RBI restrictions under SARFAESI Act cited; company never became operational
Mumbai, November 4, 2025:
The Maharashtra government has formally approved the closure of MAHA ARC Limited, the state’s asset reconstruction company (ARC) that was established in 2022 to handle stressed and non-performing assets linked to state entities.
A Government Resolution (GR) issued by the Finance Department on November 4, 2025, confirmed that the company—set up to mirror the Centre’s National Asset Reconstruction Company Limited (NARCL)—will now be wound up after failing to commence operations due to regulatory restrictions from the Reserve Bank of India (RBI).
Background: An Ambitious State-Level NARCL
MAHA ARC Limited was created through a Finance Department notification dated September 27, 2022, to manage distressed and potentially stressed state-linked assets. The initiative aimed to restructure and monetize state-level stressed properties and to support financial institutions facing liquidity challenges.
The model was inspired by the National Asset Reconstruction Company (NARCL), the Central government’s “bad bank” initiative, designed to acquire and resolve non-performing assets from banks to stabilize the financial system.
However, MAHA ARC Limited could not start its operations as planned.
Why the Project Was Halted
According to the government resolution, the Reserve Bank of India (RBI), through its circular dated June 26, 2023, clarified that under Section 3(1) and Section 3(3)(f) of the SARFAESI Act, 2002, the MAHA ARC Limited did not meet the regulatory criteria required to function as an official Asset Reconstruction Company (ARC).
This meant that the company, though registered under the Companies Act, could not legally operate as an ARC, halting its activities before any asset acquisition or restructuring could begin.
Cabinet Decision: Closure Approved
The decision to dissolve the company was placed before the Maharashtra State Cabinet in its meeting held on November 4, 2025, where it was formally approved.
The government has now authorized the Additional Chief Secretary (Finance)—who also served as the Chairperson of MAHA ARC Limited—to take all necessary procedural steps to close down the company.
The GR states that the decision is taken under the approval of the Governor of Maharashtra and has been digitally signed by Smita Vanitkar, Joint Secretary, Finance Department.
Policy Significance
The closure of MAHA ARC Limited underscores the regulatory complexities surrounding asset reconstruction at the state level. Unlike national-level bad banks, which operate under RBI-approved frameworks, state-owned entities require separate compliance under the SARFAESI Act.
The decision also signals that state financial interventions in distressed asset recovery will continue to depend primarily on national-level mechanisms like NARCL, rather than state-run ARCs.
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