Master Direction on Fit and Proper Criteria for Sponsors - Asset Reconstruction Companies (Reserve Bank) Directions, 2018

Oct 25, 2018 | by Avantis RegTech Legal Research Team


The Reserve Bank of India, on October 25, 2018, has published the Master Direction on Fit and Proper Criteria for Sponsors of Asset Reconstruction Companies (ARCs) registered under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

The provisions of these Directions shall apply to the existing and proposed sponsors of the ARCs. “Sponsor” means any person holding not less than ten per cent of the paid-up equity capital of a securitisation company or reconstruction company and any person holding not less than ten per cent of the paid-up equity capital of an asset reconstruction company.

The new Master Directions proved that, in determining whether the sponsor is fit and proper, the RBI shall take into account all relevant factors, as appropriate, including, but not limited to, the following:

(i)              The sponsor’s integrity, reputation, track record and compliance with applicable laws and regulations;

(ii)                The sponsor’s track record and reputation for operating business in a manner that is consistent with the standards of good corporate governance, integrity, in addition to the similar assessment of individuals and other entities associated with the sponsor;

(iii)               The business record and experience of the sponsor;

(iv)            Sources and stability of funds for acquisition and the ability to access financial markets;

(v)                Shareholding agreements and their impact on control and management of the ARC.

These Directions shall come into force with immediate effect.

[RBI/DNBR/2018-19/66 Master Direction DNBR. PD (ARC) CC. No. 06/26.03.001/2018-19]

URL: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/66MD251018F4877BBAD69542BC8E7CE352C780B709.PDF


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