RBI amends regulatory framework for ARCs
Recently the Reserve Bank of India (RBI) has amended the regulatory framework for Asset Reconstruction Companies (ARCs).
This amendment is based on the recommendations of the committee constituted to comprehensively review the working of ARCs.
Key guidelines:
- ARCs with a minimum net worth of Rs 1000 crore have been permitted to act as resolution applicants under the Insolvency and Bankruptcy Code (IBC), 2016.
- Earlier, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act had prohibited ARCs from undertaking securitization or other activities other than asset reconstruction without the permission of RBI.
- The IBC provides a time bound insolvency resolution process for companies and individuals.
- The minimum capital requirement for setting up an ARC has been increased from the existing Rs 100 crore to Rs 300 crore in a phased manner.
- Changes have been made in corporate governance norms. Like setting up an audit committee, it would involve only non-executive directors.
ARCs-
- They have been constituted on the recommendations of Narasimham Committee-2. These have been constituted to provide a focused approach for resolution of Non-Performing Assets (NPAs).
- These are companies registered under Section-3 of the SARFAESI Act, 2002.
- These are regulated by RBI as Non-Banking Financial Companies (NBFCs).
Source – The Hindu
