Asset reconstruction Company (ARCs) are in the business of buying bad loans from the Banks and Financial institutions. In short ARCs are the companies that are formed to manage and cover the non-performing assets of the Banking companies. Banks and Financial institution with large proportion of bad loans or Non-performing can sell those assets to a separate entity i.e. Asset Reconstruction Company. Banks rather than wasting their time and effort by going after the defaulters can sell the NPAs to the ARCs at a mutually agreed value. Its primary motive is to manage and make profitable those assets which are underperforming or are formally classified as NPAs belonging to those companies which are unable to generate sufficient revenue to complete their outstanding obligations. ARCs are companies registered under section 3 of SARFAESI Act, 2002. Under SARFAESI Act, the responsibility of the asset management companies is to function as intermediaries between the promoter and the trust. Their main role is to see that the trust is able to take over the assets or loans at reasonable price according to the revalued amount, which is consequently paid to the promoter for the acquisition.
What is Asset Reconstruction Company Registration?
Functions of Asset Reconstruction Company
Following functions are performed by ARCs under RBI Guidelines and they are as follows-
1)Acquisition of Financial Assets (as defined u/s 2(L) of the SARFAESI Act, 2002.
2)Change or takeover of management/ sale or lease of business of the borrower.
3)Rescheduling of debts.
4)Enforcement of security interest (as defined under section 13(4) of SARFAESI Act, 2002)
Reviewed by: BIATConsultant CA, CS, legal, tax, finance, and compliance expert team.
Last reviewed: May 28, 2026.
Relevant official references: Ministry of Corporate Affairs.
Important note: Timelines, government fees, professional fees, document requirements, and approvals depend on the applicable authority, applicant profile, document readiness, and current regulatory process.
FAQ
No ARCs shall commence or carry the business of asset reconstruction without-
Without obtaining a registration certificate
1)Having net owned funds of not less than two crore Rupees or such other amount not exceeding fifteen percent of total financial assets acquired or to be acquired by by the securitization company or reconstruction company, as the Reserve Bank by notification specify.
2)Reserve Bank of India may by notification specify amount of net owned funds for different class or classes of securitization companies or reconstruction companies.
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