RBI allows asset reconstruction cos to submit resolution plans under IBC

The Reserve Bank of India (RBI) has allowed asset reconstruction companies to act as resolution applicants under the Insolvency and Bankruptcy Code (IBC).

According to revised guidelines released by RBI on Tuesday, ARCs can operate as resolution applicants, which is not allowed under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, or the SARFAESI Act.

However, to qualify as an RA, the companies need to have a minimum net owned fund of ₹1000 crore and a board-approved policy to take up the role of an applicant.

According to RBI, the ARC should also have a committee comprising a majority of independent directors to take decisions on proposals of submitting resolution plans under the IBC and it should explore the possibility of preparing a panel consisting of sector-specific management firms and individuals with expertise in running firms and companies.

According to the guidelines, ARCs shall not retain any significant influence or control over the corporate debtor after five years from the approval date of the resolution plan by the adjudicating authority.

The ARCs should also make additional disclosures in their financial statements on assets acquired under IBC, in addition to the existing disclosure requirements, RBI said.

The changes in regulatory framework were made following the recommendations of an RBI-appointed committee, which was set up last year to review the working of ARCs.

Earlier RBI had objected to UV Asset Reconstruction Co.’s plan to acquire telecom operator Aircel Ltd under the insolvency process on grounds that it was outside the scope of the Sarfaesi Act.

The revised guidelines also prescribe certain measures to bring in more transparency in the ARC sector and to improve corporate governance standards for ARCs.

RBI has also raised the minimum capital requirement for setting up ARCs to ₹300 crore from the existing ₹100 crore.

Existing ARCs have been given a glide path to meet the minimum net owned fund requirement by April 2026.

“In case of non-compliance at any of the above stages, the non-complying ARC shall be subject to supervisory action, including prohibition on undertaking incremental business till it reaches the required minimum NOF applicable at that time,” RBI added.