{"id":27415,"date":"2019-12-27T16:27:13","date_gmt":"2019-12-27T10:57:13","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=27415"},"modified":"2020-01-03T11:27:16","modified_gmt":"2020-01-03T05:57:16","slug":"rbi-norms-to-strengthen-asset-reconstruction-company","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/rbi-norms-to-strengthen-asset-reconstruction-company\/","title":{"rendered":"RBI Norms to Strengthen ARC (Asset Reconstruction Company)"},"content":{"rendered":"<p class=\"has-drop-cap\">The RBI on December 6, 2019, has issued notification for&nbsp; Asset&nbsp; Reconstruction&nbsp; Companies restricting them from acquiring financial assets on a bilateral <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Basis&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;In finance, the &amp;quot;basis&amp;quot; is a term with several applications, including representing the difference between the spot price and the future contract price of an asset, which is vital in investment(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/basis\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>basis<\/a> from there sponsor firms, lenders or subscribers, and to the group entity belonging to ARC.&nbsp; <\/p>\n\n\n\n<p>However, the <a href=\"https:\/\/www.rbi.org.in\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">RBI<\/a> has stated that they may participate in auctions of the financial assets provided such auctions are conducted in a transparent manner, on arm&rsquo;s length basis and the prices are determined by <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>market<\/a> forces.<\/p>\n\n\n\n<p>Asset Reconstruction Company India (ARCIL)&nbsp;which is sponsored by State&nbsp;Bank of India, ICICI Bank, Punjab&nbsp;National Bank, and IDBI Bank will be affected the most by this restriction. Other ARC&rsquo;s sponsored by prominent Foreign Investors are Edelweiss ARC, JM&nbsp; Financial ARC, and Phoenix <a href=\"https:\/\/enterslice.com\/asset-reconstruction-company-registration\">ARC<\/a>, which is promoted by the Kotak group.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Basic&nbsp;key\npoints&nbsp;issued in the circular<strong>:<\/strong><strong><\/strong><\/h2>\n\n\n\n<p>(i) Restrictions&nbsp; have&nbsp; been&nbsp; imposed&nbsp; on&nbsp; acquiring&nbsp; financial&nbsp; assets&nbsp; from&nbsp; the&nbsp; following&nbsp; on a bilateral&nbsp; basis:<\/p>\n\n\n\n<ul><li>a bank\/ financial institution which is the sponsor of the ARC;<\/li><li>a bank\/ financial institution which is either a lender to the ARC\nor a subscriber to the fund, if any, raised by the ARC for its operations;<\/li><li>an entity in the group to which the ARC belongs.<\/li><\/ul>\n\n\n\n<p>(ii) However, the&nbsp; ARC&rsquo;S&nbsp; have&nbsp; been&nbsp; permitted&nbsp; to&nbsp; participate in&nbsp; auctions&nbsp; of&nbsp; the Financial&nbsp; Assets&nbsp; provided&nbsp; such&nbsp; auctions are&nbsp; conducted&nbsp; in:<\/p>\n\n\n\n<ul><li>a&nbsp; transparent&nbsp; manner<\/li><li>&nbsp;on&nbsp; arm&rsquo;s length\nbasis and<\/li><li>the prices are determined by market forces.<\/li><\/ul>\n\n\n\n<p>RBI had permitted&nbsp;\nARC&rsquo;S to acquire financial assets from other&nbsp; ARC&rsquo;s on meeting certain\nconditions as per the <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Amendment&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;An &amp;quot;amendment&amp;quot; refers to the formal change or correction of a legal document, often involving additions, variations, or deletions to address irregularities or clarify points in an agreement.(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/amendment\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>amendment<\/a> made in the&nbsp; SARFAESI&nbsp; Act, 2002 (Securitisation and&nbsp; Reconstruction of&nbsp; Financial&nbsp;\nAssets and&nbsp; Enforcement of&nbsp;\nSecurities&nbsp; Interest&nbsp; Act) in&nbsp;\nJune.&nbsp; However, the&nbsp; RBI&nbsp; has\nmade&nbsp; it&nbsp;\nclear&nbsp; that&nbsp; the&nbsp; transaction&nbsp;\nof&nbsp; ARC&rsquo;S&nbsp; with&nbsp;\nother&nbsp; ARC&rsquo;S can&nbsp; be&nbsp;\ndone&nbsp; on&nbsp; meeting&nbsp;\ncertain&nbsp; conditions:<\/p>\n\n\n\n<ul><li>Transactions&nbsp; have&nbsp;\nto&nbsp; be&nbsp; settled&nbsp; on a cash&nbsp; basis&nbsp;\nonly<\/li><li>&nbsp; The selling&nbsp;ARC will utilize the proceeds for the redemption\nof underlying security receipts.<\/li><li>&nbsp;&nbsp; The date of redemption\nof security receipts would not extend beyond eight years from the date of\nacquisition by the first&nbsp;ARC.<\/li><\/ul>\n\n\n\n<p>This new rule prevents the lender from selling to ARC&rsquo;S without going through the bidding process.&nbsp; <em><strong>&ldquo;The regulation is intended to bring in more transparency in the process of asset sales to&nbsp;ARC, from its lenders, investors and group entities and ring-fence the transactions from conflict of interest,&rdquo;<\/strong><\/em><strong>&nbsp;<\/strong> said Hari&nbsp; Hara Mishra, Director, UV Asset&nbsp; Reconstruction.<\/p>\n\n\n<a href=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/12\/Acquisition-of-financial-assets-by-Asset-Reconstruction-Companies-from-sponsors-and-lenders.pdf\" class=\"pdfemb-viewer\" style=\"width: 767px; \" data-width=\"767\" data-height=\"max\" data-toolbar=\"bottom\" data-toolbar-fixed=\"on\">Acquisition-of-financial-assets-by-Asset-Reconstruction-Companies-from-sponsors-and-lenders<br><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The RBI on December 6, 2019, has issued notification for&nbsp; Asset&nbsp; Reconstruction&nbsp; Companies restricting them from acquiring financial assets on a bilateral basis from there sponsor firms, lenders or subscribers, and to the group entity belonging to ARC.&nbsp; However, the RBI has stated that they may participate in auctions of the financial assets provided such [&hellip;]<\/p>\n","protected":false},"author":27,"featured_media":27418,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[5,2620],"tags":[],"acf":{"service_id":"8"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>RBI Norms to Strengthen Asset Reconstruction Company<\/title>\n<meta name=\"description\" content=\"RBI Norms on December 6, has issued notification for Asset Reconstruction Companies restricting them from acquiring financial assets on a bilateral basis\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/rbi-norms-to-strengthen-asset-reconstruction-company\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"RBI Norms to Strengthen Asset Reconstruction Company\" \/>\n<meta property=\"og:description\" content=\"RBI Norms on December 6, has issued notification for Asset Reconstruction Companies restricting them from acquiring financial assets on a bilateral basis\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/rbi-norms-to-strengthen-asset-reconstruction-company\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2019-12-27T10:57:13+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-01-03T05:57:16+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/12\/RBI-NORMS-TO-STRENGTHEN-ARC-Asset-Reconstruction-Company.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"670\" \/>\n\t<meta property=\"og:image:height\" content=\"352\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Deepti Shikha","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/01\/Deepti-Shikha.jpg","authorDescription":"Deepti is a Law graduate with an avid interest in reading and very proficient in summarizing legal cases. She has enough experience in handling legal affairs of the company. In the initial days of her career, she has worked as a legal researcher and has 3+ years of experience.","postViews":435,"readingTime":2,"nextPost":{"id":27427,"slug":"breaking-the-concept-of-deep-learning"},"prevPost":{"id":27381,"slug":"joint-venture-agreements-between-two-companies"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/12\/RBI-NORMS-TO-STRENGTHEN-ARC-Asset-Reconstruction-Company.jpg","postTerms":"Latest News","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/27415"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/27"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=27415"}],"version-history":[{"count":0,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/27415\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/27418"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=27415"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=27415"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=27415"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}