RBI tweaks conditions for sale of asset by an ARC to another

The Reserve Bank of India Friday permitted Asset Reconstruction Companies (ARCs) to acquire financial assets from each other on meeting certain conditions, in light of changes made in the Sarfaesi Act.

The decision will help improve liquidity in the ARC market.

"In view of amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (Sarfaesi) Act, 2002, it has been decided to permit ARCs to acquire financial asset from other ARCs," RBI said in a notification.

However, the transfer of assets by one ARC to another would depend on certain conditions.

For example, the transaction has to be settled on cash basis between the ARCs.

The selling ARC will utilise the proceeds so received for the redemption of underlying security receipts, it said.

The date of redemption of underlying security receipts and total period of realisation shall not extend beyond eight years from the date of acquisition of the financial asset by the first ARC, it added.