What changed
RBI issued clarifications on two points: (1) acquisition of financial assets by one SC/RC from another SC/RC is not permitted under SARFAESI Act, 2002, because SC/RCs are not classified as 'bank' or 'financial institution' under the Act; (2) restructuring of acquired loans by SC/RCs is an allowed measure for realisation of dues, and there is no bar on deploying funds for that purpose.
What it means for you
SC/RCs must source financial assets only from banks or financial institutions, not from other SC/RCs, limiting secondary market transfers among them. On the positive side, SC/RCs can actively use restructuring as a tool to recover dues, including deploying their own funds, which gives them flexibility in managing stressed assets.
What you must do
- Ensure your SC/RC does not acquire financial assets from another SC/RC; source only from banks or financial institutions.
- Review your loan restructuring policies to align with RBI's allowance for deploying funds solely for realisation of dues.
- Document all restructuring actions clearly to demonstrate the purpose is realisation of dues, not other objectives.
Who it affects
All registered Securitisation Companies (SCs), All registered Reconstruction Companies (RCs), Banks selling financial assets to SC/RCs
Can an SC/RC buy a loan portfolio from another SC/RC?
No, RBI clarified that such acquisition is not in conformity with SARFAESI Act, 2002, because an SC/RC is neither a bank nor a financial institution under the Act.
Can an SC/RC use its own funds to restructure a loan it has acquired?
Yes, restructuring is an allowed measure for realisation of dues, and there is no bar on deploying funds for that purpose, as long as the sole objective is to realise dues.