For granting a certificate of registration to an ARC

Solution

Section 3(3)(a) of the SARFAESI Act requires that, for registration as an ARC, the Reserve Bank must be satisfied that the applicant company 'has not incurred losses in any of the three preceding financial years.' This condition ensures that only financially sound companies are permitted to enter the business of ARC. It is a condition precedent that the RBI checks at the time of registration, not an ongoing requirement. However, Section 4(1)(d) provides that if an ARC subsequently fails to fulfil conditions of sub-section 3(3), its certificate of registration may be cancelled. Directors of the ARC must also have adequate professional experience in finance, securitisation and reconstruction [Section 3(3)(c)].