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- Key aspects of the guidelines include:
- Board-approved policy: Every ARC must have a Board-approved policy for settling borrower dues. This policy should cover aspects such as:
- Eligibility criteria for one-time settlements
- Permissible sacrifices for different categories of exposures
- Methodology for determining the realizable value of securities
- Independent Advisory Committee (IAC): For settlements involving dues exceeding Rs 1 crore, an IAC must examine the proposal. The IAC should consist of professionals with expertise in finance, law, and other relevant fields.
- Evaluation of borrower's financial position: The IAC should assess the borrower's financial position, including their projected earnings and cash flows, to determine the feasibility of the settlement.
- Time frame for recovery: The IAC should consider the time frame available for recovering the dues from the borrower.
- Realizable value of security: The IAC should assess the realizable value of the security offered by the borrower as part of the settlement.
- Consent decrees: If recovery proceedings are already underway, the ARC must obtain consent decrees from judicial authorities to ensure that the settlement complies with existing laws.
- Wilful defaulters and fraud: Settlements with borrowers classified as wilful defaulters or fraudsters will be subject to stricter scrutiny and require board approval, regardless of the settlement amount.
- Transparency and disclosure: ARCs are required to maintain proper records of all settlement proposals and decisions, and to disclose relevant information to investors.
Question:
1 As per Guidelines on Settlement of Dues of borrowers by ARCs, For settlement proposals exceeding which amount must an Independent Advisory Committee (IAC) be involved?
- A) ₹50 lakh
- B) ₹2 crore
- C) ₹1 crore
- D) ₹10 crore