RBI Eases Debt Conversion Norms For Asset Reconstruction Firms
Asset reconstruction companies can now hold more than 26% in stressed units, but conditions apply.
Asset reconstruction companies will be exempted from a previous rule that barred them from holding more than 26 percent stake in a borrower company after conversion of its debt into equity. But only if they meet certain conditions set out by the Reserve Bank of India.
In a notification today, the RBI said ARCs having minimum net owned funds of Rs 100 crore and where at least half of the board of directors are independent, will be exempt from the shareholding limit.
The central bank wants these companies to frame a policy for converting debt into equity, periodically value the equity shares they've acquired and explore the possibility of setting up a panel of sector-specific management to run the companies.
The RBI had raised the minimum net owned funds requirement for ARCs to Rs 100 crore from Rs 2 crore in April this year.
The extent of shareholding by ARCs, that are eligible for exemption, will be in accordance to the permitted limit under the foreign direct investment norms for that specific sector, the notification added.