RBI relaxes equity holding norm for asset reconstruction companies

Move to encourage foreign funds scouting for bad assets to tie up more with domestically incorporated ARCs

The Reserve Bank of India (RBI) on Thursday allowed asset reconstruction companies (ARCs) with a minimum net owned fund of Rs 100 crore to convert debt into equity worth more than 26 per cent. This gives ARCs greater control in a distressed asset and would encourage foreign funds scouting for bad assets to tie up even more with domestically incorporated ARCs, said an executive with an asset reconstruction company.

ARCs typically convert their acquired debt into equity in case they find the company can be nursed back to health. The central bank had so far put a cap of 26 per