RBI considering approval for changes in trusteeship of ARCs – Banking & Finance News

The Reserve Bank of India (RBI) is considering a significant change that could streamline the resolution process for stressed assets held by Asset Reconstruction Companies (ARCs). The central bank may allow Security Receipts (SR) holders to change the trusteeship of ARCs, enabling them to retain distressed assets without acting as trustees.

Currently, when an ARC acquires distressed debt, it automatically becomes the trustee of the underlying asset. This new proposal would allow for a single trustee to oversee pooled distressed debt, eliminating the need for multiple trustees and potentially expediting decision-making and resolution processes.

The idea behind this change is to have a more efficient and streamlined approach to resolving stressed assets. Multiple trustees for debt acquired by different ARCs can slow down the process and lead to delays in resolution. By allowing for a single trustee, the entire resolution process could be accelerated.

The move has been welcomed by stakeholders in the banking and financial sectors, with feedback already submitted to the RBI. The Sudarshan Sen Committee had also recommended this change in trusteeship of ARCs in 2021. With the growth of ARCs in recent years, this change could further enhance the efficiency of the resolution process for distressed assets.

Overall, the proposed change in trusteeship of ARCs could have a positive impact on the resolution of stressed assets in the country, potentially benefiting both lenders and investors in the process.