Introduction:
In the intricate web of financial regulations, Sarfaesi Act Section 12 emerges as a pivotal force vested in the Reserve Bank. This section grants the Reserve Bank authority to determine policies and issue directions when it deems necessary for public interest, financial system regulation, or investor protection. This article delves into the specifics, exploring the Reserve Bank's power to dictate income recognition, accounting standards adherence, provisions for bad debts, and more. An insightful journey awaits, unraveling the nuanced directives shaping the operations of asset reconstruction companies.
(1) When the Reserve Bank deems it necessary or expedient in the public interest, or to regulate the country's financial system advantageously, or to prevent any 1[asset reconstruction company] from conducting its affairs in a manner detrimental to the interests of investors or prejudicial to the company's interests, it holds the authority to determine policies and issue directions. These directions pertain to income recognition, adherence to accounting standards, provisions for bad and doubtful debts, capital adequacy based on risk weights for assets, and the deployment of funds by the 1[asset reconstruction company]. The company is obliged to adhere to the determined policy and issued directions.
(2) Without limiting the scope of authority granted under subsection (1), the Reserve Bank may issue directives to any 1[asset reconstruction company] in general, or to a specific class of 2[asset reconstruction companies], or to any particular 1[asset reconstruction company]. These directives may cover:
(a) The specific financial assets of a bank or financial institution that can be acquired, along with the procedure for acquisition and their valuation;
(b) The total value of financial assets that any 1[asset reconstruction company] may acquire.
3 [(c) The fees and other charges applicable for the management of financial assets acquired by any asset reconstruction company;
(d) The transfer of security receipts issued to qualified buyers.
