RBI has replaced the 5:95 model with 15:85. Can something be done to retain the current cost structure for ARCs and mitigate the management-fee driven model? Here are the options
Rajendra M Ganatra
Stung by the aggressive management-fee based model adopted by Asset Reconstruction Companies (ARC), Reserve Bank of India (RBI), on August 5, 2014, has disbanded popular 5:95 model by enhancing ARC’s minimum Security Receipt (SR) subscription to 15%. In the 5:95 model, ARCs could fund their NPA acquisition by issuing Security Receipts (SRs) to the seller banks for up to 95% of NPA acquisition cost, with a minimum of 5% of the SRs being funded in cash by the ARCs.
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