RBI to set up panel to undertake review of ARCs

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RBI to set up panel to undertake review of ARCs.

To facilitate clean functioning of Asset Reconstruction Companies (ARCs), the Reserve Bank of India (RBI) on Wednesday (April 7) determined to set up a panel to undertake a complete review of the working of such establishments. In the most recent Budget, Union Finance Minister Nirmala Sitharaman introduced setting up of ARC and Asset Management Company to deal with burdened belongings.

After enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in 2002, regulatory pointers for ARCs had been issued in 2003 to allow improvement of this sector and to facilitate clean functioning of these corporations.

“Since then, ARCs have grown in number and size but their potential for resolving stressed assets is yet to be realised fully,” RBI Governor Shaktikanta Das stated on Wednesday whereas saying the primary bi-monthly financial coverage for the present monetary yr.

“It is, therefore, proposed to constitute a committee to undertake a comprehensive review of the working of ARCs in the financial sector ecosystem and recommend suitable measures for enabling such entities to meet the growing requirements of the financial sector,” he added.

In her Budget speech in February, 2021, Sitharaman had stated the excessive stage of provisioning by public sector banks of their burdened belongings requires measures to clear up the financial institution books.

“An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization,” she had stated.

In a bid to develop the Centralised Payment Systems, RBI has additionally determined to enhance the membership in them. The RBI-operated Centralised Payment Systems-RTGS and NEFT is presently restricted to banks, with just a few exceptions.

“It is now proposed to enable non-bank payment system operators like Prepaid Payment Instrument (PPI) issuers, card networks, white label ATM operators and Trade Receivables Discounting System (TReDS) platforms regulated by the Reserve Bank, to take direct membership in CPSs,” RBI Governor stated.

“This facility is expected to minimise settlement risk in the financial system and enhance the reach of digital financial services to all user segments,” he added.

With a view to encouraging farm credit score to particular person farmers in opposition to pledge/ hypothecation of agricultural produce, Das stated it has been determined to improve the mortgage restrict below precedence sector lending from Rs 50 lakh to Rs 75 lakh per borrower.

This will probably be performed in opposition to the pledge/ hypothecation of agricultural produce backed by Negotiable Warehouse Receipts (NWRs)/ digital NWRs (e-NWRs) issued by warehouses registered with the Warehousing Development and Regulatory Authority (WDRA).

For different warehouse receipts, the mortgage restrict for classification below precedence sector lending will proceed to be Rs 50 lakh per borrower, he additional acknowledged.

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