RBI: New ARCs must have minimum net owned fund of Rs 100 crore
ARCs are companies registered under Section 3 of the Securitization and reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
The Reserve Bank of India has specified that the new Asset Reconstruction Companies (ARCs) must have minimum net owned fund of Rs 100 crore.
In a egazzette notification on October 10, RBI said, "In exercise of the powers conferred by clause (b) of sub-section (1) of section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Reserve Bank of India hereby specifies that the Net Owned Fund (NOF) for Asset Reconstruction Companies (ARCs) shall be minimum Rupees One Hundred Crore on an ongoing basis with effect from the date of this Notification."
Further, for all the already registered ARCs having less than Rs 100 crore NOF, RBI stated that they shall achieve the prescribed minimum NOF level latest by March 31, 2019 and same should be duly certified by the Statutory Auditors.
ARCs is a specialized financial institution which buys the NPAs from banks so that the latter can clean up their balance sheets.
In the month of April 2017, RBI fixed the minimum NOF for existings ARC at Rs 100 crore on an ongoing basis considering its greater role in tackling the banks stressed assets.
Under amended SARFAESI Act, 2016, no ARC are allowed to commence or carry on the business of securitisation or asset reconstruction without having NOF of not less than Rs 2 crore. Similarly, the ARCs have to maintain a capital adequacy ratio of 15% of its risk weighted assets.
India Ratings recently in its report highlighted that the aggregate capitalisation level of all ARCs is about Rs 3000 crore. With minimum investment by ARCs in security receipts issued – the net worth of ARCs would be sufficient to acquire only Rs 20,000 crire of stressed assets.