RBI Allows ARCs to Acquire Financial Assets from other ARCs

The RBI issued a notification on June 28, 2019, permitting Asset Reconstruction Companies (“ARC”) to acquire ‘financial asset(s)’ from other ARCs subject to the following conditions:

  • The transaction is settled on cash basis;
  • Price discovery for such transaction shall not be prejudicial to the interest of security receipt holders;
  • The selling ARC will utilize the proceeds so received for the redemption of underlying security receipts; and
  • The date of redemption of underlying security receipts and total period of realisation shall not extend beyond eight (8) years from the date of acquisition of such financial asset by the selling ARC.
  • Earlier, ARCs could acquire ‘financial assets’ from other ARCs only if such acquisition was for the purpose of debt aggregation for the enforcement of security. This notification, tweaks the conditions, permitting all ARC’s to acquire financial assets from other ARCs insofar as the aforementioned conditions are met.