Asset Reconstruction Companies in India – Challenges and Opportunities

The Reserve Bank of India (RBI) was assigned with the responsibility of determining suitable policy measures to tackle the challenge of growing industrial sickness in India. The RBI set up the Tandon Committee (1975), the H N Ray Committee (1976), and the Tiwari Committee (1981) to address the issue. The first two committees focused primarily on suggesting measures for improving the efficiency of bank credit to meet the industrial requirements. The third committee suggested the introduction of a regulatory mechanism to deal with the problem of industrial sickness. Based on the recommendations of the Tiwari Committee, the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA,1985), was enacted. The Act enabled the formation of a statutory body, the Board for Industrial and Financial Reconstruction (BIFR). As per the provisions of the Act, an expert panel was formed by the board to proactively identify and initiate measures for the recovery of potentially sick industrial business units. The board suggested measures for the reconstruction and restructuring of potentially sick business units (Refer to Exhibit-II for Important Provisions of SICA, 1985).