In plain words: sometimes a bank sells your bad loan to an Asset Reconstruction Company (ARC), and suddenly you are dealing with a new entity. Here is what that means.
What an ARC is
An Asset Reconstruction Company is a regulated entity (registered with the RBI) that buys stressed/bad loans from banks and seeks to recover or resolve them. SARFAESI itself provides for securitisation and asset reconstruction.
What happens when your loan is sold
- The bank assigns the debt and security to the ARC.
- The ARC steps into the lender's shoes — it can enforce under SARFAESI and pursue recovery.
- You now deal with the ARC for payments and settlement.
Does it change your rights?
Your core rights continue — proper notices, the 13(3A) representation, redemption and the Section 17 remedy all still apply, now against the ARC. The ARC must also follow the procedure.
The upside for borrowers
ARCs are often open to resolution — restructuring or a settlement — because they bought the loan at a discount and want a workable recovery. This can create negotiation space.
What to do when an ARC takes over
- Verify the assignment and the ARC's authority.
- Keep communications in writing.
- Explore settlement/restructuring with the ARC.
- Insist on proper procedure and notices.
Frequently asked questions
Can my loan be sold to someone else? Yes — banks can assign stressed loans to an ARC.
Do I lose my rights? No — your SARFAESI rights continue against the ARC.
Will the ARC settle? Often there is room, since ARCs buy at a discount and want resolution.
How Vakil Help Desk helps
Vakil Help Desk advises borrowers and guarantors on SARFAESI notices, DRT and DRAT proceedings, auctions, one-time settlements and stressed-asset disputes. If your bank has issued a demand or possession notice, or you are facing recovery, we can help you respond in time.
This article is for general legal awareness, not individual legal advice. SARFAESI and DRT procedure, time limits and thresholds are set by statute and RBI norms and can change, and the right step depends on your facts and the current position. Please consult a lawyer before acting on a recovery notice.