'Asset Reconstruction Companies are created to manage and recover Non-Performing Assets' - Comment referring the functions and benefits of Asset Reconstruction Companies.

As per RBI Notification No. DNBS.2/CGM (CSM)-2003, dated April 23, 2003, Asset Reconstruction Company (ARC) performs the following functions: (i) Acquisition of financial assets (ii) Change or takeover of management/sale or lease of business of the borrower (iii) Rescheduling of debt (iv) Enforcement of security interest (v) Settlement of dues payable by the borrower Benefits of incorporating an ARC are as under: (i) Banks can focus better on managing the core business including providing new business opportunities for the ARC. (ii) Restoration of depositor and investor confidence by ensuring the lender's financial health. (iii) It will help in building industry expertise in loan resolution and restructuring management besides serving as a catalyst for important legal reforms in bankruptcy procedures and loan collection. (iv) ARCs play an important role in developing capital markets through secondary asset instruments.