 "Reserve Bank of India")
The Reserve Bank of India (RBI) on Wednesday released a master direction for asset reconstruction companies (ARCs), saying the guidelines will be effective from April 24, 2024.
ARCs are expected to have a minimum capital requirement of Rs 300 crore, compared to Rs 100 crore as on October 11, 2022. Existing ARCs have been provided a glide path to achieve the minimum required Net Owned Fund (NOF) of Rs 300 crore as on March 31, 2026.
ARCs must have a minimum capital of Rs 200 crore by March 31, 2024.
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“In case of non-compliance at any of the above stages, the non-complying ARC shall be subject to supervisory action, including prohibition on undertaking incremental business till it reaches the required minimum NOF applicable at that time,” said the RBI.
ARCs with a minimum NOF of Rs 1000 crore can act as resolution applicants. They are allowed to deploy funds in government securities and deposits with scheduled commercial banks, Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (NABARD) or such other entities as may be specified by the central bank from time to time.
ARCs can also invest in short-term instruments like money market mutual funds, certificates of deposit and corporate bonds/ commercial papers which have a short-term rating equivalent to the long-term rating of AA- or above by an eligible credit rating agency (CRA). Investments will be subject to a cap of 10 per cent of the NOF on maximum investment in such short-term instruments.
