22.4        ndian     onom
                                                            financial institutions along with the underlying
        Antitrust                                           securities mortgaged and/or hypothecated by
     A category of the government policy which deals        the borrowers to the lenders. The ARCs then try
     with monopoly. Such laws intend to stop abuses         and manage or resolve these NPAs acquired from
     of ‘market power’ by big companies and at times        banks. It can even infuse more funds in order
     to prevent corporate mergers and acquisitions that     to reconstruct the asset. If reconstruction is not
     would strengthen monopoly. The US has such             possible and the borrower is unwilling to repay the
     laws and recently it was in news when Microsoft        loan, the ARCs even sell the secured assets.
     was its target.                                              While the basic principle of ARCs is the
                                                            same everywhere—to acquire bad loans to resolve
        AppreciAtion                                        them—the essential difference is in the ownership
                                                            of ARCs, public or private. After the Asian Crisis,
     It shows increase in value and is used in economics    countries like Indonesia, Korea, Malaysia, and
     in the following two senses:                           Thailand have adopted government-owned and
          (i) It is an increase in the price of an asset    funded ARCs. The Philippines, on the other hand,
              over time, such as price rises in land,       has opted for private ARCs. India, too, has adopted
              factory building, houses, offices, etc. It is the private sector model of asset resolution. Here,
              also known as capital appreciation.           ARCs are set up as non-governmental vehicles
                                                            mostly with support from the banking sector and
         (ii) It is an increase in the value of currency
                                                            other investors. Also, India has opted for multiple
              against any foreign currency or currencies.
                                                            ARCs, which helps in better pricing of bad loans,
              It is market-based if the economy follows
                                                            as opposed to the single ARC model followed
              the floating-currency exchange-rate
                                                            in many countries. The RBI has already allowed
              system.                                       licenses to three ARCs and some banks are also
                                                            planning to float ARCs.
        ArbitrAge                                                 ARCs acquire NPAs by way of ‘true sale’,
     Earning profits out of the price differences of the    i.e., once an NPA has been sold, the seller has no
     same product in different markets at the same          further interest in that asset. ARCs are a product of
     time. For example, buying and selling any product,     the Securitisation and Reconstruction of Financial
     financial securities (as bonds) or foreign currencies  Assets and Enforcement of Security Interest Act,
     in different markets/economies. As globalisation       2002 (SARFAESI Act).
     is promoting liberalised cross-border movement
     of goods and services around the world, arbitrage
     is prevalent today. To avoid arbitrage the WTO            Asset
     member countries (i.e.) the official countries in
                                                            Anything which has a ‘money value’ owned by an
     the process of globalisation) are under compulsion
                                                            individual or a firm is an asset. It is of three types:
     to chalk out homogenous economic policies–and
                                                                  (i) Tangible Asset: All physical assets such
     a level-playing field at the international level is
                                                                      as land, machinery, building, consumer
                                                                      durables (refrigerator, car, TV, Radio,
                                                                      etc.), etc. (the assets which are in the
        Arcs                                                          material form).
     Assets Reconstruction Companies (ARCs) acquire              (ii) Intangible Assets: All non-physical/
     non-performing assets (NPAs) from banks or                       immaterial assets such as brand names,