by the lenders themselves. we have also come across instances where arcs have warehoused the stressed assets, while the originator has continued to remain responsible for the collection as well as custody of the security provided by the borrower. arcs may like to introspect whether they would like them to be a warehousing agency for a fee, which is certainly not in consonance with the underlying intent of the framework. independence of assurance functions boards should accord due importance to assurance functions, namely, risk management, compliance and internal audit. these functions play a critical role in identifying and mitigating risks, ensuring compliance with laws and regulations as well as safeguarding the organization's reputation. boards should ensure that heads of assurance functions are positioned appropriately within the organizational hierarchy and granted direct access to the board. dual - hatting, or combining assurance responsibilities with operational or management duties, undermines the independence and objectivity of assurance functions by creating conflicts of interest. therefore, any dual hatting of assurance functions, should be avoided. 3 / 4 bis - central bankers'speeches during the course of our onsite examinations, it was observed that there is very little appreciation of these requirements. the assurance functions are manned by junior level personnel and at times even left vacant! there is very little training and exposure to industry best standards. consequently, they are often not able to stand up to senior management or report to the board. another area that is receiving closer scrutiny and attention of supervisors is the process followed for disposal of assets. at times, the proposals are not even placed before the independent advisory committee, contrary to regulatory instructions. assets are sold to group entities without following the arms length principle and without subjecting them to scrutiny under related party transactions. another surprising behaviour is the'swiss challenge ', which often goes unchallenged! this has become a routine affair giving rise to a suspicion that there may be some implicit understanding among the various participants. it will not be out of place if i mention here that such happenings are necessitating the supervisors to lift the veil and examine the transactions more closely. conclusion in conclusion, i would like to emphasise that the arcs'potential for resolving stressed assets within the system can only be realised with sound governance and adherence to ethical practices by a responsible ownership and a professional management. the boards of arcs should ensure that they do the right thing without needing the regulator to point it out to them. with strong governance, arcs can not only recover but also

revive businesses and rejuvenate the financial system, benefiting both the community and the institution. i sincerely hope that the outcomes of this conference will not only benefit the participants but will also positively impact on the broader economic ecosystem. thank you. 1 asset reconstruction company ( india ) limited was the first arc to be set up in 2002. as at march 31, 2024 there were 27 arcs registered with the reserve bank of india 2 securitization and reconstruction of financial assets and enforcement of security interest act, 2002 4 / 4 bis - central bankers'speeches