Game-changing rules for asset reconstruction companies

The new norms succinctly sum up the RBI's view on how some of the ARCs have been run

In many ways, the Reserve Bank of India’s (RBI’s) new guidelines on asset reconstruction companies (ARCs), which have been in the business of buying bad loans and making money by recovering them, are game-changing. There are 29 of them — large, medium and small.

The regulator’s prime focus is on governance and transparency. At least half of the directors attending the meetings of an ARC board must be independent directors. More importantly, the chairman of an ARC needs to be an independent director and not a nominee director, as has been the case with most owner-driven ARCs.

This changes the profile of