BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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By buying the non performing assets of banks
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Acts as recovery agents for banks
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Converts non performing assets into performing accounts
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Helps in rehabilitation of weak accounts by rescheduling the repayment plans
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Detailed explanation-1: -An Asset Reconstruction Company is a specialized financial institution that buys the NPAs or bad assets from banks and financial institutions so that the latter can clean up their balance sheets. In other words, ARCs are in the business of buying bad loans from banks.
Detailed explanation-2: -Financial lenders can recover their losses by selling out the NPA or taking its possession. Banks and financial lenders can also sell of the loan on the NPA to any other bank to recover their losses.
Detailed explanation-3: -The business of these companies is to buy bad loans from banks at a steep discount. These companies then take special measures to recover the money owed. If they are able to recover the money, they make a profit, if not they lose the money.
Detailed explanation-4: -ASREC is a securitization company carrying out activities under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002.
Detailed explanation-5: -What is an Asset Reconstruction Company (ARC)? It is a specialized financial institution that buys the Non-Performing Assets (NPAs) from banks and financial institutions so that they can clean up their balance sheets. This helps banks to concentrate on normal banking activities.