While banks and NBFCs believe that a high EMD ensures participation from only serious and committed players and helps maintain confidentiality, several ARCs believe that this discourages wider participation.
As stressed asset sales are only to specified regulated entities, most sellers never stipulated any EMD for ARCs. Only recently, some private banks and non-banking finance companies, such as Yes Bank and IndoStar, have started stipulating EMD during the sale of bad loans to ARCs.
Industry bodies like the Indian Banks Association have been addressing demands by stakeholders for higher transparency and standardised processes in the sale of distressed assets. Banks have been advised to provide information on the auction on their website to facilitate wider participation of bidders.