Section 12(1) of the SARFAESI Act empowers the RBI to

Solution

Section 12(1) empowers the RBI, if satisfied that it is necessary in public interest or to regulate the financial system, to determine policy and issue directions to ARCs in matters relating to: income recognition, accounting standards, making provisions for bad and doubtful debts, capital adequacy based on risk weights for assets, and deployment of funds by the ARC. Territorial restrictions on an ARC's operations are NOT among the enumerated grounds under Section 12(1). The ARC can operate across the whole of India by virtue of the Act extending to the whole of India [Section 1(2)]. Section 12(2) further permits the RBI to give specific directions on types of financial assets, aggregate value of assets and fee structure.