Reserve Bank of India (Asset Reconstruction Companies) Directions, 2025 (Updated as on March 10, 2026)

1. Rules start on posting

The rules take effect the day RBI posts them on its website.

2. Who must follow this

Every Asset Reconstruction Company registered with RBI must follow these rules.

3. Name of the rules

The rules are called the Reserve Bank of India Asset Reconstruction Companies Directions, 2025.

1. Six months to start

An ARC must start business within six months of getting its certificate of registration.

2. ₹300 crore to start

An ARC needs at least ₹300 crore in net owned funds to start business.

3. Existing ARCs' 2026 deadline

An ARC registered before October 11, 2022 had to reach ₹300 crore net owned funds by March 31, 2026.

4. No fresh business till compliant

Missing the net owned fund level can bar an ARC from fresh business until it complies.

5. ₹1,000 crore for IBC role

Acting as a Resolution Applicant under the insolvency code needs ₹1,000 crore net owned funds.

6. Five-year influence limit

An ARC gives up significant influence over a resolved company five years after the resolution plan is approved.

7. Short-term instrument cap

Surplus funds in short-term instruments may not exceed 10 per cent of the ARC's net owned funds.

8. Ten per cent own-use cap

Land or buildings for the ARC's own use may not exceed 10 per cent of owned funds.

9. Five years to dispose

Land taken over while enforcing security is sold within five years, unless RBI extends that.

10. Deposits are not allowed

An ARC may not raise money by taking deposits.

11. Extension up to twelve months

RBI can extend that start deadline to twelve months from the certificate date.

1. 60% consent to acquire

Acquiring a share of assets needs consent from creditors holding at least 60 per cent of the amount owed.

2. Eight-year cap resold SRs

Selling an asset on to another ARC still ends at eight years from the first ARC's own acquisition.

3. Five years to realise

An asset's realisation plan runs for five years from the date it was acquired.

4. Extendable to eight years

The Board can extend that so the total period never exceeds eight years.

BankPulse example. RBI gives a realisation plan five years. The Board can extend it, and RBI's own words stop that extension at eight years total, so the ARC gets three more years to work with.

5. 25% of the borrower's assets

Takeover needs the amount owed to be at least 25 per cent of the borrower's total assets.

6. 60% of SR holders agree

Where several lenders are involved, holders of at least 60 per cent of the SRs must agree to a takeover.

7. 60% for enforcement too

Enforcing security interest also needs consent from creditors holding at least 60 per cent of the amount owed.

8. ₹1 crore triggers committee route

Settling dues above ₹1 crore per borrower goes through the Independent Advisory Committee route.

9. 26% equity shareholding cap

Converting debt to equity may not take the ARC's shareholding past 26 per cent of the post-conversion equity.

10. Half the Board, independent

Going past that shareholding limit needs at least half the ARC's Board to be independent directors.

11. Invest 15% or 2.5%

The ARC invests at least 15 per cent, or 2.5 per cent of all SRs, whichever is higher.

12. Rated for six cycles

An ARC keeps the same credit rating agency for at least six half-yearly rating cycles.

13. ₹500 crore floats a fund

An ARC needs acquired assets over ₹500 crore to float a restructuring fund under a scheme.

14. 25% ceiling for restructuring

Funds used for restructuring under that scheme may not exceed 25 per cent of the funds raised.

15. Ninety days for the policy

An ARC must frame its financial asset acquisition policy within 90 days of registration.

16. Two weeks' due diligence

Before bidding for stressed assets, an ARC may ask for at least two weeks to do due diligence.

17. Sixty days' notice first

An ARC gives the borrower 60 days' notice before taking over management.

18. Board decides in 30 days

The Board rules on the takeover within 30 days of the notice period ending.

19. Valued once a month

Equity received this way is valued and marked to market at least once a month.

20. Rating within six months

An ARC gets its SRs rated by a SEBI-registered agency within six months of acquiring the assets.

21. Rating reviewed twice a year

That rating is reviewed every June 30 and December 31.

1. 15% capital adequacy ratio

An ARC's capital adequacy ratio must stay at a minimum of 15 per cent of risk weighted assets.

2. Sub-standard at 12 months

An NPA is a sub-standard asset for up to 12 months after classification.

3. Doubtful past 12 months

Past 12 months as sub-standard, the asset becomes doubtful.

4. Loss asset past 36 months

An asset non-performing for more than 36 months is a loss asset.

5. 10% sub-standard provision

A sub-standard asset carries a general provision of 10 per cent of the outstanding amount.

6. Full provision, uncovered doubtful

The uncovered part of a doubtful asset needs a 100 per cent provision.

1. Retirement age of seventy

An MD, CEO or whole-time director may not continue past the age of 70.

2. Five-year tenure at a time

An MD, CEO or whole-time director's tenure runs no more than five years at a time.

3. Fifteen years continuously

The same person may not hold that post continuously for more than fifteen years.

4. Three-year cooling gap

Re-appointment after that needs a gap of at least three years first.

5. Board quorum, one-third

The Board's quorum is one-third of its total strength, or three directors, whichever is higher.

6. Half must be independent

At least half of the directors attending a Board meeting must be independent directors.

7. Audit Committee meets quarterly

The Audit Committee meets at least once a quarter, with a quorum of three members.

8. 10% share transfer needs approval

Transferring 10 per cent or more of paid-up capital within five years of registration needs RBI's approval.

9. 20% voting power limit

Fresh investors from FATF non-compliant jurisdictions stay under 20 per cent of the ARC's voting power.

10. Calls only within set hours

Recovery calls to a borrower may not run before 8 a.m. or after 7 p.m.

11. Thirty days to release documents

The ARC returns the borrower's original property documents within 30 days of full repayment.

12. Compensation at ₹5,000 a day

A delay caused by the ARC costs it ₹5,000 for every day of delay.

13. Sixty more days if lost

If documents are lost, the ARC gets another 30 days before the delay penalty starts, so 60 days in total.

14. Ninety days before a vacancy

The ARC applies to RBI at least ninety days before a director or CEO vacancy arises.

15. Declared every March 31

Directors and the CEO update their fit-and-proper declaration every year, as on March 31.

16. One month for the declaration

Sponsors give a fresh declaration within one month of the financial year's end.

17. Certificate due by end-May

The ARC certifies any change in a sponsor's status to RBI by the end of May.

1. 180 days to realise fees

Management fees recognised during the planning period must be collected within 180 days of it ending.

2. NAV floor for fee reversal

An unrealised management fee is reversed if the SRs' NAV falls below 50 per cent of face value.

3. One month after the AGM

The audited balance sheet reaches RBI's Department of Supervision within one month of the AGM.

4. Monthly display of possessions

The ARC updates and displays its list of possessed secured assets every month.

1. One month, then IBA

If a professional gives no clarification within one month, the ARC reports them to IBA.

1. Old rules stand repealed

These directions repeal the existing RBI directions, instructions and guidelines for ARCs.

2. Past actions stay governed

Anything already done under the old rules stays governed by them.