MUMBAI: RBI has allowed asset reconstruction companies to settle dues with defaulters after examining other recovery options and based on the realisable value of the borrower’s assets. Settlement of accounts pertaining to a borrower having aggregate value of Rs 1 crore or below in terms of principal outstanding, can be done on the basis of a board approved policy. For larger loans, the ARC needs to have a board-level panel taking the decision.
The new rules make it easier for ARCs to recover bad debts as earlier they had to exhaust other options and get board approval even for smaller loans. “Asset reconstruction companies have been asking for this since the new norms were introduced in Oct 2022,” said Hari Hara Mishra, CEO, Association of Asset Reconstruction Companies.
He said that in the case of smaller personal loans, ARCs can make the process non-discretionary by prescribing the parameters which will vastly improve recoveries and hasten settlement in personal loans defaults. In the case of larger loans, ARCs will not longer have to go to their full board and will have to instead refer to a board-level panel which will speed the process.
Special rules apply to fraudsters and wilful defaulters, ensuring criminal proceedings remain unaffected. All settlements must comply with legal requirements, including court approvals when needed.
