RBI eases rules for change in shareholding in ARCs

Reserve Bank of India has eased rules for change in the shareholding in asset reconstruction companies (ARCs) to smoothen working for ARCs.

Now they will need to seek prior approval of regulator only when ARC sponsor transfers aggregate 10% or more stake in the ARC within five years of registration of company.

A prior nod from RBI would also be necessary when those who acquire become sponsor or when existing sponsor ceases to be in that role on transfer of shareholding.

"The relaxation will save us from hassles of approaching regulator for even small change in shareholding. But by itself, this is not going to increase attractiveness of companies dealing with distressed assets," said a chief executive of ARC.

Under existing rules, ARCs have to obtain prior approval of RBI for any substantial change in its management. The substantial change of management would mean change in management due to transfer of shares or business of company as well as amalgamation.

RBI rules prescribed at the time of granting registration to ARC states that prior approval of regulator will have to be taken by the SC/RCs for any change in their shareholding pattern.