Settlement of dues only after examining all options, RBI to ARCs

RBI revises guidelines for ARCs on settlement of dues, emphasizing thorough examination of recovery options before settlement.

The RBI on Monday (January 20, 2025) modified guidelines related to Asset Reconstruction Companies (ARCs), envisaging that settlement with the borrower should be undertaken only after all possible ways to recover dues have been examined.

After a review, it has been decided to revise guidelines on the settlement of dues payable by the borrowers to ARCs, a Reserve Bank circular said.

The 'Master Direction – Reserve Bank of India (Asset Reconstruction Companies) Directions, 2024' is also being updated accordingly, it added.

Every ARC should frame a board-approved policy for the settlement of dues payable by the borrowers.

According to the latest guidelines, the policy should, inter alia, cover aspects like a cut-off date for one-time settlement eligibility, permissible sacrifice for various categories of exposures while arriving at the settlement amount and the methodology for arriving at the realisable value of the security.

"Settlement with the borrower shall be done only after all possible ways to recover the dues have been examined, and settlement is considered as the best option available," the RBI said.

It further said the settlement amount should preferably be paid in a lump sum.