Bank regulator set to meet ARCs, may discuss borrowing, settlement process

The central bank will meet the companies on Friday

- MANOJIT SAHA

The Reserve Bank of India (RBI) will meet top executives of asset reconstruction companies (ARCS) on Friday to take stock of the sector. During the meeting, ARCS will also seek clarity from the regulator on bank borrowing.

While there is no regulatory ban in place, ARC sources said banks often refuse funding.

"If the regulator clarifies that commercial banks are allowed to lend to the ARCS, it will help," a top ARC official said. Apart from bank funding, ARCS raise funds from the market by way of non-convertible debentures.

The other issue faced by the ARCS is the settlement process. According to the current norms, every settlement proposal for an ARC has to go through an independent advisory committee consisting of three officials from finance, technical, and legal backgrounds, even for a nominal amount. In addition, all settlement proposals need to be approved at the board level.