Inevitability of defaults: Promoters gripe over loans being sold to ARCs

'Once the moratorium is lifted, we expect several companies to default. The bank will have no other option but to either restructure the loan or sell it to ARCs,' says a banker

With a large number of companies set to default in the coming months, asset reconstruction companies (ARCs) are expected to see sharp jump in loan portfolio purchase from banks. Promoters say some ARCs are delaying debt resolution to earn higher returns — often risking a company’s operations and long-term viability.

“Once the moratorium is lifted, we can expect several companies to default. The banks will have no other option but to either restructure the loan or sell the loans to ARCs at a massive discount,” says a banker.

Waving a red flag on the state of corporate finance, rating firm CARE Ratings