RBI Master Direction – Fit and Proper Criteria for Sponsors – Asset Reconstruction Companies (Reserve Bank) Directions, 2018
Master Direction DNBR. PD (ARC) CC. No. 06/26.03.001/2018-19
Dated: October 25, 2018
The Chairman / Managing Director / Chief Executive Officer
All registered Asset Reconstruction Companies
Dear Sir/ Madam,
Master Direction – Fit and Proper Criteria for Sponsors – Asset Reconstruction Companies (Reserve Bank) Directions, 2018
In exercise of the powers conferred by clause (f) of sub-Section 3 of Section (3) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the Act) and of all the powers enabling it in this behalf, Reserve Bank of India (the Bank) hereby issues the Directions on Fit and Proper Criteria for Sponsors of Asset Reconstruction Companies (ARCs) registered under the Act.
1. Short title and commencement
(i) These Directions shall be called Fit and Proper Criteria for Sponsors – Asset Reconstruction Companies (Reserve Bank) Directions, 2018.
(ii) These Directions shall come into force with immediate effect.
The provisions of these Directions shall apply to the existing and proposed sponsors of the ARCs.
In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below :
(i) “Act” means Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and amendments thereto.
(ii) “Applicant” means the person making an application under Section 3 of the Act.
(iii) “Sponsor” has the meaning as given in Section 2(1)(zh) of the Act and means any person holding not less than ten per cent of the paid-up equity capital of an asset reconstruction company.
4. Eligibility criteria for sponsors of ARCs
The sponsors should be fit and proper in order to be eligible to promote ARCs.
5. Determinants of fit and proper status of sponsors of ARCs
In determining whether the sponsor is fit and proper, the Bank 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.
6. Information to be furnished by the sponsors along with relevant supporting documents
(i) Information by a natural person
Self-declaration as per Form I (Part A, B and C) as specified in the schedule to these Directions.
(ii) Information by the legal person
Self-declaration as per Form I (Part A, B, C and D) as specified in the schedule to these Directions.
(iii) The ARC should furnish additional information as per Form I (Part E).
7. Continuous monitoring arrangements for due diligence in case of existing sponsors
(i) For the purpose of ensuring that all its sponsors are fit and proper, every ARC shall
(a) obtain within one month of the close of financial year a declaration from all its sponsors in Form I as specified in the schedule to these Directions;
(b) furnish a certificate in Form III, by the end of May every year, to the Reserve Bank on the changes in the status of the sponsor.
(ii) Every ARC shall examine any information on the sponsors which may come to its notice that may render such persons not fit and proper to hold such shares and shall immediately furnish a report on the same to the Bank.
8. Compliance with prior approval requirement
(i) The ARCs shall make an application along with Form II as specified in the schedule to these Directions, for the Bank’s prior approval for change in shareholding of the ARCs as indicated in circular DNBR(PD)CC.No.01/SCRC/26.03.001/2014-15 dated February 24, 2015 on ‘Bank’s prior approval for change in Shareholding’ as amended from time to time.
(ii) The Bank shall, inter alia, seek feedback on the persons from other domestic as well as foreign regulators and enforcement and investigative agencies as deemed appropriate to make an assessment whether a sponsor is fit and proper.
Chief General Manager