The Department of Industrial Policy and Promotion, Ministry of
Commerce & Industry, Government of India
("DIPP") released Press Note 4 of 2016
on May 6, 2016 ("Press Note") permitting
100% foreign direct investment ("FDI")
in asset reconstruction companies
("ARC"). In this hotline, we have
analyzed the changes proposed by the Press Note, and the potential
implications of such changes.
Background
The Indian government had enacted the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 ("SARFAESI") in an
attempt to assist banks and financial institutions in cleaning up
their bad loans, or non-performing assets. However, almost a decade
and a half later, experience has shown that very few ARCs have been
set up and a very small quantum of banks' bad loans have been
acquired by asset reconstruction companies
("ARC")1.
