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Note:
RBI guidelines regarding settlement of dues
payable by the borrower applicable to ARCs:
(i)
Every ARC shall frame a policy
duly approved by the Board of Directors laying down the broad parameters for settlement of
debts due from borrowers;
(ii)
The policy may, inter alia,
cover aspects such as cut-off date, formula for computation of realisable amount and settlement
of account, payment terms and conditions, and borrower's capability to pay the amount
settled
(iii)
Where the settlement does not
envisage payment of the entire amount agreed upon in one instalment, the proposals should be in
line with and supported by an acceptable business plan, projected earnings and cash flows of
the borrower
(iv)
The proposal should not
materially affect the asset liability management of the ARC or the commitments given to
investors.
(v)
The Board of Directors may
delegate powers to a committee comprising any director and / or any functionaries of the
company for taking decisions on proposals for settlement of dues;
(vi)
Deviation from the policy should
be made only with the approval of the Board of Directors
Buyback of assets by Promoters/guarantors of
defaulting company from ARC:
This is allowed only on meeting of the
following conditions:
(i)
Such a settlement is considered
helpful in
Ø minimizing or eliminating the cost of
litigation and the attendant loss of time
Ø arresting the negative impact of diminution
in the value of secured assets which are likely to rapidly lose value once a unit becomes
non-operational;
Ø where the recovery/ resolution process would
appear to be rather uncertain and;
Ø where such settlement will be beneficial for
restructuring purposes.
(ii)
The valuation of asset is worked
out by ARC after factoring in the following:
Ø The current value of the proposed settlement
(valuation of the asset not more than six months old) vis a vis the net present value of the
recoveries under the alternative mode of resolution taking into consideration the timelines
involved therein.
Ø likely positive or negative changes in the
value of the secured asset on account of passage of time.
Ø likely diminution in realisation due to
accumulation of statutory dues, liability to employees etc.
Ø other factors, if any, which may affect
recoveries.
(iii)
ARC shall frame a policy duly
approved by the Board of Directors, in line with the policy for settlement of dues
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