Finance Minister Haseeb Drabu on Wednesday said that the Jammu and Kashmir government has completed the formalities for incorporating the "J&K Asset Reconstruction Company" in partnership with the J&K Bank which will buy the impaired assets of the state subjects.
"In my first budget, I had mooted the idea of an Asset Reconstruction Company. It was proposed as a practical solution to provide commercial banks a market route and avenues for recovery of bad assets. With the recent Judgment of the Hon’bleSupreme Court on SARFAESI, it has gained news value. I am happy to report that we completed the formalities for incorporating the "J&K Asset Reconstruction Company" in partnership with the J&K Bank. The State Government is a majority shareholder in this, while J&K bank holds 49 per cent," said Drabu, in his budget speech.
The mandate of this state-owned ARC is to buy the impaired assets of state subjects that are mortgaged to financial institutions. These will, of course, include some of the assets of the commercial banks as well ofother financial institutions like the State Finance Corporation, he said.
A special situations fund within the ARC shall focus on constructive investing in distressed assets for restructuring and turnaround of “state subject owned businesses".
The business viability of the ARC is not in doubt as most of these impaired assets have substantial collaterals. Indeed, these are hugely over collateralized. Or in other words, the assets of SMEs in J&K are grossly underleveraged.