Mumbai, (Thestates.news)| Underlining its critical role in resolution of stressed financial assets of banks and financial institutions, the Reserve Bank of India (RBI) on Wednesday issued Master Directions for the Asset Reconstruction Companies (ARCs) and fixed minimum net owned fund (NOF) of Rs 300 crore to commence the business of securitisation or asset reconstruction.
“To commence the business of securitisation or asset reconstruction, an ARC is required to have a minimum net owned fund (NOF) of ₹300 crore and thereafter, on an ongoing basis,” RBI said in its master directions for ARCs.
ARCs existing as on October 11, 2022 have been provided the glide path to achieve the minimum required NOF of Rs 300 crore. They had commenced with NOF of Rs 100 crore which has to be increased to Rs 200 crore by March, 2024 and Rs 300 crore by March 2026.
In case of non-compliance at any of the above stages, the non-complying ARC shall be subject to supervisory action, including prohibition on undertaking incremental business till it reaches the required minimum NOF applicable at that time.
In terms of the provision of the Act, ARCs have been permitted to undertake those activities as Resolution Applicants under Insolvency and Bankruptcy Code, 2016 (IBC) which are not specifically allowed under the Act. This permission shall be subject to the conditions.
The conditions include inter alia, the ARC has a minimum NOF of Rs 1,000 crore; the ARC shall have a Board-approved policy regarding taking up the role of Resolution Applicant which may include the scope of activities, internal limit for sectoral exposures, etc.; a committee comprising of a majority of independent directors shall be constituted to take decisions on the proposals of submission of resolution plan under IBC. (UNI)
RBI issue Master Direction for ARCs; minimum Net Owned Fund set at Rs 300 cr
