Amidst various allegations of their indulgence in unethical practices including providing backdoor entry to defaulting promoters of insolvent companies, the Reserve Bank of India (RBI) has asked top bosses of Asset Reconstruction Companies (ARCs) to focus on governance and adhere to ethical conduct while doing business.
Deputy Governor Swaminathan J. on Friday, while urging ARCs to foster a culture of integrity and ethical conduct, highlighted several supervisory concerns in the functioning of ARCs.
He asked these entities to adopt a regulation plus approach where “there is compliance with both the letter of the regulation and also its spirit.”
“Boards should accord due importance to assurance functions, namely, risk management, compliance and internal audit. These functions play a critical role in identifying and mitigating risks, ensuring compliance with laws and regulations as well as safeguarding the organisation’s reputation,” he said.
Addressing a gathering of ARC top executives, Deputy Governor M. Rajeshwar Rao, highlighted the importance of sound governance which would provide a strong foundation for the ARCs to build a robust business model.
“The onus in this regard lies largely with the Boards of the ARCs and the top functionaries who will have to develop a strong and institutional culture based on these principles,” he said.
He also stressed the need for responsible conduct in recovery process and emphasised that ARCs should follow transparent and non-discriminatory practices in line with the comprehensive fair practice code (FPC) put in place by the Reserve Bank.
The RBI had on Friday organised a conference for the directors and MD/ CEOs of ARCs in Mumbai as part of a series of supervisory engagements that the Reserve Bank has been organising with Regulated Entities. The conference was attended by more than 80 participants representing all 27 ARCs.
