Market in distressed assets may be huge, but deal-making faces headwinds

Tucked away in the Reserve Bank of India’s (RBI’s) Trend and Progress of Banking in India for 2019-20 (T&P:2020) is this detail — the price paid by asset reconstruction companies (ARCs) to buy bad loans from banks, as a proportion of the book-value of assets, fell from 38 per cent in FY19 to 35 per cent in FY20. This is the lowest level in five years. Clearly, the realisable value of these assets is fast slipping.

With the Supreme Court vacating the one-year breather on the filing of insolvency proceedings, it’s back to the grind on the bad-loans front. At