The Reserve Bank of India has formed a committee to review the way asset reconstruction companies (ARCs) function in the financial sector and recommend measures to reform them according to the growing requirements of the financial sector. RBI Governor Shaktikanta Das had announced after the monetary policy committee meeting earlier this month that such a panel was in the work.
The six-member committee would be led by Sudarshan Sen, former Executive Director, RBI. Other members on the panel include Vishakha Mulye, Executive Director, ICICI Bank; P N Prasad, former Dy Managing Director, SBI; Rohit Prasad, Professor of Economics, MDI, Gurgaon; Abizer Diwanji, Partner, Ernst & Young; and R Anand, Chartered Accountant.
The committee will review existing legal and regulatory framework applicable to ARCs and recommend measures to improve efficacy of ARCs. The review will also look at role of ARCs in resolution of stressed assets including under Insolvency & Bankruptcy Code (IBC), 2016. The panel will also assess business models of the ARCs.
The committee will formulate suggestions for improving liquidity in and trading of security receipts, and look into any other matter relevant to the functioning, transparency and governance of ARCs.
The Committee will submit its report within three months from the date of its first meeting.
After enactment 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 enable development of this sector and to facilitate smooth functioning of these companies.
Since then, ARCs have grown in number and size but their potential for resolving stressed assets is yet to be realised fully, RBI Governor Das had while announcing the first bi-monthly monetary policy for the current financial year on April 7.
In the latest Budget, Finance Minister Nirmala Sitharaman announced setting up of Asset Reconstruction Company and Asset Management Company to tackle stressed assets.
"An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization," she had said.