Arrangement between banks, asset reconstruction firms needs a relook

.................The RBI noted that as most of the securitisation activity is taking place predominantly with the issuance of security receipts (SRs) rather than cash, there is a concern that banks may tend to use this option to evergreen their balance sheets. SRs may not carry the stigma of NPAs (their value mainly being derived from the collateral and not based on the record of recovery), although the risk of loss of income on the asset still remains, in effect, with the originator (the bank). The central bank said under the current framework, the ‘real’ incremental value addition of ARCs in the process of ‘reconstruction’ of assets,............

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