SC/RCs cannot buy assets from each other; can restructure loans
Current · Source: Reserve Bank of India · RBI/2008-09/446 · issued 22 Apr 2009 · ~1 min read
Quick answerRBI clarified that one SC/RC cannot acquire financial assets from another SC/RC under SARFAESI Act, as they are neither banks nor financial institutions. However, SC/RCs may deploy funds to restructure acquired loans solely for realisation of dues.
The rule, in the simplest words
One SC/RC (a company that buys bad loans from banks) cannot buy bad loans from another SC/RC because the law only lets them buy from banks or financial institutions (like regular banks).
SC/RCs can change the terms of a loan (called 'restructuring') to help get their money back, and they are allowed to spend their own money to do that.
When an SC/RC restructures a loan, it must only do it to collect the money owed, not for any other reason.
How it plays out — a real example
A credit & lending officer in Indore, Priya, works for an SC/RC that bought a defaulted loan from a bank. She wants to restructure the loan by lowering the interest rate so the borrower can repay. The RBI rule says she can use her company's funds for this restructuring, as long as her only goal is to recover the dues. She cannot buy the same loan from another SC/RC, though—she must get it directly from a bank.
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
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
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.
📜 Read the original circular — full text as issued by RBI
2. The issues were examined and our response is as under:
(i) A Securitisation Company/Reconstruction Company is neither a ‘bank’ in terms of provisions of Section 2(1)(c) of SARFAESI Act, 2002 nor a ‘financial institution’ in terms of provisions of Section 2(1)(m) of the said Act. Therefore, acquisition of financial assets by one SC/RC from another SC/RC will not be in conformity with the provisions of SARFAESI Act, 2002.
(ii) ‘Restructuring of loans by SC/RC’ is one of the measures allowed to be undertaken by SC/RCs for realisation of their dues. As such, there is no bar on
SC/RCs deploying their funds for undertaking restructuring of acquired loan account with the sole purpose of realizing their dues.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/446 · issued 22 Apr 2009. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (All registered Securitisation Companies (SCs), All registered Reconstruction Companies (RCs), Banks selling financial assets to SC/RCs), your first concrete step on “SC/RCs cannot buy assets from each other; can restructure loans” is: “Ensure your SC/RC does not acquire financial assets from another SC/RC; source only from banks or financial institutions.” (RBI issued this 22 Apr 2009).
Circular: RBI/2008-09/446 -- SC/RCs cannot buy assets from each other; can restructure loans
Issued: 22 Apr 2009
Action required: Ensure your SC/RC does not acquire financial assets from another SC/RC; source only from banks or financial institutions.
Action required: Review your loan restructuring policies to align with RBI's allowance for deploying funds solely for realisation of dues.
Action required: Document all restructuring actions clearly to demonstrate the purpose is realisation of dues, not other objectives.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4943&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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