Published on Fri, Apr 23, 2010 at 08:57 | Source : Reuters
Updated at Fri, Apr 23, 2010 at 11:52
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RBI allows securitisation firms more powers
The Reserve Bank of India (RBI) on Thursday allowed securitisation and reconstruction companies to take over or change the management of borrowers' business to realise their dues
The Reserve Bank of India (RBI) on Thursday allowed securitisation and reconstruction companies to take over or change the management of borrowers' business to realise their dues.
In 2002, the government had enacted the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act to provide more powers to lenders in realising dues from defaulters.
The law was put in place to help banks tackle the problem of non-performing assets in their books. Asset reconstruction companies buy non-performing loans from banks and are in the ambit of the law.
In a statement, the RBI said the rules for securitisation companies are to allow fairness, transparency, non-discrimination and non-arbitration in actions taken by securitisation and reconstruction companies.
The RBI said the move would help build a system of checks and balances in the course of taking over the management of the borrower's business. The central bank said securitisation and reconstruction companies should make rules for taking over or changing the management after receiving an approval from their board.
The new rules allow setting up of an independent advisory committee to evaluate the proposals of the securitisation companies and providing a compulsory notice of 60 days to the borrower, indicating a takeover or change in management.
