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The RBI updated guidelines for Asset Reconstruction Companies (ARCs) regarding settlement with borrowers.
ARCs must explore all possible recovery methods before settling dues with borrowers.
Each ARC must have a board-approved policy covering settlement eligibility, sacrifice amounts, and valuation methods.
The settlement amount should preferably be paid in a lump sum; if not, a business plan and financial details should support it.
The guidelines provide procedures to be followed in cases where the settlement of accounts pertaining to a borrower with an aggregate value of more than ₹1 crore or less.
The net present value (NPV) of the settlement should generally match or exceed the value of the collateral security.
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