9th November 2021 (4 Topics)
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Asset reconstruction companies (ARCs)
- Creation of online platform for the sale of stressed assets and permitting ARCs to act as resolution applicants during the insolvency and bankruptcy process.
- The scope of Section 5 of the SARFAESI Act be expanded to permit ARCs to acquire financial assets from all regulated entities, including AIFs, FPIs, AMCs making investment on behalf of MFs, and all NBFCs including HFCs.
- For all accounts above Rs 500 crore, two bank-approved external valuers carry out a valuation to determine the liquidation value and fair market value. In case of accounts between Rs 100 crore and Rs 500 crore, one valuer may be engaged.
- Minimum net-owned fund (NOF) requirement for ARCs should be increased to Rs 200 crore wherein existing ARCs may be provided a glide path to meet this requirement.
What is an Asset Reconstruction Company? Why is the government planning to establish a National Asset Reconstruction Company? (150 Words)
Approach:
- Introduce by describing what is an asset for a lender and how an asset can become non-performing. The briefly explain the role of ARCs here
- Elaborate on ARCs and their functioning
- Discuss why ARCs till now have not succeeded as per expectation
- Discuss how a National ARC can help
- Conclusion
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