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RBI allows strong ARCs to hold more than 26% in sick units

ARC should be in compliance with net owned fund requirement of Rs 100 crore on an ongoing basis

Press Trust of India  |  Mumbai 

RBI office

In a major boost to the (ARCs) the Reserve Bank today relaxed norms capping their shareholdings at 26% in the borrower firm under reconstruction, provided their net-owned funds are maintained at Rs 100 crore. Earlier ARCs could convert a portion of the debt into equity of the borrower company to the extent of 26% of the revamped equity capital. However, in a notification today said, "ARCs with (NOF) of Rs 100 crore on an ongoing basis are exempted from the shareholding cap at 26% of post- converted equity of the borrower company". But the regulator did not specify the new sharing limit post-debt conversion. All ARCs with at least half of the directors, including independent directors, are also exempted from the 26% shareholding cap in the borrower firm. The central bank also asked the boards of ARCs to frame a policy for converting debt into equity, under which it prefers a committee comprising mostly independent directors to take a call on such matters. The equity shares acquired under the scheme shall be periodically valued and marked-to-market and the frequency of valuation shall be at least once a month, the central bank notification said.

First Published: Thu, November 23 2017. 20:25 IST
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