Review committee for ARC rules by RBI
- Posted By
10Pointer
- Categories
Economy
- Published
22nd Apr, 2021
-
Context
The Reserve Bank of India (RBI) constituted a committee for the evaluation of the role of asset reconstruction companies (ARCs) in stressed debt resolution and to review their business model.
About the Committee
- Chairman: The committee will be headed by former RBI executive director Sudarshan Sen.
- It is a six-member panel.
- Time bound: The panel has to submit the report within three months of the first meeting
- Tasks: The committee will review the legal and regulatory framework.
- It will also recommend the measures to improve the efficacy of ARCs.
- It will review their role in stressed asset resolution under the Insolvency and Bankruptcy Code (IBC).
- It would suggest ways to improve liquidity and trading of security receipts.
Asset Reconstruction Company (ARC)
- It is a specialized financial institution which buys the NPAs or bad assets from banks and financial institutions.
- Lenders sell stressed loans to the ARCs at a discount.
- It is either in exchange of cash or a mix of cash and security receipts.
- These receipts are redeemable.
- In the Union Budget 2021-22, the setting up of Asset Reconstruction Companies in India to take care of Non-Performing Assets (NPAs) of stressed banks was announced.
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