In a notification dated 28th June 2019, Reserve Bank of India has permitted Registered Asset Reconstruction Companies (ARCs) to acquire financial assets from other ARCs, subject to the following conditions:
- That the transaction is settled on cash basis;
- That the price discovery for such transaction is not prejudicial to the interest of Security Receipt holders;
- That the selling ARC utilizes the proceeds so received for the redemption of underlying Security Receipts;
- That the date of redemption of underlying Security Receipts and total period of realisation does not extend beyond eight years from the date of acquisition of the financial asset by the first ARC.
Background:
This is in view of the 2014 amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, a new clause was added which where Securitisation Companies / Reconstruction Companies (SC/ RCs) are permitted to acquire debt from other SC/ RCs on certain conditions
Source: Reserve Bank of India