Securitisation Companies And Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003
Preamble
The Reserve Bank of India, having considered it necessary in the public interest, and being satisfied that, for the purpose of enabling the Reserve Bank to regulate the financial system to the advantage of the country and to prevent the affairs of any Securitisation Company or Reconstruction Company from being conducted in a manner detrimental to the interest of investors or in any manner prejudicial to the interest of such Securitisation Company or Reconstruction Company, it is necessary to issue the guidelines and directions relating to registration, measures of asset reconstruction, functions of the company, prudential norms, acquisition of financial assets and matters related thereto, as set out below, hereby, in exercise of the powers conferred by Sections 3, 9, 10 and 12 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, issues to every Securitistion Company or Reconstruction Company, the guidelines and directions hereinafter specified.
1 . Short title and commencement.--
(1) These guidelines and directions shall be known as ''The Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003''.
(2) They shall come into force with effect from April 23, 2003 and any reference in these guidelines and directions to the date of commencement thereof shall be deemed to be a reference to that date.
2 . Applicability of the Directions.--
The provisions of these guidelines and directions shall apply to Securitisation Companies or Reconstruction Companies registered with the Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, in respect of the trust/s mentioned in paragraphs 8 herein, the provisions of paragraphs 4, 5, 6,9, 10(i), 10(iii) 12,13,14 and 15 shall not be applicable.
3 . Definitions.--
(1) (i) "Act" means the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(ii) "Bank" means the Reserve Bank of India constituted under Section 3 of the Reserve Bank of India Act, 1934;
1[(iii) "Date of acquisition" means the date on which the ownership of financial assets is acquired by Securitisation Company or Reconstruction Company either on its own books or directly in the books of the trust;]
(iv) "Deposit" means deposit as defined in the Companies (Acceptance of Deposits) Rules 1975 framed under Section 58 A of the Companies Act, 1956;
(v) Fair value means the mean of the earning value and the break up value;
(vi) "Non-performing Asset" (NPA) means an asset in respect of which:
a) Interest or principal ( or instalment thereof) is overdue for a period of 180 days or more from the date of acquisition or the due date as per contract between the borrower and the originator, whichever is later;
b) interest or principal (or instalment thereof) is overdue for a period of 180 days or more from the date fixed for receipt thereof in the plan formulated for realisation of the assets referred to in paragraph 7(1)(6) herein;
c) interest or principal (or instalment thereof) is overdue on expiry of the planning period, where no plan is formulated for realisation of the assets referred to in paragraph 7(1)(6) herein; or
d) any other receivable, if it is overdue for a period of 180 days or more in the books of the Securitisation Company or Reconstruction Company.
Provided that the Board of Directors of a Securitisation Company or Reconstruction Company may, on default by the borrower, classify an asset as a non-performing asset even earlier than the period mentioned above (for facilitating enforcement as provided for in Section 13 of the Act).
(vii) "Overdue" means an amount which remains unpaid beyond the due date;
(viii) "Owned Fund" means the aggregate of paid up equity capital, paid up preference capital to the extent it is compulsorily convertible into equity capital, free reserves (excluding revaluation reserve), credit balance in Profit and Loss Account as reduced by the debit balance on the profit and loss account and Miscellaneous Expenditure (to the extent not written off or adjusted), book value of intangible assets and under / short provision against NPA / diminution in value of investments, and over recognition of income, if any; and further reduced by the book value of the shares acquired in a Securitisation Company or Reconstruction Company, and other deductions required on account of the items qualified by the auditors in their report on the financial statements;
(ix) "Planning period" means a period not exceeding twelve months allowed for formulating a plan for realization of non-performing assets (in the books of the originator) acquired for the purpose of reconstruction;
(x) "Standard asset" means an asset, which is not an NPA.
(xi) "Trust" means trust as defined in Section 3 of the Indian Trusts Act, 1882.
(2) Words or expressions used but not defined herein and defined in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, shall have the same meaning as assigned to them in that Act. Any other words or expressions not defined in that Act shall have the same meaning as assigned to them in the Companies Act, 1956.
4 . Registration and matters incidental thereto.--
2[(i) Every Securitisation Company or Reconstruction Company shall apply for registration in the form of application specified vide Notification No.DNBS.1/CGM(CSM)-2003, dated March 7, 2003 and obtain a certificate of registration from the Bank as provided under Section 3 of the Act;]
(ii) A Securitisation Company or Reconstruction Company, which has obtained a certificate of registration issued by the Bank under Section 3 of the Act, can undertake both securitisation and asset reconstruction activities;
3[(ii) (a) A Securitisation Company or Reconstruction Company shall commence business within six months from the date of grant of Certificate of Registration by the Bank;
Provided that on the application by the Securitisation Company or Reconstruction Company, the Bank may grant extension for such further period, not exceeding one year in aggregate from the date of grant of Certificate of Registration.
(ii) (b) A Securitisation Company or Reconstruction Company, which has obtained a Certificate of Registration from the Bank under Section 3 of the Act and not commenced business as on the date of the Notification shall commence business within six months from the date of Notification."]
4[(ii) (c) Provisions of section 45 -IA, 45-IB and 45-IC of RBI Act,1934 shall not apply to non banking financial company, which is a securitisation company or reconstruction company registered with the Bank under section 3 of the SARFAESI Act,2002].
(iii) Any entity not registered with the Bank under Section 3 of the Act may conduct the business of securitisation or asset reconstruction outside the purview of the Act.
5 . Owned Fund.--
Every Securitisation Company or Reconstruction Company seeking the Bank''s registration under Section 3 of the Act, shall have a minimum Owned Fund of Rs. 2 crore.
5[Provided that every Securitisation company or reconstruction company seeking the Bank''s registration under Section 3, or carrying on business on commencement of the Securitisation Companies and Reconstruction Companies (Reserve Bank) (Amendment) Guidelines and Directions, 2004, shall have a minimum Owned Fund not less than fifteen percent of the total financial assets acquired or to be acquired by the Securitisation Company or Reconstruction Company on an aggregate basis, or Rs. 100 crore, whichever is less;
Provided further that --
(i) the minimum Owned Fund for any Securitisation Company or Reconstruction Company shall in no case be less than Rs two crore;
(ii) a Securitisation Company or Reconstruction Company carrying on business on the commencement of the Securitisation Companies and Reconstruction Companies (Reserve Bank) (Amendment) Guidelines and Directions, 2004 shall reach the level of minimum Owned Fund specified in the first proviso within three months from such commencement;
(iii) while computing the amount for the purpose of the first proviso, no account shall be taken whether the assets are transferred to a trust set up for the purpose of Securitisation or not;
(iv) the amount shall be continued to be held by the Securitisation Company or Reconstruction Company until realisation of assets and redemption of security receipts issued against such assets;
6[(v) the Securitisation Company or Reconstruction Company shall invest in the security receipts issued by the trust set up for the purpose of securitisation, an amount not less than 5% under each scheme:
provided further that-
a Securitisation Company or Reconstruction Company which has already issued the security receipts shall achieve the minimum subscription limit in security receipts under each scheme within a period of six months from the date of the Notification.]
7[(vi) the Securitisation Company or Reconstruction Company shall continue to hold a minimum of 5% of the Security Receipts of each class issued by the SC/RC under each scheme on an ongoing basis till the redemption of all the Security Receipts issued under such scheme.]
6 . Permissible Business.--
(i) A Securitisation Company or Reconstruction Company shall commence/undertake only the securitisation and asset reconstruction activities and the functions provided for in Section 10 of the Act.
(ii) A Securitisation Company or Reconstruction Company, which is carrying on any other business, shall cease to do such business by June 20, 2003;
(iii) A Securitisation Company or Reconstruction Company shall not raise monies by way of deposit.
7 . Asset Reconstruction.--
(1) Acquisition of Financial Assets
(i) Every Securitisation Company or Reconstruction Company shall frame with the approval of its Board of...
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