Asset Reconstruction Companies:
The Reserve Bank of India (RBI) has raised supervisory concerns regarding the functioning of asset reconstruction companies (ARCs).
- Asset Reconstruction Companies (ARCs) are financial institutions that acquire and manage stressed assets from banks and financial institutions. Registered under Section 3 of the SARFAESI Act, 2002, ARCs face several challenges, including issues like back-door entry of defaulting promoters, lengthy settlement processes, and non-transparent practices.
- The direction stipulates that ARCs must maintain a minimum capital requirement of Rs 300 crore, with existing ARCs given until March 31, 2026, to meet this threshold.
- Non-compliant ARCs will face supervisory action, including the prohibition on incremental business until compliance is achieved.
- ARCs with a minimum Net Owned Fund (NOF) of Rs 1000 crorecan act as resolution applicants and are permitted to invest in specified instruments, subject to certain conditions and caps on investment.
