Page 50 - Banking Finance January 2018

RBI CIRCULAR

Conversion of debt into equity- Review of sector specific management firms/ individuals having
expertise in running firms/ companies which could be
RBI/2017-18/101
considered for managing the companies.
DNBR.PD(ARC)CC. No.04/26.03.001/2017-18
Yours faithfully,
1. Please refer to our Circular DNBS(PD)CC.No. 35/SCRC/
(C D Srinivasan)
26.03.001/2013-14 dated January 23, 2014 on the
Chief General Manager
above subject.
2. On a review of the limit imposed on shareholding of Auction of Government Securities: Non-
the post converted equity of the borrower company
under reconstruction by Asset Reconstruction Competitive Bidding Facility to retail
Companies (ARCs), it has been decided to exempt ARCs investors
meeting the criteria set out in paragraph 3 below from
the cap of 26% subject to compliance with the RBI/2017-18/99
provisions of the SARFAESI Act, 2002, Guidelines/ IDMD.1080/08.01.001/2017-18
Instructions issued by Reserve Bank of India from time
to time as applicable to ARCs as well as Foreign 1. Please refer to the circular IDMC./08.01.02/2001-02
Exchange Management Act, 1999, Reserve Bank of dated December 7, 2001 as well as the press release
India Act, 1934, Companies Act, 2013, SEBI Regulations dated July 28, 2016 whereby the facility of non-
and other relevant Statutes. competitive bidding in Government of India dated

The extent of shareholding post conversion of debt into securities and T-Bills was allowed to retail investors.
equity shall be in accordance with permissible Foreign 2. As part of the overall strategy of diversifying the
Direct Investment (FDI) limit for that specific sector. investor base for government securities, the

3. ARCs that meet the conditions mentioned below are Government of India and RBI have been taking various
exempted from the limit of shareholding at 26% of post measures to encourage participation of retail investors
converted equity of the borrower company: in G-Sec market including introduction of non-
i. The ARC shall be in compliance with Net Owned competitive bidding in primary auctions. In continuation
Fund (NOF) requirement of ? 100 crore on an of this endeavour, the Union Budget 2016-17 had
ongoing basis, announced, inter-alia, that RBI will facilitate retail
ii. At least half of the Board of Directors of the ARC participation in the primary markets through stock
comprises of independent directors, exchanges. In line with this announcement and in
consultation with SEBI, it has been decided that in
iii. The ARC shall frame policy on debt to equity
addition to scheduled banks and primary dealers;
conversion with the approval of its Board of
a. Specified stock exchanges will be permitted to act
Directors and may delegate powers to a
Committee comprising majority of independent as aggregators/facilitators.
directors for taking decisions on proposals of debt b. These stock exchanges will submit a single
to equity conversion, consolidated non-competitive bid in the auction
iv. The equity shares acquired under the scheme shall process and will put in place necessary processes
be periodically valued and marked to market. The to transfer the securities so allotted in the primary
frequency of valuation shall be at least once in a auction to their members/clients.
month. c. Stock exchanges, desirous of acting as
4. The ARC shall explore the possibility of preparing a panel aggregators/facilitators, may approach CGM,

50 | 2018 | JANUARY | BANKING FINANCE

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