The Reserve Bank of India (RBI) Issued Master Direction for Asset Reconstruction Companies (ARCs) | Current Affairs | Vision IAS
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    The Reserve Bank of India (RBI) Issued Master Direction for Asset Reconstruction Companies (ARCs)

    Posted 25 Apr 2024

    1 min read

    • These have been issued in exercise of the powers conferred by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
    • Aim of the direction: To ensure prudent and efficient functioning of ARCs and to protect the interest of investors.
    • ARCs are financial institutions that buy the Non Performing Assets (NPA) or bad assets from banks and financial institutions to clear their balance sheets.
      • Union Budget 2021-22, announced the setting up of ARCs.
      • They are registered by RBI under SARFAESI Act, 2002.

     

    • The RBI’s direction to ARCs:
      • Have to maintain capital adequacy ratio of a minimum of 15% of its total risk-weighted assets.
        • Prohibited from raising money by way of deposit.
      • No ARC shall invest in land or building, except for investment for its own use up to 10% of its owned funds.

     

    • Significance of ARCs:
      • Incentivize quicker action on resolving stressed assets thereby helping in better value realization.
      • Help in bringing liquidity into the economy. 
      • Improves bank's valuation and enhances their ability to raise market capital.
    • Tags :
    • RBI
    • ARCs
    • NPAs

    Articles Sources

    https://theprint.in/economy/rbi-issues-master-direction-for-asset-reconstruction-companies/2054663/
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