On June 28, 2019, the Reserve Bank of India (“RBI”) issued a circular on ‘Permission to acquire financial asset from other Asset Reconstruction Companies (ARCs)’ (“Circular”).
Vide the Circular, the RBI has set out the following conditions for an asset reconstruction company (“ARC”) to acquire financial asset(s) from another ARC:
1. The transaction is settled on cash basis.
2. Price discovery for such transaction is not prejudicial to the interest of security receipt holders.
3. The selling ARC will utilize the proceeds so received for the redemption of underlying security receipts.
4. The date of redemption of underlying security receipts and total period of realisation shall not extend beyond 8 (eight) years from the date of acquisition of the financial asset by the first ARC.
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