RBI asks ARCs to adopt fair practices code

Mumbai: The Reserve Bank of India on Thursday asked asset reconstruction companies (ARCs) to adopt a board-approved 'Fair Practices Code', which, among other things, should prohibit the use of uncivilised, unlawful and questionable behaviour for recovery of loans.

The Code, the central bank said, should also ensure transparency and fairness in operation.

ARCs buy bad loans from banks to turn them around. "In order to achieve the highest standards of transparency and fairness in dealing with stakeholders, asset reconstruction companies are advised to put in place Fair Practices Code (FPC) duly approved by their board," the RBI said.

It has prescribed the minimum regulatory expectation, while each ARC's board is free to enhance its scope and coverage. The FPC must be followed in right earnest, and the board must involve itself in its evolution and proper implementation at all times, it added.

"ARC 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 while asking them that FPC should be placed in public domain for information of all stakeholders.