On April 19, RBI had set up a committee to undertake a comprehensive review of the working of asset reconstruction companies (ARCs) in the financial sector ecosystem and recommend suitable measures for enabling them to meet the growing requirements.
As per the terms of reference of the committee, the panel will review the existing legal and regulatory framework applicable to ARCs and recommend measures to improve efficacy of ARCs.
It will also review the role of ARCs in resolution of stressed assets including under Insolvency and Bankruptcy Code (IBC), and give suggestions for improving liquidity in and trading of security receipts.
Besides, it has also been asked to review business models of the ARCs.
The panel is scheduled to submit its report within three months from the date of its first meeting.
After enactment of 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 ARCs.
Since then, while ARCs have grown in number and size, their potential for resolving stressed assets is yet to be realised fully.