BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The commission paid by banks
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The fees charged from loan defaulters
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The difference in amounts recovered from the accounts less the amount paid to the bank for buying the account
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The retainer fees by the banks
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Detailed explanation-1: -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-2: -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-3: -The word “asset reconstruction” in India owes its origin to Narsimham I which envisaged the setting up of a central Asset Reconstruction Fund with money contributed by the Central Government, which was to be used by banks to shore up their balance sheets to clean up their non-performing loans.
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.