SARFAESI Act, 2002 / Chapter II

Section 12A SARFAESI Act: Power of Reserve Bank to Call for Statements and Information

Section 12A empowers the Reserve Bank of India (RBI) to obtain statements and information about the business or affairs of an asset reconstruction company (ARC). It supports regulatory supervision of companies engaged in acquiring and reconstructing stressed financial assets.

Text of Section 12A - Power to call for statements and information

Legislative note: Act 44 of 2016, section 3, substituted the expression "asset reconstruction company" for the earlier expression "securitisation company or reconstruction company", with effect from 1 September 2016. The statutory wording above is presented without editorial footnote markers.

Explanation of the powers under Section 12A

1. RBI may require information at any time

The expression "at any time" allows RBI to call for statements or information whenever necessary for purposes of the SARFAESI Act. Section 12A does not make the exercise of this power dependent on a scheduled inspection or a prior complaint.

2. RBI may set the response deadline

The ARC must furnish the requested material within the time specified by RBI. The section itself does not prescribe one uniform response period for all requests.

3. Information may extend beyond an individual transaction

The request may concern the ARC's business or affairs, including business or affairs with which it is concerned. Depending on the request and applicable directions, this may encompass financial assets acquired, recovery or resolution activity, security receipts, accounts, transactions, and relevant records. These are illustrations, not an exhaustive statutory list.

4. Statutory purpose limits the request

RBI must consider the information necessary or expedient for the purposes of the Act. Section 12A therefore operates as a supervisory information-gathering provision, not an unrestricted authority unrelated to SARFAESI regulation.

Relevant legal definitions

Asset reconstruction company: Under Section 3 read with the definitions in Section 2, an ARC is a company registered with RBI to carry on the business of asset reconstruction.

Asset reconstruction: Acquisition by an ARC of rights or interests of a bank or financial institution in financial assets for the purpose of realisation of such assets, within the statutory definition.

Reserve Bank: The Reserve Bank of India, established under the Reserve Bank of India Act, 1934, and entrusted with regulatory functions under the SARFAESI Act.

Practical implications and connected provisions

• Maintain reliable records: ARCs should preserve accurate accounts, transaction details and supporting records in accordance with applicable RBI directions and legal requirements.
• Respond to the RBI communication: Identify the statements requested, responsible officials and specified deadline; furnish complete, consistent and verifiable information.
• Distinguish connected powers: Section 12 concerns RBI policy and directions; Section 12A concerns obtaining statements and information; Section 12B deals with audit and inspection.
• Follow current RBI regulation: Relevant RBI directions, including applicable directions for asset reconstruction companies, may impose separate periodic reporting, governance, record-keeping and compliance obligations.

Section 12A is a regulatory information power. It is distinct from the enforcement of security interests against borrowers under Section 13.

Official Act and regulatory resources

Consult India Code for the SARFAESI Act, 2002 and its amendments; Reserve Bank of India for regulatory directions, circulars and ARC supervision; and Department of Financial Services for relevant official information.

This is a general explanation of the provision. The applicable reporting requirements depend on the RBI communication and the directions in force.