SIDBI to set up ARC in 6 months

Small Industries Development Bank of India (Sidbi) is planning to set up a joint venture asset reconstruction company (ARC) to buy non-performing assets in the SME sector, in next six months with an initial paid-up capital of Rs 100 crore.

"Punjab National Bank, Canara Bank and United Bank have already agreed to be partners in the joint venture ARC. The venture may have 10 partners and we are in talks with some other banks," said Sidbi Chairman and Managing Director R M Malla.

"We will apply to the Reserve Bank of India in next two months for permission. We expect to make the ARC functional in next six months," Malla said.

The ARC will mainly buy bad loans from state finance corporations (SFCs) to enable them to concentrate on fresh lending, he added.

SIDBI is likely to hold 15 per cent stake in the company while other partners may hold 5-10 per cent share each.

The ARC would be looking at NPAs in the SME sector estimated to be around Rs 8,000 crore.