RBI Tightens Guidelines For Settlement Of Dues With Asset Reconstruction Firms

The Reserve Bank of India has tightened guidelines for settlement of dues with asset reconstruction companies, the central bank said in a press release.

Every ARC shall frame a board-approved policy for settlement of dues payable by borrowers.

ARCs must get settlement proposals cleared by an independent advisory committee, which will consist of professionals having technical, finance or legal background and the requirement for dues must be above Rs 1 crore.

After assessing the financial position of the borrower, time frame available for recovery of the dues from the borrower, projected earnings and cash flows of the borrower, the committee shall give its recommendations to the ARC regarding settlement of dues with the borrower.

ARCs must undertake settlement of dues with wilful defaulter or fraud accounts, without prejudice to criminal proceedings underway against such borrowers.

Further, the net present value of the settlement amount should generally be not less than the realisable value of securities.

Additionally, the settlement amount should preferably be paid in lump sum.

Any official who was part of the acquisition as an individual or part of a committee of the concerned financial asset shall not be part of processing or approving the proposal for settlement of the same financial asset, in any capacity.

The central bank has also asked ARCs for a quarterly report on the resolution of these accounts, which shall be placed before the board or the committee.