These are important parts of the revised set of rules for ARCs that the regulator unveiled on Tuesday with the aim of improving their regulatory framework and strengthening their governance standards.
before, reserve Bank of India Opposed ARC’s bid for debt resolution under insolvency courts. Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI ACT) prohibits ARCs from undertaking activities other than securitization or asset reconstruction without the permission of RBI.
The RBI has now stated that ARCs with a minimum net worth of Rs 1000 crore can act as solution applicants.
In general, the regulator has asked all ARCs to increase their minimum net owned funds 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 is pegged at Rs 100 crore.
RBI said, “In case of non-compliance at any of the above stages, the non-compliance will be subject to ARC supervisory action, including prohibition on carrying out incremental business, until it reaches the required minimum NOF for the time being in force.” go.”
The changes in the regulatory framework for ARCs were made following the recommendations of an RBI committee constituted last year to review the functioning of ARCs.
RBI has also streamlined the process of settlement of loans due from borrowers. It said that the settlement amount should preferably be paid in lump sum and should be paid only after taking all possible steps for recovery of the arrears.
“The net present value of the settlement amount should ordinarily not be less than the realizable value of the securities,” the regulator said.
The regulator has also made sweeping changes in corporate governance norms for ARCs. These include measures relating to the constitution of boards and audit committees and adherence to “fit and proper” criteria for CEOs.