up in the pre-global financial crisis years when there was a gold rush for bad loans. But the situation changed after bad loans dropped to a low of 2.3% of the banking system's loans in 2007-08. Besides the decline in bad loans, banks have been reluctant to hand over their NPAs to ARCs becau...

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