Asset Reconstruction Company (ARC) — Registration, Operations & SARFAESI Compliance in India

Q: What is the minimum capital requirement for ARC registration?

₹300 crore minimum NOF, with ARCs required to invest at least 15% of Security Receipts issued for each trust as a continuing interest.

Q: How do ARCs acquire NPAs from banks?

Through assignment of debt and security interests, with consideration partly in cash and partly via Security Receipts. RBI guidelines require arms-length pricing.

Q: What is the time limit for redemption of Security Receipts?

8 years from acquisition date, extendable by 2 years at RBI discretion. ARCs must disclose SR NAV regularly.

Q: Can ARCs take over management of a borrower company?

Yes, under SARFAESI. Management takeover is one of several resolution measures, used typically for strategic borrower accounts where operational recovery adds value.

Q: Can ARCs bid for NPAs under the IBC insolvency process?

Yes. ARCs can participate as resolution applicants in CIRP proceedings under IBC 2016, complementing SARFAESI enforcement for large and complex NPA accounts.

Specialist advisory for Asset Reconstruction Company (ARC) registration with the RBI, acquisition of Non-Performing Assets (NPAs) from banks and NBFCs, Security Receipts (SR) issuance, and SARFAESI Act compliance.

ARC Registration

End-to-end advisory for obtaining RBI registration as an Asset Reconstruction Company — covering minimum NOF of ₹300 crore requirement, fit-and-proper assessment, application preparation, and regulatory liaison.

NPA Acquisition Structuring

Advisory on structuring NPA acquisitions from banks and financial institutions — asset valuation, pricing negotiations, assignment agreements, and compliance with RBI guidelines on ARC-bank transactions.

Security Receipts (SR) Management

Advisory on issuance, rating, and redemption of Security Receipts — the trust certificates issued by ARCs to banks for acquired NPAs — including NAV computation, SR valuation, and SEBI listing compliance.

SARFAESI Enforcement

Guidance on exercising enforcement rights under the SARFAESI Act 2002 — possession of secured assets, sale of securities, and management change — to maximise recovery on acquired NPA accounts.

Resolution Strategy Advisory

Developing and executing resolution strategies for acquired NPA accounts — restructuring, one-time settlements, sale of assets, insolvency proceedings under IBC, and enforcement of personal guarantees.

ARC Annual Compliance

Management of all RBI periodic returns, SR redemption reporting, capital adequacy compliance, and annual audited financial statement submissions specific to ARC entities. Connects with our NBFC annual compliance services.

Role of ARCs in India's Financial System

Asset Reconstruction Companies play a critical role in cleaning up banks' balance sheets by acquiring Non-Performing Assets, allowing banks to deploy capital more efficiently. ARCs are regulated by the RBI under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and the RBI (Asset Reconstruction Companies) Directions, 2024. ARCs acquire NPA accounts, issue Security Receipts to selling banks, and recover value through various resolution mechanisms.

Frequently Asked Questions

What is the minimum capital requirement for ARC registration? +

The minimum Net Owned Fund for ARC registration is ₹300 crore — significantly higher than standard NBFCs — reflecting the capital-intensive nature of ARC operations and the need for adequate skin-in-the-game when acquiring NPA portfolios. ARCs are also required to invest a minimum of 15% of the Security Receipts issued for each trust as a continuing interest.

How do ARCs acquire NPAs from banks? +

ARCs acquire NPAs through an assignment of the debt and security interests from the bank. The ARC pays consideration partly in cash and partly through Security Receipts issued by a trust. The assignment transfers all rights, title, and interest in the NPA loan and its collateral to the ARC, which then manages recovery independently. RBI guidelines require arms-length pricing and limit related-party transactions between banks and their promoted ARCs.

What is the time limit for redemption of Security Receipts? +

Security Receipts must be redeemed within 8 years from the date of acquisition of the financial asset by the ARC. The RBI may, at its discretion, extend the period for a further 2 years in exceptional circumstances. ARCs must disclose the NAV of SRs at regular intervals, and the RBI monitors SR redemption performance as a measure of ARC effectiveness.

Can ARCs take over management of a borrower company? +

Yes. Under the SARFAESI Act, ARCs have the power to take over management of a borrower's business as part of asset reconstruction measures. This is one of several resolution measures available, alongside restructuring, rescheduling of debt, enforcement of security interests, settlement of dues, and sale or lease of business assets. Management takeover is typically used for strategic borrower accounts where operational recovery adds value.

Can ARCs bid for NPAs under the IBC insolvency process? +

Yes. ARCs can participate as resolution applicants in CIRP (Corporate Insolvency Resolution Process) proceedings under the Insolvency and Bankruptcy Code, 2016. ARCs submit resolution plans for insolvent companies, acquiring the business as a going concern or in liquidation. The IBC route provides an additional recovery mechanism complementing SARFAESI enforcement, particularly for large and complex NPA accounts.

Set Up or Operate an ARC with Specialist Advisory Support

ARC registration, NPA acquisition structuring, SR management, and SARFAESI enforcement advisory.

F.A.Q.

What is GSTR-9 and why is it required?

GSTR-9 is an annual GST return that summarizes all transactions reported during the financial year. It is required to ensure proper reconciliation and compliance with GST laws.

Who is required to file GSTR-9?

All regular GST-registered taxpayers are required to file GSTR-9, except composition dealers, casual taxable persons, and non-resident taxpayers.

What is the due date for filing GSTR-9?

The due date is generally 31st December following the end of the relevant financial year, unless extended by the government.

What details are included in GSTR-9?

It includes details of outward supplies, inward supplies, input tax credit claimed, taxes paid, and adjustments made during the year.

Is GSTR-9 mandatory for all taxpayers?

GSTR-9 is mandatory for most regular taxpayers, but certain small taxpayers may get exemptions based on turnover thresholds notified by the government.

What happens if GSTR-9 is not filed on time?

Late filing may result in penalties and late fees, along with potential compliance issues or notices from GST authorities.