An Asset Reconstruction Company (ARC) is a special type of financial institution that buys the debts of banks at a mutually agreed value and attempts to recover the debts or associated securities by itself.
ARC is a company incorporated under the Companies Act. It is registered with Reserve Bank of India under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
The SARFAESI Act helps reconstruction of bad assets without the intervention of courts. The Act stipulates various measures that can be undertaken by ARCs for asset reconstruction. These include taking over or changing the management of the business of the borrower.
In India, ARCs function under the supervision and control of the Reserve Bank of India. They operate strictly as per SARFAESI Act and guidelines issued by Reserve Bank of India.
All the rights that were held by the lender (the bank) in respect of the debt would be transferred to the ARC.