State establishes Asset Reconstruction Company

Mumbai: In a major policy decision, the state cabinet chaired by chief minister Eknath Shinde on Wednesday approved the establishment of an Asset Reconstruction Company (ARC)

Mumbai: In a major policy decision, the state cabinet chaired by chief minister Eknath Shinde on Wednesday approved the establishment of an Asset Reconstruction Company (ARC). This will be along the lines of a similar company constituted by the Narendra Modi government at the national level.

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The company will take care of the reconstruction of the government entities which have the state government stake in terms of land, equity capital, loan and loan guarantee among others.

The company will take responsibility for the government, and semi-government entities including the cooperative societies with government funding that are in bad financial health or have gone into liquidation. The state government will fund the formation of the company with ₹111 crore as net own fund and it will be registered with the registrar of the company. The company will be headed by an additional chief secretary of the finance department as chairman with five other bureaucrats from other departments as its directors.

The company will help the state government to safeguard the investment of the government and the interest of the general public. “Despite having the government stake in these entities, the government is very limited in their revival if these institutions slip into bad financial situations leading to losses to the government. The company will help the government in the revitalisation of such entities which are either financially sick or governed without transparency,” the statement by the CMO stated.

The asset reconstruction company is a financial institution that buys debtors of banks at the mutually agreed value in an attempt to recover the debts or associated securities. It takes over a portion of the debts of the bank that qualify to be recognised as non-performing assets to ensure asset reconstruction or securitisation.

State entities like district cooperative banks and cooperative sugar factories are likely to come under the purview of the company in case these entities run into a financially bad position.