The finance ministry has proposed bank-specific ARCs to resolve the problem of bulging non-performing assets (NPAs). However, senior bankers insist on area-specific ARCs as they feel if individual banks are allowed to float ARCs to take care of the NPAs, the entire exercise may turn futile with banks dumping their NPAs in the ARCs to clean their books.

"If a weak bank is floating an ARC, it may simply shift the NPAs from one book to another. To be really meaningful, ARCs should be set up by more than one bank in a particular geographical area and should have a professional board with a Reserve Bank of India nominee on it," said the chairman of a Mumbai-based nationalised bank.

The proposed ARCs will bail out weak public sector banks like the United Commercial Bank, Indian Bank, Allahabad Bank and United Bank of India.

Seniorbankers said that there should be area-specific ARCs on the lines of debt-recovery tribunals. For instance, one ARC should be floated by three banks -- UBI, Uco and Allahabad -- in Calcutta, and another in Madras by Indian Bank and Overseas Bank.

"The joint ARCs are imperative as they will be in a better position to handle the consortium lendings which have turned into NPAs," another banker said.

Bank of Baroda chairman K Kannan said: "The asset-reconstruction companies could be nothing more than a farce; banks could create a separate company and transfer all their NPAs to this company and cleanse their balance sheets by a mere book entry. "The asset value less the provision will be transferred to this sister company, while the provision will be written off."

"It defeats the very purpose of recovery of funds sunk in these NPAs. For this, the DRTs will have to aid in the recovery of these funds, which will not be possible till they are given more powers," he added.

The ARCs are one of therecommendations of the second Narasimham Committee set up to chart out the second phase of financial sector reforms.