NBFCs may be permitted to float ARCs

 According to official sources, the Centre in consultation with the Reserve Bank of India is in the process of firming up its views to allow NBFCs for setting ARCs.

 At present only banks and financial institutions are allowed to undertake asset reconstruction.

 This follows from the recommendation of Parliamentary standing committee on finance on the Financial Companies Regulation Bill, 2000.

 As per the recommendation, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SRFAESI) Act enacted last year should also be extended to non banking finance companies in addition to banks and financial institutions.

 If the NBFCs are allowed to float ARCs, it will pave way for various foreign banks which are keen to participate in the asset reconstruction activity but do not want to include the activity under the banking umbrella.

 Sometime back, few foreign banks had represented to the RBI seeking the permission to undertake asset reconstruction through their parent bank overseas.

 The objective was to take up the business outside the purview of the banking business in India so as to avoid procedural and accounting hurdles that might arise from mixing the operations.

 Moreover, by operating the business through overseas branches, the parent bank