Asset Reconstruction Companies (ARCs) are better than ‘bad banks’ as there is stress in the entire banking portfolio, said Sanjay Tibrewala, CEO of Phoneix ARC on Thursday. For the uninitiated, banks are now trying to push the sale of bad retail assets to ARCs. So far they have been selling corporate assets.

Speaking with CNBC-TV18 at length whether ARCs have a taste for retail assets and will they have the headroom to absorb these bad assets, Tibrewala said, “The banks have always been selling retail assets in the past also. This was more in small lots and bits and pieces. Corporate because of the size and the sheer number was the mainstay of sale to ARCs.”

The stress can be seen in the entire banking portfolio, he added.

“However, now we are seeing some stress in the entire banking portfolio including retail, there is a strong possibility that the bank will come out with selling retail assets.”

On ‘bad bank’, Tibrewala said, “The ‘bad bank’ idea is not new; in the last 10 years it has come up at least 2-3 times and there are challenges in setting up a bad bank. However, ARCs are also like a ‘bad bank’, but owned by private entities instead of being a ‘bad bank’ which is owned by the bank itself. So, if the selling price is right, sold at a fair price and there is a reasonable timeframe given for recovery then ARCs are better equipped than a specific ‘bad bank’.”

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(Edited by : Ajay Vaishnav)