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MUMBAI : The Reserve Bank of India (RBI) is intensifying scrutiny on asset reconstruction companies (ARCs), mandating that they classify borrowers by risk profile and verify their KYC (know your customer) data after acquiring bad loans from banks and non-bank financiers..
According to two ARC executives aware of the development, the RBI has informed ARCs that they need to start verifying the KYC of borrowers even if they are buying from lenders who have those details..
ARCs have to put in a lot of effort into this and the cost of compliance would go up as we have to redo the KYC exercise," said a senior executive at an asset reconstruction company..
Given that they have already defaulted on loans sold to ARCs for recovery, they might not be forthcoming with their KYC data," the executive said, adding that this issue was discussed with RBI officials last month in a meeting on compliance with KYC norms..
Deputy governor Rajeshwar Rao noted that while ARCs can aid in stressed asset resolutions, there are concerns about them becoming a vehicle for tainted promoters." . Recently, RBI imposed business curbs on two Edelweiss group entities, including its asset reconstruction company Edelweiss ARC, for regulatory breaches..
