RBI issues takeover norms for loan securitisation

The Reserve Bank of India (RBI) today released the final guidelines to enable securitisation companies (SCs) and reconstruction companies (RCs) to effect changes or take over the management of the business of the borrower in order to realise their dues.

These guidelines are effective 21 April 2010, RBI said in a release.

As per the guidelines, SCs/RCs should frame policy guidelines detailing the eligibility conditions and grounds for exercising powers to effect changes or take over the management of the business of the borrower for realising their dues.

The SCs/RCs must compulsory give notice of 60 days to the borrower and set up an independent advisory committee (IAC) to evaluate the proposals and indicate the intention of the SC/RC of effecting changes or taking over the management of his business, giving opportunity to the borrowers to file objections, if any before a reasoned order is passed.

The Monetary Policy Statement for the year 2010-11 contained a extract of the guidelines on change in or takeover of the management of the business of the
borrower by the SCs/RCs,

According to RBI, ''change in management'' would mean effecting change by the borrower at the instance of SC/RC in the person who has responsibility for the whole or substantially whole of the management of the business of the borrower and / or other relevant personnel.