In a significant regulatory development, the Central Government has issued a temporary exemption to the Indian Bank under the Banking Regulation Act, 1949. This exemption permits the bank to hold more than 30% of the paid- up capital in ASREC (India) Limited, a major player in asset reconstruction and financial recovery services.
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Key Highlights of the Exemption
The exemption has been issued under the powers conferred by sub- section (1) of Section 53 of the Banking Regulation Act, 1949. On the basis of the recommendation of Reserve Bank of India (RBI), the Central Government has declared that sub-section (2) of Section 19 of the Act shall not apply to Indian Bank with respect to its equity holdings in ASREC (India) Limited.
Under Section 19(2), a banking company is prohibited from holding any shares in the company, beyond 30% of that company’s paid-up capital or 30% of its own paid- up share capital and reverses, whichever is less. However, this exemption permits Indian Bank to surpass the threshold specifically in the case of ASREC (India) Limited.
Exemption Validity and Implementation
According to the official notification published in the Gazette of India, the exemption is effective immediately and will be valid till 31st March 2026. The notification shall come into force from the date it published in the Official Gazette.
This step reflects the government's strategic approach in strengthening asset reconstruction institutions and helping banks resolve non-performing assets (NPAs) more efficiently.
Implications for Indian Bank and Financial Sector
The exemption allows Indian Bank to continue investing in ASREC (India) Limited without breaking the regulatory limits, thus strengthening its participation in the asset reconstruction space. It is expected to increase the bank’s ability to handle distressed assets and contribute to a stronger financial ecosystem.
From a policy perception, this decision also aligns with the continuing efforts of the Reserve Bank of India and the Government of India to empower public sector banks in their resolution edges, specifically in the context of high value stressed assets.
The temporary exemption granted to Indian Bank marks an active regulatory move aimed at supporting financial stability and efficient NPA management. This underlines the growing role of asset reconstruction companies (ARCs) and the significance of strategic bank investment in strengthening India's financial architecture.
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