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The Reserve Bank of India’s (RBI’s) revised guidelines to prevent the majority of asset reconstruction companies (ARCs) from bidding for assets under the insolvency process. Only three out of 28 ARCs, Edelweiss ARC, JM Financial ARC, and Asset Reconstruction Co India Ltd (ARCIL), will qualify as resolution applicants as they meet the requirement of net owned funds.
“There has to be a level playing field. According to regulations enacted by Parliament, anybody can be a resolution applicant. Most IBC assets are mid corporate and allowing all ARCs irrespective of capital base, can improve IBC recovery,” said a person associated with a smaller ARC.
In 2020, RBI had rejected UV ARC’s bid to acquire assets of Reliance Communication and Aircel under the IBC process, claiming that it had flouted norms under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. This prompted the association of ARCs to seeking clarity on the matter from RBI, which led the central bank to come out with revised guidelines.
That said, large ARCs may not be keen to acquire IBC assets. “ARCs will bid as a resolution applicant if they identify a strategic investor with interest in running the business as ARCs are not in the business of running the business,” said Pallav Mohapatra, chief executive officer, Arcil.
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John Miller has been writing about science, gaming, and tech culture for over a decade. He’s a top-rated reviewer with extensive experience helping people find the best deals on tech and more.
