Bad Loans: India’s bad loan firms call for rule change to boost market

Indian companies that buy bad loans from banks have decided to approach policymakers to open up the sector to new players such as wealthy individuals and corporates, according to a sector body.

The proposed changes would increase the types of entities who trade instruments called Security Receipts, which are backed by non-performing loans. Currently, the business is confined to banks and non-financial companies.

The adjustment would boost liquidity and competition, Hari Hara Mishra, chief executive officer of the Association of Asset Reconstruction Companies in India, told Bloomberg in an interview last week.

The group is set to propose the change to the Reserve Bank of India and government officials in coming days.

“If those proposals are approved, it may help enhance liquidity and attract offshore investors,” said Mishra. A committee “decided to approach the authorities with sweeping changes in India’s distressed- asset market.”

Indian Banks’ Association formed a working group, which met recently to discuss proposals paving the way for those companies known as asset reconscruction companies in India.