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Consider the following statements:
1. An Asset Reconstruction Company (ARC) is a specialized financial institution that buys the Non Performing Assets (NPAs) from banks and financial institutions
2. The SARFAESI Act, 2002 provides a unified mechanism to tackle NPAs in the farm sector.
Which of the above 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 'A'. Can you explain this answer?
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Most Upvoted Answer
Consider the following statements:1. An Asset Reconstruction Company (...
- An Asset Reconstruction Company (ARC) 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. Hence, statement 1 is correct.
- This helps banks to concentrate on normal banking activities. Banks, rather than going after the defaulters by wasting their time and effort, can sell the bad assets to the ARCs at a mutually agreed value.
- The SARFAESI Act, 2002 provides the legal basis for the setting up of ARCs in India.
- At present, there is neither a unified mechanism to tackle NPAs in the farm sector nor a single law that deals with enforcement of mortgages created on agricultural land. Hence, statement 2 is not correct.
- Agriculture being a state subject, the recovery laws, wherever agricultural land is offered as collateral – varies from state to state.
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Community Answer
Consider the following statements:1. An Asset Reconstruction Company (...
The correct answer is option A, i.e., statement 1 only.
Explanation:
1. An Asset Reconstruction Company (ARC) is a specialized financial institution that buys the Non Performing Assets (NPAs) from banks and financial institutions:
- An Asset Reconstruction Company (ARC) is a specialized financial institution that is established to acquire and resolve Non Performing Assets (NPAs) from banks and financial institutions.
- NPAs are loans or advances that have gone into default, where the borrower has failed to repay the principal and interest amount for a specified period of time.
- ARCs play a crucial role in the banking system by helping banks and financial institutions manage their NPAs and improve their financial health.
- ARCs purchase NPAs from banks and financial institutions at a discounted price and then attempt to recover the dues from the defaulting borrowers through various measures like restructuring, recovery, or sale of assets.
- The establishment and functioning of ARCs in India are regulated by the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
2. The SARFAESI Act, 2002 provides a unified mechanism to tackle NPAs in the farm sector:
- The SARFAESI Act, 2002 is a legislation enacted by the Indian government to facilitate the realization of secured assets by banks and financial institutions.
- It empowers banks and financial institutions to take possession of and sell the assets of borrowers in the event of default.
- While the SARFAESI Act provides a mechanism for the recovery of loans and assets, it does not specifically address NPAs in the farm sector.
- There are other schemes and initiatives by the government, such as debt waiver schemes and agricultural loan restructuring programs, that aim to address the issue of NPAs in the farm sector. However, these initiatives are separate from the SARFAESI Act.
In conclusion, only statement 1 is correct. ARCs are specialized financial institutions that buy NPAs from banks and financial institutions, while the SARFAESI Act, 2002 does not specifically address NPAs in the farm sector.
Explanation:
1. An Asset Reconstruction Company (ARC) is a specialized financial institution that buys the Non Performing Assets (NPAs) from banks and financial institutions:
- An Asset Reconstruction Company (ARC) is a specialized financial institution that is established to acquire and resolve Non Performing Assets (NPAs) from banks and financial institutions.
- NPAs are loans or advances that have gone into default, where the borrower has failed to repay the principal and interest amount for a specified period of time.
- ARCs play a crucial role in the banking system by helping banks and financial institutions manage their NPAs and improve their financial health.
- ARCs purchase NPAs from banks and financial institutions at a discounted price and then attempt to recover the dues from the defaulting borrowers through various measures like restructuring, recovery, or sale of assets.
- The establishment and functioning of ARCs in India are regulated by the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
2. The SARFAESI Act, 2002 provides a unified mechanism to tackle NPAs in the farm sector:
- The SARFAESI Act, 2002 is a legislation enacted by the Indian government to facilitate the realization of secured assets by banks and financial institutions.
- It empowers banks and financial institutions to take possession of and sell the assets of borrowers in the event of default.
- While the SARFAESI Act provides a mechanism for the recovery of loans and assets, it does not specifically address NPAs in the farm sector.
- There are other schemes and initiatives by the government, such as debt waiver schemes and agricultural loan restructuring programs, that aim to address the issue of NPAs in the farm sector. However, these initiatives are separate from the SARFAESI Act.
In conclusion, only statement 1 is correct. ARCs are specialized financial institutions that buy NPAs from banks and financial institutions, while the SARFAESI Act, 2002 does not specifically address NPAs in the farm sector.
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Consider the following statements:1. An Asset Reconstruction Company (ARC) is a specialized financial institution that buys the Non Performing Assets (NPAs) from banks and financial institutions2. The SARFAESI Act, 2002 provides a unified mechanism to tackle NPAs in the farm sector.Which of the above statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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