The Reserve Bank of India (RBI) on July 16, 2020 has issued a circular for fair practices Code for Asset Reconstruction Companies (ARC).
The following guidelines have been provided for Fair Practices Code for Asset Reconstruction Companies:
• ARC shall follow transparent and non-discriminatory practices in acquisition of assets. It shall maintain arm’s length distance in the pursuit of transparency.
• ARCs shall release all securities on repayment of dues or on realisation of the outstanding amount of loan, subject to any legitimate right or lien for any other claim they may have against the borrower. If such right of set off is to be exercised, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which ARCs are entitled to retain the securities till the relevant claim is settled or paid.
• ARCs shall put in place Board approved policy on the management fee, expenses, and incentives, if any, claimed from trusts under their management. The Board approved policy should be transparent and ensure that management fee is reasonable and proportionate to financial transactions.
• Compliance with FPC shall be subject to periodic review by the Board.
[Circular No. DOR.NBFC(ARC) CC NO. 9/26.03.001/2020-21]
