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An asset reconstruction company (ARC) main objective is to manage Non-performing and securitization assets of a bank and to make profitable those assets which have been underperforming or become formally classified as NPA’s belonging to companies who have been unable to generate sufficient timely revenue to service their outstanding obligations.
SRA or ARC company classified as securitization company or reconstruction company shall commence business only after RBI Approval-
The Reserve Bank may, by notification, specify different amounts of the owned fund for different class or classes of companies or reconstruction companies.
The Securitisation Company or Reconstruction Company requires making an application for registration to the Reserve Bank to carry on the business of securitization or asset reconstruction business.
Every application for company registration shall be made in the prescribed form and in such manner as may be specified by the Reserve Bank of India. On receipt of the application RBI may inspect records or books of the company. If RBI is satisfied as to the fulfillment of the following conditions that –
Read Also: Function of Asset Reconstruction Companies & RBI Regulation for ARC.
The Reserve Bank of India may, after being satisfied that the conditions specified above are fulfilled, grant a certificate of registration to the securitization company(ASC) or the reconstruction company(ARC) to commence or carry on the business of securitization or asset reconstruction subject to necessary conditions may be deemed feet.
The Reserve Bank may reject the application if it is satisfied that the conditions specified as per the RBI Act are not fulfilled.
Before rejecting the application, the applicant shall be given a reasonable opportunity of being heard.
Every securitization company or reconstruction company shall obtain prior approval of the Reserve Bank for any substantial change in its management or change of location of its registered office or change in its name.
A substantial change in management means the change in the management by way of transfer of shares or amalgamation or transfer of the business of the company.
A company aggrieved by the order of cancellation of the certificate of registration may prefer an appeal to the Central Government within 30 days from the date on which such order is communicated to it. The company cannot file an appeal against the order of rejection of the application for a certificate of registration.
Recommended Article: What are the Challenges Faced by ARC in Case of NPAs.
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