Mumbai, July 16 The Reserve Bank of India (RBI) on Thursday came up with a Fair Practices Code for asset reconstruction companies (ARC) wherein the central bank has asked the ARCs to deal with prospective buyers in spirit with the Section 29A of the Insolvency and Bankruptcy Code, 2016.
According to the Section 29A of IBC, an insolvent, a willful defaulter or a person who was a promoter or was in the management of the corporate debtor, among other conditions would not be allowed to bid for the concerned insolvent company.
In order to enhance transparency in the process of sale of secured assets the central bank's code said that invitation for participation in auction shall be publicly solicited, the process should enable participation of as many prospective buyers as possible.
The terms and conditions of such sale may be decided in wider consultation with investors in the security receipts as per SARFAESI Act 2002.
The Reserve Bank guidelines said that ARCs shall follow transparent and non-discriminatory practices in acquisition of assets.
"It shall maintain arm's length distance in the pursuit of transparency," it said.
It said that ARCs shall 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.
"If such right of set off is to be exercised, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which ARCs are entitled to retain the securities till the relevant claim is settled/ paid," it said.
RBI said that in the matter of recovery of loans, ARCs shall not resort to harassment of the debtor and would ensure that the staff are adequately trained to deal with customers in an appropriate manner.
Compliance with FPC shall be subject to periodic review by the board, it said.
( With inputs from IANS )