SUDARSHAN SEN COMMITTEE

SUDARSHAN SEN COMMITTEE

Subject : Economics

Context : Recently, the Reserve Bank of India (RBI) has set up a committee to undertake a comprehensive review of the working of asset reconstruction companies (ARCs).

Concept :

• It is a six-member committee which will be headed by Sudarshan Sen, former Executive Director of RBI.
• The other members are ICICI Bank ED Vishaka Mulye, SBI deputy MD R N Prasad, EY partner Abizer Diwanji, MDI economics professor Rohit Prasad and CA R Anand.
• The panel will submit their report within three months of their first meeting.
• The Department of Regulation (RBI) will provide the necessary secretarial support to the Committee.

What are Asset Reconstruction Companies (ARCs)?

• The ARCs are entities that purchase bad loans from banks and salvage value from them by finding buyers for the security or selling the business.
• The ARCs are registered under the RBI and regulated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act, 2002).
• The ARCs take over a portion of the debts of the bank that qualify to be recognised as Non-Performing Assets.
• It implies that the ARCs are engaged in the business of asset reconstruction or securitisation or both.
• All the rights that were held by the lender (the bank) in respect of the debt would be transferred to the ARC.
• In February 2021, the government had said that public sector banks will set up a national ARC which will buy bad loans from banks and help clean their books.