What changed
RBI formalized guidelines under Section 9(a) of SARFAESI Act for SC/RCs to change or take over borrower management. The guidelines set eligibility conditions, including a minimum dues threshold of 25% of total assets and consent from 75% of security receipt holders in multi-creditor cases. They also specify grounds such as willful default and require restoration of management upon full repayment.
What it means for you
SC/RCs now have a clear regulatory framework to enforce management changes, reducing ambiguity in recovery actions. Banks and lenders can expect more structured and transparent processes when SC/RCs intervene in stressed assets. The 25% asset threshold and 75% creditor consent rule ensure checks and balances, preventing arbitrary takeovers.
What you must do
- Review borrower's latest audited balance sheet to confirm dues exceed 25% of total assets before initiating management change.
- Obtain written consent from secured creditors holding at least 75% of outstanding security receipts if borrower has multiple creditors.
- Document willful default or other grounds as per guidelines before proceeding with management takeover.
- Ensure compliance with Section 15 of SARFAESI Act for takeover procedure and restore management upon full repayment.
Who it affects
Registered Securitisation Companies (SCs), Registered Reconstruction Companies (RCs), Borrowers with dues to SC/RCs, Secured creditors in consortium lending
What is the minimum dues threshold for an SC/RC to take over management?
The dues must be at least 25% of the borrower's total assets as per the latest audited balance sheet.
What happens if there are multiple secured creditors?
SC/RCs need consent from secured creditors holding at least 75% of the outstanding security receipts to proceed with management change or takeover.
Can management be restored after full repayment?
Yes, the guidelines require SC/RCs to restore management to the borrower once all dues are realized in full, as per Section 15(4) of SARFAESI Act.