text: Assets Reconstruction Company
  It is a company registered under the company act 2013 for the purpose of securitization & it also requires a registration from RBI .and is regulated by the section 3 of the SARFAESI Act, 2002.Asset reconstruction company is a specialized financial institution that buys the bad loan, NPAs from banks & financial institution in order to clean up their balance sheet. It takes over the loan and advances from the bank and financial institution for recovery, so it acts as a recovery agent for the banks also.
  On acquisition of financial assets the securitization or reconstruction company become the owner of the financial asset and step into the shoes of the lender bank or FIs.
  Asset Reconstruction Company, existing on the commencement of this Act, shall make an application for registration to the Reserve Bank before the expiry of six months from such commencement and notwithstanding anything contained in this subsection may continue to carry on the business of securitization or asset reconstruction until a certificate of registration is granted to it or, as the case may be, rejection of application for registration is communicated to it.
  Procedure for Registration of Assets Reconstruction Company
  1. No asset reconstruction company shall commence or carry on the business of securitization or asset reconstruction without
  • Obtaining a certificate of registration granted under this section; and
  • Having net owned fund of not less than 2 Crore rupees or such other higher amount as the Reserve Bank, May, by notified.
  1. Every asset reconstruction company shall make an application for registration to the Reserve Bank in such form and manner as it may specify.
  2. The Reserve Bank may, for the purpose of considering the application for registration of a asset reconstruction company to commence or carry on the business of securitization or asset reconstruction, as the case may be, require to be satisfied, by an inspection of records or books of such asset reconstruction company, or otherwise, that the following conditions are fulfilled, namely:
  • That the asset reconstruction company has not incurred losses in any of the three preceding financial years;
  • That such asset reconstruction company has made adequate arrangements for the realization of the financial assets acquired for the purpose of securitization or asset reconstruction and shall be able to pay periodical returns and redeem on respective due dates on the investments made in the company by the qualified buyers or other persons;
  • That the directors of asset Reconstruction Company have adequate professional experience in matters related to finance, securitization and reconstruction;
  • That any of its directors has not been convicted of any offence involving moral turpitude;
  • That a sponsor of an asset reconstruction company is a fit and proper person in accordance with the criteria as may be specified in the guidelines issued by the Reserve Bank for such persons;
  • That asset reconstruction company has complied with or is in a position to comply with prudential norms specified by the Reserve Bank;
  • That asset reconstruction company has complied with one or more conditions specified in the guidelines issued by the Reserve Bank for the said purpose.
  1. The Reserve Bank may, after being satisfied that the conditions specified in sub-section (3) are fulfilled, grant a certificate of registration to the asset reconstruction company to commence or carry on the business of securitisation or asset reconstruction, subject to such conditions, which it may consider, fit to impose.
  2. The Reserve Bank may reject the application made under sub-section (2) if it is satisfied that the conditions specified in sub-section (3) are not fulfilled.
  3. Every asset reconstruction company shall obtain prior approval of the Reserve Bank for any substantial change in its management [including the appointment of any director on the board of directors of the asset reconstruction company or managing director or chief executive officer thereof] or change of location of its registered office or change in its name.
  Cancellation of Certificate of Registration for an Asset Reconstruction Company
  1. The Reserve Bank may cancel a certificate of registration granted to an asset reconstruction company if such company
  • (a) Ceases to carry on the business of securitization or asset reconstruction; or
  • (b) Ceases to receive or hold any investment from a qualified buyer; or
  • (c) Has failed to comply with any conditions subject to which the certificate of registration has been granted to it; or
  • (d) At any time fails to fulfill any of the conditions referred to in clauses (a) to (g) of sub-section (3) of section 3; or
  • (e) Fails to—I. comply with any direction issued by the Reserve Bank under the provisions of this Act; or
  1. II. Maintain accounts in accordance with the requirements of any law or any direction or order issued by the Reserve Bank under the provisions of this Act; or
  2. III. Submit or offer for inspection its books of account or other relevant documents when so demanded by the Reserve Bank; or
  3. IV. Obtain prior approval of the Reserve Bank required under sub-section (6) of section 3: Provided that before cancelling a certificate of registration on the ground that the asset reconstruction company has failed to comply with the provisions of clause (c) or has failed to fulfil any of the conditions referred to in clause (d) or sub-clause (iv) of clause (e), the Reserve Bank, unless it is of the opinion that the delay in canceling the certificate of registration granted under sub-section (4) of section 3 shall be prejudicial to the public interest or the interests of the investors or the asset reconstruction company, shall give an opportunity to such company on such terms as the Reserve Bank may specify for taking necessary steps to comply with such provisions or fulfillment of such conditions.
  4. An asset reconstruction company aggrieved by the order of cancellation of the certificate of registration may prefer an appeal, within a period of thirty days from the date on which [such order of cancellation] is communicated to it, to the Central Government. Provided that before the rejection of such an appeal the company shall be given a reasonable opportunity of being heard.
  5. An asset reconstruction company, which is holding investments of [qualified buyers] and whose application for grant of certificate of registration has been rejected or certificate of registration has been canceled shall, notwithstanding such rejection or cancellation be deemed to be a asset reconstruction company until it repays the entire investments held by it (together with interest, if any) within such period as the Reserve Bank may direct.
  Documents required for registration
  • Certified copy of up to date MOA & AOA of the company.
  • Certified copy of the certificate of incorporation.
  • Board resolution to the effect the company has not accepted any deposit.
  • None of the directors are disqualified
  • All information about the sponsor.
  • All information about management.
  • A certified copy of auditor certificate.
  • Audited balance sheet of last three years along with director and auditor report.
  • Statement of the owned fund.
  • Information about the related party.