RBI had arranged a committee to initiate a thorough review of the functioning of asset reconstruction companies (ARCs) in the financial sector ecosystem and advise appropriate measures for empowering them to meet the expanding demands.
The RBI Committee on Asset Reconstruction Companies, which will evaluate the existing legal and regulatory framework suitable to ARCs, on Wednesday urged views and suggestions from stakeholders.
The recommendations could be given to the committee by May 31, 2021.
On April 19, RBI had set up a committee to initiate a thorough review of the working of asset reconstruction companies (ARCs) in the financial sector ecosystem and recommend suitable measures for equipping them to meet the growing requirements.
The central bank had framed the Committee under the chairmanship of Sudarshan Sen, former Executive Director, Reserve Bank of India.
As per the terms of reference of the committee, the board will review the existing legal and regulatory framework suitable to ARCs and recommend measures to enhance the effectiveness of ARCs.
It will also review the role of ARCs in the resolution of stressed assets including under the Insolvency and Bankruptcy Code (IBC), and give recommendations for developing liquidity in and speculation of security receipts.
Furthermore, it has also been ordered to review the business models of the ARCs.
The panel is programmed to submit its report within three months from the date of its first meeting.
After the impersonation of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in 2002, regulatory guidelines for ARCs were issued in 2003, to approve the development of this sector and to expedite the smooth functioning of ARCs.
Since then, while ARCs have arisen in number and size, their potential for determining stressed assets is yet to be accomplished fully.