The Reserve Bank of India through its Notification dated 6th December 2019 has tightened the norms for asset reconstruction companies to acquire financial assets from their sponsor firms and lenders on a bilateral basis.
RBI in its earlier circular on Buyback of assets from SC/RCs by the Defaulters and acquisition of assets by SC/RCs from sponsor banks has notified that the Asset Reconstruction Companies (ARCs) shall not acquire financial assets.
However, as per this Circular they may participate in auctions of non-performing assets by their sponsor banks provided such an auction is conducted in a transparent manner, on arm’s length basis, at prices determined by the market factors.
Through this circular RBI has further stated that The ARCs shall not acquire financial assets on bilateral basis from the following: –
- a bank or financial institution which sponsors the ARC;
- a bank or financial institution which is either lends to ARC or is a subscriber to the fund raised by the ARC for its operations;
- An entity in the group to which the ARC belongs.
Click here to read the Notification.
