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RBI tells ARCs to follow uniform standards while buying bad loans from banks

RBI tells ARCs to follow uniform standards while buying bad loans from banks

The Reserve Bank of India has told asset reconstruction companies (ARCs) to follow uniform standards while buying bad loans from banks and to avoid coercive practices during recovery of loans from borrowers.

The banking regulator directed these entities to put fair practices code (FPC) in place to ensure transparency.

This is "in order to achieve the highest standards of transparency and fairness in dealing with stakeholders", RBI said Thursday in a note to ARCs. The fair practice should be approved by their respective boards.

The regulator suggested that they should publicly invite participation in auction of bad loans to ensure maximum buyers while the terms of such sale should be decided after consulting with investors in the security receipts as per SARFAESI Act 2002.

ARCs are told to release all securities on repayment of dues or on realisation of the outstanding amount of loan, subject to any legitimate right or lien for any other claim they may have against the borrower.

"ARCs shall not resort to harassment of the debtor. ARCs shall ensure that the staff are adequately trained to deal with customers in an appropriate manner," RBI said.

RBI is also of the view that these firms should form grievance redressal machinery within the organisation.

"ARCs shall keep the information about assets they acquire strictly confidential and shall not disclose the same to anyone including other companies," RBI said.

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