1. MODULE II
ARC – ASSET
RECONSTRUCTION
COMPANY
BY
Dr. Sudeshna Dutta
BIITM
2. What is Asset Reconstruction
• An asset reconstruction means acquisition by an ARC of any right or
interests of any Bank or Financial Institution in any financial assistance for
the purpose of realization of such financial assistance.
3. What is an ARC
• An Asset Reconstruction Company (ARC) is a company incorporated under
the Companies Act and registered with Reserve Bank of India under section
3 of The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002.
• Eg- Edelweiss Asset Reconstruction Company Limited, J M Financial Asset
Reconstruction Company Limited, Phoenix ARC Private Limited
4. Objective to establishARC in India
• Rapid growth of bad debts/ non-performing assets was the chronic hurdle
for healthy growth of Indian economy. Asset Reconstruction Companies
were established as specialised entities to facilitate securitisation and asset
reconstruction of non-performing asset thereby earliest resolution and
bringing the liquidity in the system.
5. How do ARC function in India ?
• In India, ARCs function under the supervision and control of Reserve Bank
of India. ARCs are in the business of securitisation and reconstruction of
financial assets. They are strictly as per SARFAESI Act and guidelines
issued by Reserve Bank of India. ARCs acquire the bad debts/NPA accounts
from Banks and Financial Institutions and try to resolve expeditiously by
availing remedies under existing laws of India.
6. Who is a sponsor for an ARC ?
• Sponsor is any person holding not less than 10 percent of the paid up equity
capital of an ARC.
7. What is Securitisation ?
• Securitisation means acquisition of financial assets by an ARC from Banks/
FIs by raising of funds from Qualified Buyers (QBs) by issue of security
receipts (SRs) representing undivided interest in such financial assets or
otherwise.
8. What is security receipt?
• Security Receipt means a receipt or other security, issued by an ARC to any
Qualified Buyers (QBs) pursuant to a scheme, evidencing the purchase or
acquisition by the holder thereof, of an undivided right, title or interest in the
financial asset involved in securitisation.
9. Who is a qualified buyer?
• A Qualified Buyer (QB) means Financial Institution, Insurance Company,
Bank, State Financial Corporation, State Industrial Development
Corporation, Trustee or ARC or any asset management company making
investment on behalf of mutual fund, Foreign Institutional investor registered
under the Securities and Exchange Board Of India Act, 1992 (15 of 1992) or
regulations made thereunder, any category of non-institutional investors as
may be specified by Reserve Bank of India or any other body corporate as
may be specified by the Securities and Exchange Board of India.
