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With reference to the bad bank, consider the following statements:
1. The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.
2. The takeover of bad loans is normally below the loan's book value, and the bad bank tries to recover as much as possible subsequently.
1. The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.
2. The takeover of bad loans is normally below the loan's book value, and the bad bank tries to recover as much as possible subsequently.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
With reference to the bad bank, consider the following statements:1. T...
As the problem of non-performing assets (NPAs), or loans on which borrowers have defaulted, persists in a sector stressed by the pandemic, the RBI Governor has agreed to look at a proposal for creating a bad bank.
- A bad bank conveys the impression that it will function as a bank but has bad assets to start with.
- Technically, a bad bank is an asset reconstruction company (ARC) or an asset management company that takes over the bad loans of commercial banks, manages them and finally recovers the money over a period of time.
- The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.
- The takeover of bad loans is normally below the book value of the loan and the bad bank tries to recover as much as possible subsequently.
- US-based Mellon Bank created the first bad bank in 1988, after which the concept has been implemented in other countries including Sweden, Finland, France and Germany.
Most Upvoted Answer
With reference to the bad bank, consider the following statements:1. T...
Explanation:
Statement 1: The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.
This statement is correct. A bad bank is a separate entity that is established to take over bad loans from commercial banks. Its main purpose is to clean up the balance sheets of these banks and help them resolve bad loans. The bad bank does not engage in traditional banking activities such as lending or taking deposits.
Statement 2: The takeover of bad loans is normally below the loans book value, and the bad bank tries to recover as much as possible subsequently.
This statement is also correct. When a bad bank takes over bad loans from commercial banks, it usually does so at a price that is below the loans' book value. The book value is the value of the loan as recorded on the bank's balance sheet. This is because the bad loans are considered to be risky and may not be fully recoverable. The bad bank then tries to recover as much as possible from these bad loans through various means, such as restructuring the loans, selling collateral, or pursuing legal action against defaulting borrowers.
Conclusion: Both statements 1 and 2 are correct. The bad bank's role is to help commercial banks clean up their balance sheets by taking over bad loans. The takeover of bad loans is usually at a price below the loans' book value, and the bad bank tries to recover as much as possible from these loans subsequently.
Statement 1: The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.
This statement is correct. A bad bank is a separate entity that is established to take over bad loans from commercial banks. Its main purpose is to clean up the balance sheets of these banks and help them resolve bad loans. The bad bank does not engage in traditional banking activities such as lending or taking deposits.
Statement 2: The takeover of bad loans is normally below the loans book value, and the bad bank tries to recover as much as possible subsequently.
This statement is also correct. When a bad bank takes over bad loans from commercial banks, it usually does so at a price that is below the loans' book value. The book value is the value of the loan as recorded on the bank's balance sheet. This is because the bad loans are considered to be risky and may not be fully recoverable. The bad bank then tries to recover as much as possible from these bad loans through various means, such as restructuring the loans, selling collateral, or pursuing legal action against defaulting borrowers.
Conclusion: Both statements 1 and 2 are correct. The bad bank's role is to help commercial banks clean up their balance sheets by taking over bad loans. The takeover of bad loans is usually at a price below the loans' book value, and the bad bank tries to recover as much as possible from these loans subsequently.
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With reference to the bad bank, consider the following statements:1. The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.2. The takeover of bad loans is normally below the loans book value, and the bad bank tries to recover as much as possible subsequently.Which of the statements given above is/are correct? a)1 only b)2 only c)Both 1 and 2 d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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With reference to the bad bank, consider the following statements:1. The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.2. The takeover of bad loans is normally below the loans book value, and the bad bank tries to recover as much as possible subsequently.Which of the statements given above is/are correct? a)1 only b)2 only c)Both 1 and 2 d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for Current Affairs 2024 is part of Current Affairs preparation. The Question and answers have been prepared according to the Current Affairs exam syllabus. Information about With reference to the bad bank, consider the following statements:1. The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.2. The takeover of bad loans is normally below the loans book value, and the bad bank tries to recover as much as possible subsequently.Which of the statements given above is/are correct? a)1 only b)2 only c)Both 1 and 2 d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for Current Affairs 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to the bad bank, consider the following statements:1. The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.2. The takeover of bad loans is normally below the loans book value, and the bad bank tries to recover as much as possible subsequently.Which of the statements given above is/are correct? a)1 only b)2 only c)Both 1 and 2 d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
With reference to the bad bank, consider the following statements:1. The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.2. The takeover of bad loans is normally below the loans book value, and the bad bank tries to recover as much as possible subsequently.Which of the statements given above is/are correct? a)1 only b)2 only c)Both 1 and 2 d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for Current Affairs 2024 is part of Current Affairs preparation. The Question and answers have been prepared according to the Current Affairs exam syllabus. Information about With reference to the bad bank, consider the following statements:1. The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.2. The takeover of bad loans is normally below the loans book value, and the bad bank tries to recover as much as possible subsequently.Which of the statements given above is/are correct? a)1 only b)2 only c)Both 1 and 2 d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for Current Affairs 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to the bad bank, consider the following statements:1. The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.2. The takeover of bad loans is normally below the loans book value, and the bad bank tries to recover as much as possible subsequently.Which of the statements given above is/are correct? a)1 only b)2 only c)Both 1 and 2 d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
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