Pedestrians walk past the Reserve Bank of India (RBI) building in the BBD Bagh area of Kolkata, West Bengal, India (Photographer: Sanjit Das/Bloomberg)

RBI Tweaks Conditions For Sale By Asset Reconstruction Companies

The Reserve Bank of India permitted asset reconstruction companies to acquire financial assets from each other on meeting certain conditions, in light of changes made in the Sarfaesi Act.

The decision will help improve liquidity in the ARC market.

“In view of amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (Sarfaesi) Act, 2002, it has been decided to permit ARCs to acquire financial asset from other ARCs,” the central lender said in a notification.

The transfer of assets by one ARC to another would depend on the following conditions:

  • The transaction is settled on cash basis
  • Price discovery for such transaction shall not be prejudicial to the interest of Security Receipt holders
  • The selling ARC will utilise the proceeds recieved for the redemption of underlying security receipts
  • The date of redemption of underlying Security Receipts and total period of realisation shall not extend beyond eight years from the date of acquisition of the financial asset by the first ARC.

The selling ARC will utilise the proceeds received for the redemption of underlying security receipts, it said.

The date of redemption of underlying security receipts and total period of realisation shall not extend beyond eight years from the date of acquisition of the financial asset by the first ARC, it added.

Also read: RBI Spells out Concern About Potential Losses From Shadow Banks

Bloomberg Quint

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