The RBI, on Friday, said Asset Reconstruction Companies (ARCs) cannot acquire financial assets on a bilateral basis from a bank/ financial institution that is their sponsor. It also barred ARCs from acquiring financial assets on a bilateral basis from a bank/ financial institution, which is either a lender to them or a subscriber to the fund, if any, raised by them for their operations.

Further, the central bank disallowed ARCs from acquiring financial assets on a bilateral basis from an entity in the group (such as a non-banking finance company) to which the ARC belongs.

However, ARCs may participate in auctions of the financial assets provided such auctions are conducted in a transparent manner, on arm’s length basis, and the prices are determined by market forces. Currently, there are 28 ARCs registered with the RBI.

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