What changed
RBI issued a master circular consolidating all existing instructions for Asset Reconstruction Companies (ARCs) as of March 31, 2023. It updates the 2003 guidelines and guidance notes, incorporating Ind AS requirements for financial statements from FY2019-20. The circular also revises definitions and reporting obligations.
What it means for you
ARCs now have a single reference document for compliance, reducing ambiguity. The inclusion of Ind AS ensures standardized financial reporting, aiding supervision. Banks dealing with ARCs can expect more consistent asset valuation and disclosure practices, impacting loan recovery and securitization processes.
What you must do
- Review the master circular to align ARC operations with updated definitions and capital adequacy norms.
- Ensure ARCs comply with Ind AS for financial statements from FY2019-20 as per RBI circular DOR (NBFC).CC.PD.No.109/22.10.106/2019-20.
- Update internal audit and reporting systems to meet the consolidated disclosure and quarterly submission requirements.
- Verify that ARC management changes and share transfers adhere to the fit and proper criteria and prior approval norms.
Who it affects
Asset Reconstruction Companies registered with RBI, Banks and financial institutions dealing with ARCs, Sponsors and investors in ARCs, Credit Information Companies and Information Utilities
What is the effective date of this master circular?
The circular is dated April 3, 2023, and consolidates instructions updated as of March 31, 2023.
Does this circular apply to all ARCs?
Yes, it applies to all ARCs registered under Section 3 of the SARFAESI Act, 2002, with certain exemptions for trusts as specified in paragraph 7.
What are the key reporting requirements for ARCs?
ARCs must submit quarterly statements, audited balance sheets, data to credit information companies, and file transactions with the Central Registry and Information Utilities.