ARC industry will need to reinvent itself

The RBI unveiled new regulations in October 2022, which enhanced governance standards and permitted ARCs to act as resolution applicants under the IBC's ambit

R K Bansal
Last Updated at February 26, 2023 22:27 IST

Asset reconstruction companies (ARCs) have their genesis in the Sarfaesi Act, 2002, and corresponding Reserve Bank of India (RBI) guidelines in 2003, starting as an agency dedicated to resolving bad loans. The model was changed with the stipulation of a minimum investment of 5 per cent, which turned it into a low-capital-investment model. While ARCs geared up to raise capital to meet this stipulation, the minimum investment was tripled to 15 per cent in August 2014. This impacted the economics and raised question marks about their ability to raise funds.

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