The RBI has decided to allow asset reconstruction companies to have higher holding than the 26 per cent cap set earlier with regard to limits on shareholding of the post-converted equity of a borrower company under reconstruction.

The extent of shareholding will be in accordance with the permissible foreign direct investment limit for the sector. This exemption is subject to the condition that the ARCs meet the following criteria:

The ARC shall be in compliance with the net-owned fund requirement of ₹100 crore on an ongoing basis;

At least half the board of directors of the ARC comprises independent directors;

The ARC shall frame policy on debt to equity conversion with the approval of its board of directors and may delegate powers to a committee comprising majority of independent directors for taking decisions on proposals of debt to equity conversion; and

The equity shares acquired under the scheme shall be periodically valued and marked to market. The frequency of valuation shall be at least once a month.

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