The Reserve Bank of India (RBI) has asked all the present asset reconstruction companies (ARCs) to possess a minimum net owned fund (NOF) of Rs100 crore by March 2019. This decision happens to be taken by RBI as outlined by its last bi-monthly monetary policy wherein it had proposed to stipulate a baseline NOF of Rs100 crore taking into consideration the enhanced role and greater cash based transactions carried out by ARCs.
Per amended SARFAESI Act, 2016, ARCs cannot carry over the business of securitisation or asset reconstruction lacking NOF of not less than Rs 2 crore or other amount stipulated with the RBI. Per the notification of RBI,
the present ARCs not meeting the minimum NOF criteria need to own minimum NOF of Rs100 crore latest by 31 March 2019.
ARC is known as a company registered under Section 3 with the Securitization and reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. ARCs are regulated with the RBI. They are definitely the specialised agencies with a primary role of resolving the stressed assets issue with the Indian banking system. They initiate buying bad loans from Indian banks to turn them around.
ARCs are automobile overnight asset management companies evident in countries like Malaysia, Korea plus several other countries. Narsimham Committee II (1998) proposed creating of ARCs over the similar lines bring back of asset management companies present globally. Lower than replacement ARCs is support banks to concentrate on normal banking operations as an alternative to working with stressed assets