Asset Reconstruction Company Registration
                     
Asset Reconstruction 
Company Registration
BY- HARSHIT SHARMA

WHY ASSET RECONSTRUCTION 
COMPANIES?
WORKING OF ASSET 
RECONSTRUCTION COMPANIES IN 
INDIA

HISTORCIAL JOURNEY OF 
SARFAESI & ARC’s IN INDIA
In 1997 by Government of India, the problem of 
recovery from NPAs was recognized.  In the 
Narasimhan Committee Report it is mentioned 
about the important aspect of the continuing 
reform process was to reduce the high level of NPAs 
as a means of banking sector reform.  It was 
expected that new NPAs in the future could afford 
to be lower with the combination of policy and 
institutional development. 
ARC’s FOUNDATIONAL PRINCIPLES: 
SHOWCASING THE FLOW OF WORK
Facilitating 
Freeing the Financial 
Isolating Non Performing development 
System to work on Core 
Loans (NPLs) of market for 
Activities distressed 
assets
Functions of Asset 
Reconstruction Company (ARC)
• Enforcement 
• of Security Interest • Change or takeover Acquisition of (as per section 13(4) 
of Management / 
financial assets (as • Rescheduling of of SRFAESI Act, 
Sale or Lease of 
defined u/s 2(L) of Debts; 2002)
Business of the 
SARFAESI Act, 2002); Settlement of dues 
Borrower;
payable by the 
borrower.
Registration Process of Asset 
Reconstruction Companies
Step-1: Obtaining Certificate of 
Registration
Steps of Registration Cont.….
• STEP-2: 
Having net owned fund of not less than two crore 
rupees or such other amount not exceeding fifteen per 
cent of total financial assets acquired or to be acquired 
by the securitization company or reconstruction 
company, as the Reserve Bank may, by notification, 
specify. 
Steps of Registration Cont.….
• STEP-3
Every securitization company or reconstruction company shall make an application 
for registration to the Reserve Bank in such form and manner as it may specify.
• STEP-4
Reserve Bank of India may for the purpose of considering the application for 
registration of asset Reconstruction Company requires to be satisfied by inspection 
of records or books of such company. 
OTHER CONDITIONS TO BE FULFILLED FOR ASSET 
RECONSTRUCTION COMPANY TO GET DULY 
REGISTERED
• Reconstruction 
company has not 
incurred losses in any of 
the three preceding 
financial years.
•Such reconstruction company has made adequate arrangements for realisation of 
the financial assets acquired for the purpose of asset reconstruction and shall be 
able to pay periodical returns and redeem on the investments on respective due 
dates made in company by the qualified institutional buyers or other persons.
• Directors of the reconstruction 
company have adequate professional 
experience in matters related to finance, 
securitization and reconstruction.
OTHER CONDITIONS TO BE FULFILLED FOR ASSET 
RECONSTRUCTION COMPANY TO GET DULY 
REGISTERED
• Board of directors of such reconstruction company do not consist more 
than half of its total number of directors who are either nominees of any 
sponsor or associated in any manner with the sponsor or any of its 
subsidiaries.
• Any of the directors has not 
been convicted of any offence 
involving moral turpitude.
• Sponsor is not a holding company of the Securitization Company or 
Reconstruction Company or does not otherwise hold any controlling 
interest in such Securitization Company or reconstruction company
• Such securitization company or reconstruction company 
has complied with or is in a position to comply with 
prudential norms specified by the Reserve Bank of India.

THE FINAL STEP!
The  Reserve  Bank  of  IIndiia  may  after  beiing  satitisfified  the  condiititions  speciifified  iin  sub-sectition  (3)  are  fullfifilllled,,  grant  a  certitifificate  of  
regiistratition  to  the  securiititizatition  company  or  the  reconstructition  company  to  commence  or  carry  on  busiiness  of  securiititizatition  or  
asset  reconstructition,,  subjject  to  such  condiititions,,  whiich  iit  may  consiider,,  fifit  to  iimpose..
The  Reserve  Bank  may  rejject  the  applliicatition  made  under  sub-sectition  (2)  iif  iit  iis  satitisfified  that  the  condiititions  speciifified  iin  sub-
sectition  (3)  are  not  fullfifilllled::
Proviided that before  rejjectiting  the  applliicatition,,  the  applliicant  shallll  be  giiven  a  reasonablle  opportuniity  of  beiing  heard..
Every  securiititizatition  company  or  reconstructition  company  shallll  obtaiin  priior  approvall  of  the  Reserve  Bank  of  IIndiia,,  whereby  the  
deciisiion  of  the  Apex  bank  wiillll  be  Fiinall..