Eligibility criteria for sponsors - ARCs

RBI has released guidelines on the fit and proper criteria for the sponsors of the asset reconstruction companies.

Determinants of fit and proper status of sponsors of ARCs

In determining whether the sponsor is fit and proper, the Bank shall take into account all relevant factors, as appropriate, including, but not limited to, the following:

(i) The sponsor’s integrity, reputation, track record and compliance with applicable laws and regulations;

(ii) The sponsor’s track record and reputation for operating business in a manner that is consistent with the standards of good corporate governance, integrity, in addition to the similar assessment of individuals and other entities associated with the sponsor;

(iii) The business record and experience of the sponsor;

(iv) Sources and stability of funds for acquisition and the ability to access financial markets;

(v) Shareholding agreements and their impact on control and management of the ARC.

Continuous monitoring arrangements for due diligence in case of existing sponsors

(i) For the purpose of ensuring that all its sponsors are fit and proper, every ARC shall

(a) obtain within one month of the close of financial year a declaration from all its sponsors in Form I as specified in the schedule to these Directions;

(b) furnish a certificate in Form III, by the end of May every year, to the Reserve Bank on the changes in the status of the sponsor.

(ii) Every ARC shall examine any information on the sponsors which may come to its notice that may render such persons not fit and proper to hold such shares and shall immediately furnish a report on the same to the Bank.

Bank notification can be found here