Arcil acquired distraught consumer loans in housing and auto segment

Arms is an innovative project of Asset Reconstruction Company of India Ltd (Arcil) has recently got hold of over Rs 1,200 crore worth of unpaid consumer loans in housing and auto segments. The main recovery is of housing loans segment of Rs 1,000 crore given by National Housing Board and ICICI Bank. Currently Arcil is having around Rs 10,000 crore sticky assets which it has acquired from other banks and financial institutions during the last three years of time.

S Khasnobis, managing director and CEO, Arcil, said, “This is the first time that an organized pan-India attempt is being made to recover distressed consumer retail loans. Arms would focus on resolution through dialogue and borrower co-operation, thereby fostering the culture of responsible borrowing and repayment.”

Khasnobis said the resolving strategy adopted by Arms for retail assets will be quite different from Arcil corporate assets’ recovery practice Recovery solution for retail loans segment is carried out after the thorough assessment of the borrowers’ paying capacity and the values of the collaterals. On the other hand, the company will not get hold of unsecured loans like credit and personal loan. “Though we would acquire them, at a much later stage, we will have to deal with them indirectly as it may involve the same borrowers. We will try to work out a resolution for retail assets,” he said.

Arcil’s latest proposal seems to be significant as a rough estimate by Crisil puts the size of bad loans in the retail segment to around Rs 15,000 crore as on March 31, 2008. This amount includes both housing as well as auto loan defaults in the country. Bankers are of view that in the current fiscal the delinquencies in home and auto loan portfolios might rise further because rise in the interest rates, after the regulators have taken strict steps in its latest monetary policy in order to control the rising inflation. As per the figures released by the Reserve Bank of India, as of May 2008, the total unpaid housing loans in India are estimated at Rs 2,62,486 crore.