Asset Reconstruction Company Registration with RBI
Asset reconstruction company registration is a certificate from the Reserve Bank of India under section 3 of the SARFAESI Act, 2002. It lets a company buy bad loans from banks and resolve them. The capital bar is high: RBI expects ₹300 crore of net owned fund.
What it is
An asset reconstruction company, or ARC, buys non-performing loans from banks and financial institutions and then recovers or restructures them. It funds the purchase by issuing security receipts to qualified buyers. Registration is the certificate that makes this business lawful.
Section 3 of the SARFAESI Act, 2002 bars any company from starting the business without RBI’s certificate. The company applies to RBI in the form and manner RBI specifies. RBI has issued a fresh set of Reserve Bank of India (Asset Reconstruction Companies) Directions, 2025 dated 28 November 2025, which sit on top of the Act.
Who it applies to
Well-capitalised sponsor groups
Think of a promoter group in Delhi NCR with a distressed-debt desk, or a financial institution that wants its own vehicle. Both need to bring ₹300 crore of net owned fund and a clean track record to the table.
Experienced distressed-asset teams
Professionals from banking, resolution and recovery who want a regulated vehicle of their own. Section 3(3) asks for directors with real experience in finance, securitisation and reconstruction.
Entities comparing licences
Some founders really want to lend, not buy bad loans. That is an NBFC question, not an ARC question. Our NBFC registration team can pick it up, and we say so early.
Why it matters
The business is unlawful without it
Without asset reconstruction company registration, there is no ARC business. Banks will not sell you assets, and rating agencies will not rate your security receipts.
RBI is a continuing regulator
Registration is the start. RBI Directions govern governance, asset acquisition policy, security receipts and ownership changes for as long as you operate.
Capital is tested at the gate
A new ARC has to meet the ₹300 crore net owned fund level before it begins business. Getting the capital structure right is the real project.
Documents required
Company papers
- Certificate of incorporation, MoA and AoA with the ARC object
- Audited accounts and net owned fund computation
- Shareholding and sponsor details
People files
- Profiles, PAN and ID proof of directors and key managers
- Fit and proper declarations
- Proof of experience in finance, securitisation or reconstruction
Business and policy papers
- Business plan and asset acquisition policy
- Systems for asset recovery and payments to investors
- Prudential and governance policies as RBI’s Directions require
How it works
Test eligibility against section 3(3)
In practice, the gaps show up in capital and in director experience. We check both, plus three-year loss history and sponsor standing, and tell you plainly where you stand.
Fix the structure before you file
If the entity needs capital, a new board or a cleaner shareholding pattern, we sort that out first. Where a new company is required, our public limited company registration team sets it up.
Prepare and file the application with RBI
We draft the application in the form and manner RBI specifies, build the annexures and the policy papers, and submit it.
Answer RBI and begin compliance
RBI may call for more information or a hearing. We draft replies and, once the certificate arrives, build your reporting calendar.
Timelines
Before you start business
Net owned fund of ₹300 crore must be in place before a new ARC begins business. Section 3(1) also bars business without the certificate.
Three preceding financial years
Section 3(3) asks that the company has not incurred losses in any of the three preceding financial years.
Eight years per asset
RBI’s Directions cap realisation at eight years from the date an asset is acquired. Once the limit passes, the asset is treated as a loss asset.
What happens if conditions are not met
Application rejected
RBI can reject an application that does not meet the section 3(3) conditions, after giving you a reasonable opportunity of being heard under section 3(5).
Capital shortfall
RBI’s October 2022 circular says that falling short of the net owned fund milestone triggers supervisory action, including restrictions on new business.
Ownership changes without approval
Certain changes in sponsor shareholding need RBI’s prior approval. Skipping it puts the licence at risk.
Frequently asked questions
Who can register as an asset reconstruction company?
Only a company can apply, and the Reserve Bank of India grants the certificate under section 3 of the SARFAESI Act, 2002. The applicant must meet the net owned fund requirement, show no losses in any of the three preceding financial years, and have fit and proper sponsors and directors. Share your group structure and we will check each test before any application is drafted.
What net owned fund does an ARC need?
RBI has raised the minimum net owned fund from ₹100 crore to ₹300 crore on an ongoing basis. A new ARC must meet the ₹300 crore level before it begins business. Existing ARCs followed a glide path of ₹200 crore by 31 March 2024 and ₹300 crore by 31 March 2026. We confirm the current figure against RBI’s latest Directions before you commit capital.
Is an ARC the same as an NBFC?
No. An ARC is registered under section 3 of the SARFAESI Act and regulated by RBI under its own Directions, not under the NBFC framework. It buys financial assets from banks and lenders and resolves them, instead of lending. If you want to lend instead, our NBFC team can advise on that licence.
How long does an ARC get to resolve an acquired asset?
RBI’s Directions set an eight-year outer limit from the date of acquisition. After that, an ARC cannot issue fresh security receipts to qualified buyers for that asset, and the asset is treated as a loss asset in the books. Plan your recovery strategy and provisioning around that clock from day one.
Can an ARC sell security receipts to the public?
No. Security receipts are issued through a trust structure and only to qualified buyers. The ARC must also invest in the security receipts it issues, and a recovery rating from a rating agency is required. A public offer is outside the framework, so your funding plan should be built around institutional investors.
Do directors of an ARC have to meet any special tests?
Yes. Section 3(3) requires directors with adequate professional experience in finance, securitisation and reconstruction, and none convicted of an offence involving moral turpitude. Sponsors must also meet RBI’s fit and proper criteria. The Chair of the board must be an independent director under RBI’s circular. We collect declarations from each person early so nothing comes up late.
Can the shareholding of an ARC change after registration?
Only with care. RBI’s directions require its prior approval for certain changes, such as a new sponsor coming in or a sponsor leaving. Plan your cap table before you apply. A fund-raise a year later should not need a fresh approval. Our fundraising advisory work can help with that. We list these triggers for you in a short note.
What happens if RBI rejects the application?
Under section 3(5), RBI can reject an application that does not meet the conditions, but only after giving you a reasonable opportunity of being heard. So a rejection is not the end of the road. We prepare the reply and any fresh evidence, and you can re-apply once the gap is fixed.
Can Taxhint get the ARC certificate for me?
We prepare the application, build the sponsor and director files, coordinate with RBI and reply to its queries. RBI alone decides the grant. Where the work needs a practising chartered accountant or other professional to certify net owned fund or financials, a qualified professional signs it.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
We have not verified a government fee schedule for this application, so we do not quote one here. We will confirm every government charge for your file before you commit.
Ready to begin?
Tell us your sponsors and your capital plan, and we will tell you honestly whether an ARC certificate is within reach.