RBI constitutes panel to conduct comprehensive review of ARC

To facilitate the smooth functioning of asset reconstruction companies (ARCs), the Reserve Bank of India (RBI) on 7 April decided to constitute a panel to conduct a comprehensive review of the functioning of such institutions.

In the latest budget, Finance Minister Nirmala Sitharaman announced the establishment of an Asset Reconstruction Company and an Asset Management Company to deal with stressed assets.

Regulatory guidelines for ARCs were issued in 2003 to enable the development of the sector and facilitate the smooth functioning of these companies, following the enactment of the Securitization and Reconstruction of Financial Assets and Reconstruction and Security Interest (SARFAESI) Act in 2002.

Since then, ARCs have grown in number and size, but their ability to resolve stressed assets is yet to be fully realized, with RBI Governor Shaktikanta Das announcing the first bi-monthly monetary policy for the current fiscal on Wednesday. Said while doing.

He has, therefore, proposed to constitute a committee to comprehensively review the functioning of ARCs in the financial sector ecosystem and appropriate measures to enable such entities to meet the growing needs of financial institutions. Recommends

In her budget speech in February, Ms. Sitharaman said that high-level provision has been made by public sector banks for measures to clear bank books to their stressed assets.

“An Asset Reconstruction Company Limited and an Asset Management Company will be set up to consolidate and recoup existing stressed debt and then recover the final value for disposal of assets to alternative investment funds and other potential investors,” he said. said.

To expand the centralized payment system, RBI has also decided to increase membership in them.

RBI operated centralized payment systems – RTGS and NEFT are currently limited to banks with few exceptions.

“It is now proposed to enable prepaid payment instruments such as non-bank payment system operators. [PPI] Issuers, Card Networks, White Label ATM Operators and Trade Receivable Discount Systems [TReDS] A platform regulated by the Reserve Bank for direct membership in CPS, ”he said.

The facility is expected to reduce settlement risk in the financial system and increase access to digital financial services to all users.

With the aim of encouraging agricultural loans to individual farmers against the pledge / hypothesis of agricultural produce, Das said that it has been decided to increase the loan limit under priority sector loans from ₹ 50 lakh to ₹ 75 lakh per borrower. This will be done against the pledge / hypothesis of agricultural produce supported by Nigohi Warehouse Receipts (NWR) / Electronic-NWR (E-NWR) issued by warehouses registered with the Warehousing Development and Regulatory Authority (WDRA).

He said that for other warehouse receipts, the loan limit for classification under priority sector loans would continue to be ₹ 50 lakh per borrower.