DNBR. PD (ARC) CC. No. 03/26.03.001/2016-17
The Chairman / Managing Director
/ Chief Executive Officer
All registered Asset Reconstruction Companies.
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002- Section 3 (1) (b) - Requirement of Net Owned Fund (NOF) for
Asset Reconstruction Companies.
A reference is invited to
paragraph 9 of the Bank’s Monetary Policy Statement on Developmental and
Regulatory Policies dated April 06, 2017 (extract enclosed as annex).
2. Section 5 of the Enforcement
of Security Interest and Recovery of Debts Laws & Misc. Provisions
(Amendment) Act, 2016 (No.44 of 2016), substitutes clause (b) in
sub-section (1) of Section 3 of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter
referred to as “the SARFAESI Act, 2002”).
3. Consequent to the above
amendment, no Asset Reconstruction Company (hereinafter referred to as “the
ARC”) shall commence or carry on the business of securitisation or asset
reconstruction without having Net Owned Fund (hereinafter referred to as
NOF) of not less than Rupees two crore or such other higher amount as the
Reserve Bank may, by notification, specify.
4. Accordingly, and keeping in
view the greater role envisaged for ARCs in resolving stressed assets as
also the recent regulatory changes governing sale of stressed assets by
banks to ARCs, it has been decided to fix the minimum NOF requirement for
ARCs at ? 100 crore on an ongoing basis with effect from the date of the
5. NOF shall be arrived at by
reducing from Owned Fund (OF), as defined in the Notification DNBR
(PD).CC.No.03/SCRC/26.03.001/2015-16 dated July 1, 2015, the amounts
i. investments of the ARC in
shares of –
in the same group;
other ARCs; and
ii. the book value of
debentures, bonds, outstanding loans and advances made to, and deposits
of the ARC; and
in the same group,
to the extent such amount
exceeds 10% of the OF.
6. All the ARCs which are
already registered with Reserve Bank of India as on the date of the
Notification and not having the revised minimum NOF as on date shall
achieve a minimum NOF of ? 100 crore latest by March 31, 2019. ARCs shall
submit a certificate from their Statutory Auditors periodically as evidence
of compliance thereof.
7. A copy of the Notification
DNBR (PD-ARC) No. 05/ED(SS)-2017 dated April 28, 2017 is enclosed.
(C. D. Srinivasan)
Chief General Manager
Encl : 1. Notification DNBR
(PD-ARC) No. 05/ED(SS)-2017 dated April 28, 2017;
Bank of India
Department of Non-Banking Regulation
Central Office, Centre No 1
World Trade Centre
Mumbai 400 005.
Notification DNBR (PD-ARC) No.
05/ED(SS)-2017 dated April 28, 2017
In exercise of the powers
conferred by clause (b) of sub-section (1) of section 3 of the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002, Reserve Bank of India hereby specifies that
the Net Owned Fund (NOF) for Asset Reconstruction Companies (ARCs) shall be
minimum Rupees One Hundred Crore on an ongoing basis with effect from the
date of this Notification.
2. All the ARCs which are
already registered with Reserve Bank of India, having less than Rupees One
Hundred Crore NOF shall achieve the prescribed minimum NOF level latest by
March 31, 2019 and the same should be duly certified by the Statutory
on Developmental and Regulatory Policies - April 06, 2017
Bank of India
Banking Regulation and Supervision
9. Asset Reconstruction
Companies(ARCs): Raising the Minimum Level of Net Owned Funds (NOF) - While
the earlier provision in the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 of a
minimum of ‘? 2 crore of owned funds’ was amended in 2016 as ‘? 2 crore of
net owned funds (NOF)’, the cap on owned fund of 15 per cent of financial
assets was removed. In view of the enhanced role of ARCs and greater cash
based transactions, it is proposed to stipulate a minimum NOF of ? 100
crore for ARCs. The necessary instructions will be issued by end-April,