The Reserve Bank of India (RBI) on Wednesday released a ‘Master Direction’ for Asset Reconstruction Companies (ARCs) mandating them to maintain a minimum net owned fund (NOF) of ₹300 crore in a phased manner by FY26.
The Master Direction came into effect April 24, 2024. “To commence the business of securitisation or asset reconstruction, an ARC is required to have a minimum net owned fund (NOF) of ₹300 crore and thereafter, on an ongoing basis,” the RBI said.
ARCs in existence since October 11, 2022, have been provided a glide path to achieve the minimum NOF of ₹300 crore.
This meant that they hold a minimum NOF of ₹100 crore as on October 2022, ₹200 crore by March 31, 2024, and ₹300 crore by March 31, 2026.
If the ARC fails to comply, it “shall be subject to supervisory action, including prohibition on undertaking incremental business till it reaches the required minimum NOF applicable at that time,” the RBI said.
An ARC shall undertake only securitisation and asset reconstruction activities and functions provided under Section 10 of the Act, the RBI said.
But ARCs with a minimum NOF of ₹1,000 crore are eligible to function as Resolution Applicants under the IBC, it added.
