Asset reconstruction companies (ARCs) will no longer be allowed to bilaterally buy assets from banks or financial institutions (FIs) that they count among their sponsors, the Reserve Bank of India (RBI) said on Friday. ARCs will also be barred from directly buying assets from institutions that have lent to them, subscribed to the fund or are part of the same group as the ARC.
“However, they may participate in auctions of the financial assets provided such auctions are conducted in a transparent manner, on arm’s length basis and the prices are determined by market forces,” RBI said in a notification.
The firm most likely to be affected by the central bank directive is Asset Reconstruction Company (India), or Arcil, which is sponsored by State Bank of India, ICICI Bank, Punjab National Bank and IDBI Bank. Other ARCs sponsored by prominent FIs are Edelweiss ARC, JM Financial ARC and Phoenix ARC, which is promoted by the Kotak group.