The Reserve Bank of India (RBI) has extended the time for realising the assets acquired by asset reconstruction companies (ARCs) from five years to eight years. In addition, ARCs are also allowed to acquire assets in their own books or directly in the books of the trusts set up by them.
At present, ARCs can extend the resolution of assets by two years which have completed five years. Also ARCs can only acquire assets in their own books. The tenor of a security receipt (SR) can be a maximum of 5 years from the date of acquisition of asset.
ARCs buy non-performing assets from banks and financial institutions and unlock the value of such assets in a timely and effective manner.
In the Annual Policy Statement, RBI said that assets which remain unresolved or are not redeemed as at the end of five years or eight years, as the case may be, would be ,henceforth be treated as loss assets.
In addition, RBI said that it will be mandatory for these companies to invest at least 5 per cent of each class of securities receipts and hold on the investments till the time all the SRs issued under that class are redeemed completely.
