The Reserve Bank of India has decided to set up a panel to undertake a comprehensive review of the working of asset reconstruction companies (ARCs).

Though ARCs have grown in number and size, their potential for resolving stressed assets is yet to be realised fully, RBI governor Shaktikanta Das said on Wednesday while unveiling the first bi-monthly monetary policy for the current financial year.

"It is, therefore, proposed to constitute a committee to undertake a comprehensive review of the working of ARCs in the financial sector ecosystem and recommend suitable measures for enabling such entities to meet the growing requirements of the financial sector," Das said.

In her Budget speech in February, Finance Minister Nirmala Sitharaman had called for the setting up of Asset Reconstruction Company and Asset Management Company. The high level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books, she had said.

"An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realisation," she added.

In 2002, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act was passed. Regulatory guidelines for ARCs were issued in 2003 to enable development of this sector and to facilitate smooth functioning of these companies.