RBI allows asset recast companies to acquire bankrupt firms
RBI allows asset recast companies to acquire bankrupt firms

The Reserve Bank of India (RBI) has allowed asset reconstruction entities to act as resolution applicants under the Insolvency and Bankruptcy Code, 2016, subject to certain conditions.

Presently, asset reconstruction firms are not allowe to start or carry any business other than that of securitisation or asset reconstruction or business referred to in the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, termed the SARFAESI Act, without the RBI's prior consent.

In April 2021,  RBI had set up a committee to undertake a comprehensive review of the working of asset reconstruction companies. According to the final regulatory framework issued by the central bank today, asset reconstruction companies seeking to act as resolution applicant under IBC must have minimum net owned funds of 10 bln rupees. They should also have a board-approved policy regarding taking up the role of resolution applicant.

 Asset reconstruction companies have to explore setting up a panel of sector-specific management firms or individuals with expertise in running firms, which may be considered for managing the firms, it said. As per the norms, asset reconstruction companies have to make additional disclosures in financial statements with regard to assets acquired under IBC, in addition to existing disclosure requirements

The Reserve Bank has modified and consolidated guidelines for banks on unhedged foreign currency exposures of any entity to prevent losses due to heightened volatility in the forex market. T

he RBI has, from time to time, issued several guidelines, instructions and directives to the banks on Unhedged Foreign Currency Exposure of the entities, which have borrowed from banks. In the wake of a bank seeking clarification on various aspects related to UFCE, the RBI said a comprehensive review of the extant guidelines has been undertaken and all the existing instructions on the subject have been consolidated.

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