PricewaterhouseCoopers (PwC) has recommended to the finance ministry that capital adequacy requirements to financial assets acquired by asset reconstruction companies (ARCs) should be done away with and foreign ownership in these entities should be permitted up to 100 per cent. | |
| These suggestions form part of a series of recommendations made by PwC as a consultant to the Government of India to carry out an assignment for "Developing the enabling environment for and structuring ARCs in India". |
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| In regard to structural/ ownership framework, PwC said a single party should be allowed to control an ARC subject to safeguards to prevent warehousing of non performing assets. A single NPA investor, including foreign entities, may be allowed to hold entire 100 per cent of security receipts issued under any scheme. |
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| Further, ARC registration requirements need to be framed in such a way as to ensure that only ARCs sponsored by reputed parties with adequate financial substance/ resources are granted registration possibly with minimum net owned fund criteria of Rs 5 crore. |
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| In regard to acquisition and valuation, banks and financial institutions should be allowed to amortise losses over five years for capital adequacy computations. |
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