ARCs are formed to acquire NPL from banks and financial institutions with the objective of focused management and optimal recovery, thereby relieving banks and financial institutions of the burden of NPL and allowing them to focus on core activities.The word asset reconstruction company is a typical Indian word - the global equivalent of which is asset management companies. The word “asset reconstruction” in India owes its origin to Narsimham Committee I which envisaged the setting up of a central Asset Reconstruction Fund with money contributed by the Central Government, which was to be used by banks to shore up their balance sheets to clean up their non-performing loans. This idea never worked: so Narsimham Committee II thought of ARCs, the likes of which had already been successful in Malaysia, Korea and several other countries in the world. To keep the tune the same as the original idea of asset reconstruction fund, as also to give an impression that ARCs are not merely concerned with realisation of bad loans but they are going to do “reconstruction”, e.g. resurrect bad loans into good ones, the word ARC has been used in India.

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