A World Bank professional is likely to head the ARC of India Ltd, the first asset reconstruction company in the country which is set to take off by buying out Rs 5,000 crore (Rs 50 billion) worth of bad assets.

ICICI, Industrial Development Bank of India and State Bank of India hold 24.5 per cent each in the ARC which has an equity base of Rs 10 crore.

HDFC and HDFC Bank hold 10 per cent each of the equity and the rest is being held by a clutch of banks including Federal Bank and IDBI Bank.

According to sources, four candidates have been short listed for the top job - one each from the World Bank and Asian Development Bank, Manila, and two managing directors of SBI associate banks.

"The offer letter has been sent to the World Bank professional who is an Indian. In case he declines to accept the offer, one of the SBI associate managing directors can be made the chief," said sources.

The interviews took place last week at the SBI headquarters where ICICI managing director and chief executive officer K V Kamath, IDBI chairman P P Vora and HDFC chairman Deepak Parekh joined SBI chairman A K Purware to screen the candidates.

The RBI last week finalised the guidelines for the ARC. Starting with a Rs 5,000 crore (Rs 50 billion) asset base, it plans to acquire Rs 20,000 crore (Rs 200 billion) worth of assets by the end of fiscal 2004.

Around 50 sticky accounts worth Rs 20 crore and above are being transferred to the ARC. Most of these assets are common in the books of IDBI, SBI, IFCI and ICICI.

A six-member core team has been working on the project. The ARC board consists of non-executive chairman N Vaghul and directors Deepak Parekh, P P Vora, P N Venkatachalam, J J Irani, Ashok Ganguly and Y H Malegam.

The ARC has appointed PricewaterhouseCoopers and another chartered accountant firm for valuation of assets.

Sources said that there will be a negotiated floor price and if the ARC is able to recover more, then the spoil will be shared between the bank or institution, and the ARC.

The ARC will be modeled on the asset management company of a mutual fund. After taking over assets, it will bundle the assets like a mutual fund and create asset portfolios.

At the second stage, pass through certificates against these assets will be issued to banks and institutions as there is no qualified institutional buyer in the market to buy junk bonds.