RBI panel on ARCs proposes norms for valuers, reserve price

Committee recommends creation of online platform for sale of stressed assets

November 02, 2021 10:50 pm | Updated 10:50 pm IST - Mumbai

Efficacy mantra:  The panel   suggests that ARCs be allowed to act as resolution applicants in the bankruptcy process.

Efficacy mantra: The panel suggests that ARCs be allowed to act as resolution applicants in the bankruptcy process.

To streamline the functioning of asset reconstruction companies (ARCs), a Reserve Bank panel has come out with a host of suggestions including the creation of an online platform for the sale of stressed assets and allowing ARCs to act as resolution applicants during the IBC process.

The committee, headed by former RBI Executive Director Sudarshan Sen, suggested that the scope of Section 5 of the SARFAESI Act be expanded to permit ARCs to acquire financial assets from all regulated entities, including AIFs, FPIs, AMCs making investment on behalf of MFs and all NBFCs including HFCs. The performance of the ARCs has so far remained lacklustre, both in ensuring recovery and in revival of businesses. Lenders could recover only about 14.29% of the amount owed by borrowers in respect of stressed assets sold to ARCs in the 2004-2013 period. To improve the performance of ARCs, the RBI had appointed the committee to examine the issues and recommend measures for enabling ARCs to meet the growing requirements of the financial sector. Stakeholders can send comments on the report to the RBI by December 15.

For accounts above ₹500 crore, two bank-approved external valuers should carry out a valuation to determine liquidation value and fair market value. “Also, the final approval of the reserve price should be given by a high-level committee that has the power to approve the corresponding write-off of the loan,” the report said.

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