Reserve Bank on Thursday permitted asset reconstruction companies (ARCs) to convert debt of crisis-ridden companies into equities as part of restructuring process.Securitisation or reconstruction companies are permitted to convert a portion of debt into shares of the borrower company as a measure of asset reconstruction provided their shareholding does not exceed 26% of the post converted equity of the company under reconstruction," RBI said in a notification.

Source - http://www.financialexpress.com