Asset Reconstruction Companies (ARCs): What Happens When Your Loan is Sold

What is an ARC?

Asset Reconstruction Companies are RBI-regulated entities that acquire NPAs from banks and NBFCs, then work to recover or reconstruct value. They operate under the SARFAESI framework and are governed by RBI's ARC Master Direction.

How acquisitions are structured

• Cash deal: ARC pays the seller upfront and inherits the loan.
• SR deal (Security Receipts): ARC pays partly in SRs subscribed by the seller, aligning incentives on eventual recovery.

What changes for the borrower

• The lender of record changes; the loan obligation does not.
• Existing SARFAESI/DRT proceedings continue.
• The ARC is often more open to commercial settlements than a public-sector bank.

Practical opportunities

ARCs are commercial buyers, not regulators. Well-structured OTS proposals — especially with quick cash, take-out finance, or co-investor backing — often find quicker traction than with the originating bank.

Investor angle

Resolution-driven investors can co-invest with the borrower to take out ARC debt at a discount, freeing the underlying asset and creating equity upside.