criteria

Note:

Calculation of Net Owned Fund: As per RBI Circular No. RBI/2016-17/295 DNBR. PD (ARC) CC. No. 03/26.03.001/2016-17 dated April 28, 2017, Net Owned Fund (NOF) shall be arrived at by reducing from Owned Fund, the following amounts, to the extent such amount exceeds 10% of Owned Fund:

(i) Investment of the ARC in shares of

Ø Its subsidiaries;

Ø Companies in the same group;

Ø All other ARCs and

(ii) The book value of debentures, bonds, outstanding loans and advances made to, and deposits with:

Ø Subsidiaries of the ARC; and

Ø Companies in the same group

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 Rs.100 crore latest by March 31, 2019. ARCs shall submit a certificate from their Statutory Auditors periodically as evidence of compliance thereof.

Owned Fund: As per RBI Notification No.DNBR (PD).CC.No.03/SCRC/26.03.001/

2015-16 dated July 1, 2015, "Owned Fund" means the aggregate of:

a. paid up equity capital

b. paid up preference capital to the extent it is compulsorily convertible into equity capital

c. free reserves (excluding revaluation reserve)

d. credit balance in Profit and Loss Account as reduced by the debit balance on the profit and loss account and Miscellaneous Expenditure (to the extent not written off or adjusted), book value of intangible assets and under / short provision against NPA / diminution in value of investments, and over recognition of income, if any; and further reduced by the book value of the shares acquired in a SC / RC and other deductions required on account of the items qualified by the auditors in their report on the financial statements;

b. ARCs shall maintain, on an ongoing basis, a capital adequacy ratio of not less than 15% of its total risk weighted assets.

Note:

Risk weighted assets specified by RBI:

On-Balance Sheet Items		Percentage Risk Weight
(a)	Cash and deposits with scheduled commercial banks/NABARD/SIDBI	0
(b)	Investments in Government securities	0
(c)	Shares in other SCs/RCs	0
(d)	All Other assets	100
Off-Balance Sheet Items
All Contingent Liabilities		50

c. Foreign Direct Investment in Equity of Asset Reconstruction Companies registered with the Reserve Bank of India under Section 3 of SARFAESI Act. Is allowed up to 100% on the Automatic route, as per Consolidated FDI Policy effective from 28.8.2017 issued by the Department of Industrial Policy & Promotion.

d. Persons resident outside India can invest in the capital of ARCs registered with Reserve Bank of India, up to 100% on the automatic route.

e. Investment limit of a sponsor in the shareholding of an ARC will be governed by the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, as amended from time to time. Similarly, investment by institutional / non-institutional investors will also be governed by the said Act, as amended from time to time.

f. The total shareholding of an individual FII/FPI shall be below 10% of the total paid-up capital.

g. FIIs/FPIs can invest in the Security Receipts (SRs) issued by ARCs. FIIs/FPIs may be allowed to invest up to 100 per cent of each tranche in SRs issued by ARCs, subject to directions/guidelines of Reserve Bank of India. Such investment should be within the relevant regulatory cap as applicable.

h. All investments would be subject to provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, as amended from time to time

As per Section 4(1) of SARFAESI Act, The Reserve Bank of India can cancel the certificate of registration of ARC on the following grounds:

a. If the company ceases to receive or hold any investment from a qualified buyer.

b. If the company has failed to comply with any condition subject to which the certificate of registration was granted.

c. If the company fails to fulfil any of the conditions referred to in Section 3.

e. If the company fails to maintain accounts in accordance with law or any direction or order issued by the RBI.

f. If the company fails to submit for inspection its books of account or other relevant documents when so demanded by the RBI.

As per Section 4(2), a company aggrieved by the order of RBI may prefer an appeal to the Central Government within 30 days from the date on which the order of cancellation was communicated to it.