Public sector bank (PSB) Punjab National Bank(PNB) has decided to sell its entire stake in Asset Reconstruction Company (India) (ARCIL) at an agreed price. PNB currently holds a 10.01% stake in ARCIL. The bank plans to divest its stake in the ARC by December 2022-end.
Asset Reconstruction Company
An Asset Reconstruction Company is a specialized financial institution that buys the NPAs or bad assets from banks and financial institutions so that the latter can clean up their balance sheets. In other words, ARCs are in the business of buying bad loans from banks.
Divestment
The bank will divest about 3,25,06,486 equity shares or 10.01% shareholding in ARCIL. In its rationale for divestments, PNB in the regulatory filing said, “The Policy on Investment by banks in ARC’s was reviewed by the Reserve Bank of India.
Accordingly, it was decided that banks may sponsor only one ARC at any point of time and banks’ investment in other ARCs should be less than 10% of the paid-up equity capital of the ARC subject to extant prudential norms on investment. Thereafter, Bank was advised to comply with the above stipulation.” PNB said, “to comply with the above guidelines and based on the market scenario, Bank has decided to sell its entire stake of ARCIL at an agreed price.”
ARCIL
ARCIL was founded in 2002 and is among the leading ARCs in the country. In FY22, ARCIL reported a total income of ₹3.04 crore compared to ₹1.73 crore in the previous fiscal. In FY20, the income stood at ₹1.66 crore. That said, in the last three fiscals, ARCIL has made consistent growth in its total income.