The Asset Reconstruction Companies (ARCs) are advised by the Reserve Bank of India (RBI) to put in place a Fair Practices Code (FPC) that is duly approved by their Board of Directors. To enable the ARCs to achieve highest standards of transparency and fairness in dealing with the stakeholders, the FPC shall also be placed in public domain for information of all stakeholders. The brief highlights of the FPC as recommended by the RBI are as follows:

• In the acquisition of assets, ARC shall follow a transparent and non-discriminatory approach.


• Further, in order to maintain transparency in the process of sale of secured assets, it is recommended to invite public to participate in the auction process.


• The ARCs shall release all securities after realization of the outstanding amount of loan.


• It is to be ensured by ARCs that policies on management fee, expenses and incentives, if any, shall be approved by their Board and should be transparent.


• Further, ARCs intending to outsource shall put in place a comprehensive outsourcing policy approved by the board which includes criteria for selection of such activities as well as service providers, delegation of authority depending on risks and materiality and systems to monitor and review the operations of these activities/ service providers.


• As a part of Fair Practice Code, ARCs shall also put in place a Board approved Code of Conduct for Recovery Agents. The Recovery Agents are mandated to observe strict customer confidentiality and should be adequately trained to do their responsibilities effectively and avoid using force during the recovery process.


• The ARCs should constitute Grievance Redressal Machinery within the organization and also ensure that genuine grievances are redressed quickly.


• The ARCs shall not disclose any information they acquire during the course of their business and maintain strict confidentiality.


• And, lastly, compliance with the FPC shall be reviewed periodically by the Board of Directors.

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