These are the important parts in the revised set of rules for ARC reserve Bank of India ,reserve Bank of India) on Tuesday aimed at reforming the regulatory framework and strengthening the governance standards of the ARC.
Earlier, the RBI had opposed a proposal to allow ARCs to bid for debt resolution under bankruptcy courts.
The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act prohibits ARCs from undertaking activities other than securitization or asset reconstruction without the permission of RBI.
The RBI has now said that ARCs with a minimum net ownership of Rs 1,000 crore can act as solution applicants.
In general, the regulator has asked all ARCs to raise their minimum net-owned fund limits in a phased manner — Rs 200 crore by the end of March 2024 and Rs 300 crore by the end of March 2026. At present, the minimum standard has been pegged at Rs.100 crore.
“In case of non-compliance at any of the above steps, non-compliance will be subject to ARC supervisory action, including a ban on undertaking incremental business until it reaches the required minimum. NOF applicable at that time,” RBI said.
The changes in the regulatory framework for ARCs were made following the recommendations of the RBI committee set up last year to review the functioning of ARCs.
RBI has also streamlined the process of settlement of debt dues from borrowers. It said that the settlement amount should preferably be paid in lump sum and only after taking all possible steps to recover the dues.