What changed
RBI consolidated all existing circulars on ARCs into a single Master Direction, effective April 24, 2024. The direction updates registration requirements, prudential norms like capital adequacy and provisioning, governance standards including fit-and-proper criteria, and disclosure norms. It also repeals all earlier circulars listed in Annex VII.
What it means for you
ARCs must now comply with a unified regulatory framework, which may tighten capital and governance requirements. Banks and lenders dealing with ARCs for stressed asset resolution will see more standardized processes and enhanced transparency. Non-compliance can attract penal consequences.
What you must do
- Review and align your ARC's policies with the new Master Direction, especially on capital adequacy, asset classification, and provisioning.
- Update governance structures to ensure board and management meet fit-and-proper criteria as per the direction.
- Revise fair practices code and disclosure formats to comply with the new requirements.
- Ensure all returns and audited balance sheets are submitted as per the updated timelines and formats.
Who it affects
All Asset Reconstruction Companies registered with RBI, Banks and financial institutions that transfer stressed assets to ARCs, Investors in security receipts issued by ARCs
When does this Master Direction take effect?
It came into effect on April 24, 2024, the date it was placed on RBI's website.
Does this direction replace all earlier ARC circulars?
Yes, it repeals all previous circulars listed in Annex VII of the direction.
What are the key prudential requirements for ARCs under this direction?
ARCs must maintain a minimum capital adequacy ratio, follow asset classification norms, and make provisions as specified in Section IV of the direction.