SC/RCs can use part of investors' money to restructure assets

The Reserve Bank today allowed securitisation and reconstruction companies (SC/RCs) to use part of funds raised from investors to restructure their financial assets, however, with certain riders.
The RBI decision came in the wake of recommendations of a Key Advisory Group by government to revitalise distressed assets of SC/RCs.
"...It has been decided to allow SC/ RCs to utilise a part of funds raised under a scheme from the Qualified Institutional Buyers (QIBs) for restructuring of financial assets acquired under the relative scheme," RBI said in a notification.
As per the relaxation on using the funds, SC and RCs with acquired assets in excess of Rs 500 crore can utilise a part of funds raised from QIBs for restructuring of financial assets.

Further, the extent of funds that can be utilised for reconstruction purpose should not be more than 25 per cent of the funds raised.
"The funds raised to be utilised for reconstruction (within the ceiling of 25 per cent) should be disclosed upfront in the scheme. Further, the funds utilised for reconstruction purposes should be separately accounted for."

In addition, RBI has directed the SCs and RCs to frame a policy laying down the broad parameters for utilisation of funds raised from QIBs.
RBI, in a separate notification, also allowed promoters of a defaulting company, borrowers or guarantors to buy back their assets from the SC/RCs with certain conditions.

It also allowed SC/RCs to participate in auctions of non- performing assets of their sponsor banks given that such an auctions are conducted in a transparent manner, on arms length basis, at prices determined by market foces.