ICICI Bank chairman N Vaghul is heading the country's first asset reconstruction fund ARC of India Ltd, floated by ICICI Bank, Industrial Development Bank of India, State Bank of India, Housing Development Finance Corporation, HDFC Bank and a clutch of other banks.

ARC of India, which has recently been incorporated, has sought Reserve Bank of India's licence to be kick off operations.

The other members on the board of the company, which has an equity base of Rs 10 crore (Rs 100 million), are Deepak Parekh, chairman HDFC; P P Vora, chairman IDBI, and P N Venkatachalam, managing director, State Bank of India.

The independent directors on the board are Ashok Ganguly, J J Irani and Y H Malegam.

One more independent director is likely to join the board soon.

ICICI, IDBI and SBI hold 24.5 per cent each in the ARC, while HDFC and HDFC Bank hold 10 per cent each and the rest is being held by a clutch of banks including Federal Bank and IDBI Bank.

The ARC will function as a trustee and buy distressed assets from banks.

"Globally, qualified institutional buyers buy the distress assets. Since this market has not developed in India as yet, banks will be issued units against the assets and these units can be encashed after the assets are recovered," said a source familiar with the development.

In essence, the ARC will act as a fund.

To start with, it will buy sticky assets of banks in small tranches. Unlike in other parts of the world, where the sticky assets are sold at a very steep discount -- as much as 85 per cent -- in India the stressed assets are unlikely to be sold cheap.