What changed
RBI issued a master circular consolidating all existing instructions on Asset Reconstruction Companies (ARCs) as of April 1, 2022, updated through October 14, 2022. It replaces earlier circulars and includes guidance on Ind AS compliance, net owned fund requirements, and permissible business activities.
What it means for you
ARCs now have a single reference document for regulatory compliance, reducing ambiguity. Banks dealing with ARCs for asset sales must ensure ARCs adhere to updated capital adequacy and disclosure norms. The circular reinforces RBI's oversight on ARC governance and resolution processes under IBC.
What you must do
- Review the master circular to align ARC partnership agreements with updated capital adequacy and asset classification rules.
- Ensure ARC counterparties comply with fit-and-proper criteria for sponsors and investors before transferring assets.
- Update internal policies to reflect ARC reporting requirements to credit information companies and central registry.
- Train staff on ARC-related provisions, especially for asset reconstruction and securitisation transactions.
Who it affects
All Asset Reconstruction Companies registered with RBI, Banks and financial institutions selling NPAs to ARCs, Investors and sponsors in ARC equity, Credit information companies and central registry
Does this master circular change any existing ARC rules?
No, it consolidates all current instructions as of the date of the circular (April 1, 2022, updated through October 14, 2022), without introducing new requirements. ARCs must continue to follow the same rules on registration, capital, and asset classification.
Are ARCs required to follow Ind AS for financial statements?
Yes, ARCs covered by Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 must comply with Ind AS for preparation of their financial statements from financial year 2019-20 onwards, as per RBI's March 13, 2020 circular.