RBI starts tightening the norms for ARCs
RBI has started tightening the norms for ARCs so as to increase their accountability.
image for illustrative purpose
Mumbai RBI has started tightening the norms for ARCs so as to increase their accountability.
In the past, the sellers had started paying the management fee directly to the asset reconstruction companies (ARCs) disregard of the recovery happening from those assets.
Bad Loan firms are looking for change in rule to boost market. But, the RBI not only stopped the practice, but also made it clear that management fee will be paid to the ARCs out of recoveries only.
Moreover, RBI emphasised on corporate governance, RBI focussed on the circular which had been issued by the apex bank last year. Also, RBI said that the chairman of the board of such companies will be there in the capacity of independent. Besides, the RBI said that the formation
of an independent advisory committee was a must for one time settlement.Now, ARCs will have to change their business model with the new regulations in place.
