Asset Reconstruction Companies Permitted to Buy Financial Assets from Peers (Download PDF)

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The Asset Reconstruction Companies have been permitted by RBI to acquire financial assets from peers (other such entities). All such transactions should be settled in cash. ARC is a specialized financial institution that buys the NPAs or bad assets from banks and financial institutions so that the latter can clean up their balance sheets. This decision of RBI is expected to improve liquidity in Asset Reconstruction Companies Market.

This is images show in Asset Reconstruction

This is Images Show in Asset Reconstruction

This is images show in Asset Reconstruction

Overview & Significance

  • The ARCs have been allowed to acquire financial assets from other ARCs, in the view of amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002.

  • It lets banks as well as other financial institutions of India to auction commercial or residential properties (of defaulters) for purpose of loan recovery.

  • Asset reconstruction Companies (ARC) was established to identify and rectify issues of Non-Performing Assets (NPAs) via multiple mechanisms.

  • The transfer of assets from one ARC to another includes Price discovery for such transaction shall not be disadvantageous to interest of Security Receipt holders.

  • The selling of ARC must utilise proceeds so received for redemption of underlying security receipts.

  • The Redemption date of underlying Security Receipts and total Period of Realisation (conversion of assets, goods & services into cash or receivables through sale) should not extend beyond a period of 8 years from date of acquisition of financial asset by 1st ARC.

- Published/Last Modified on: August 25, 2019

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