Mumbai, May 31 (IANS) The RBI has told the top executives of Asset Reconstruction Companies (ARC) that they should not directly or through their recovery agents harass distressed borrowers while recovering overdue loans and play by the rule book.
The issue was taken up by RBI Deputy Governor J. Swaminathan at a meeting with the CEOs, managing directors and executive directors of ARCs in Mumbai recently.
“ARCs need to be conscious of their conduct vis-à-vis the distressed borrowers. Even a single incident of misconduct can potentially snowball into a controversy which the sector should guard against. While we acknowledge the rights of the ARCs to recover overdue loans, they or their recovery agents should not resort to harassment of borrowers,” Swaminathan told the top executives of ARCs.
He highlighted the fact that a comprehensive fair practice code (FPC) for ARCs has been put in place which requires ARCs to follow transparent and non-discriminatory practices in this regard.
“This becomes that much more critical at the present juncture when the share of retail loans in the financial assets acquired by the ARCs has increased (from 9 per cent, as of March 31, 2020, to 16 per cent as of March 31, 2023),” Swaminathan said.
Swaminathan emphasised that ARCs must improve their overall governance by bringing more independent directors on their boards in accordance with the regulations.
He pointed out that not all ARCs have implemented the revised guidelines on the composition and functioning of the Board.
“I would take this opportunity to urge all ARCs to implement these guidelines in the right spirit. Also, failure to meet regulatory guidelines and wilful violations would invite strict supervisory and enforcement action, if warranted,” Swaminathan was cited as saying in an RBI statement issued on Friday.
The Deputy Governor said that the RBI regulations were intended to promote the integrity and effectiveness of the sector.
The leaders of the ARC sector should endeavour to ensure that the sector remains focused on course charted through legislative and regulatory intent and should ensure that any negative perception about the functioning and governance standards of the ARCs is dispelled, he added.
Swaminathan observed that the thrust of RBI regulations going forward is on developing a market for distressed assets by considering the inclusion of additional stakeholders with strong fundamentals and possessing expertise in resolution.
This is expected to increase competition among buyers of distressed assets, giving a competitive advantage to the entities with superior resolution and recovery mechanisms capable of achieving optimal outcomes.
–IANS
sps/pgh
Disclaimer
The information contained in this website is for general information purposes only. The information is provided by TodayIndia.news and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this website.
Through this website you are able to link to other websites which are not under the control of TodayIndia.news We have no control over the nature, content and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.
Every effort is made to keep the website up and running smoothly. However, TodayIndia.news takes no responsibility for, and will not be liable for, the website being temporarily unavailable due to technical issues beyond our control.
For any legal details or query please visit original source link given with news or click on Go to Source.
Our translation service aims to offer the most accurate translation possible and we rarely experience any issues with news post. However, as the translation is carried out by third part tool there is a possibility for error to cause the occasional inaccuracy. We therefore require you to accept this disclaimer before confirming any translation news with us.
If you are not willing to accept this disclaimer then we recommend reading news post in its original language.