Sudarshan Sen committee
GS PAPER III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Context: RBI sets up a six-member committee headed by Sudarshan Sen to review working of ARCs. Panel to submit report in 3 months.
Task of the taskforce:
- It will undertake a comprehensive review of the working of asset reconstruction companies (ARCs) in the financial sector ecosystem and recommend suitable measures for enabling them to meet the growing requirements.
- The panel will also review the existing legal and regulatory framework applicable to ARCs and recommend measures to improve efficacy of ARCs.
- It will also review the role of ARCs in the resolution of stressed assets, including under the Insolvency and Bankruptcy Code (IBC), and give suggestions for improving liquidity in and trading of security receipts.
- Besides, it has also been asked to review the business models of ARCs.
Asset Reconstruction Company
- It is a special type of financial institution that buys the debtors of the bank at a mutually agreed value and attempts to recover the debts or associated securities by itself.
- These are registered under the RBI and regulated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act, 2002).
- The ARCs take over a portion of the debts of the bank that qualify to be recognised as Non-Performing Assets. Thus ARCs are engaged in the business of asset reconstruction or securitisation or both.
- All the rights that were held by the lender (the bank) in respect of the debt would be transferred to the ARC. The required funds to purchase such such debts can be raised from Qualified Buyers.
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