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Consider the following statements about Asset Reconstruction Companies (ARCs):
  • ARCs are specialized financial institutions regulated under The Banking Regulation Act, 1949.
  • ARCs purchase the bad debts of a bank at a mutually agreed value and attempt to recover those debts or associated securities by themselves.
  • All the rights previously held by the lender (the bank) in regard to the debt are transferred to the ARC.
How many of the statements given above are correct?
  • a)
    Only one
  • b)
    Only two
  • c)
    All three
  • d)
    None of the above
Correct answer is option 'B'. Can you explain this answer?
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Verified Answer
Consider the following statements about Asset Reconstruction Companies...
Statement Analysis
  • Statement 1: Incorrect
    • ARCs are registered under the RBI and regulated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act, 2002).
    • They function under the supervision and control of the RBI.
  • Statement 2: Correct
    • An ARC is a specialized financial institution that purchases the bad debts of a bank at a mutually agreed value and attempts to recover those debts or associated securities by itself.
    • As per the RBI, ARC performs the functions namely Acquisition of financial assets, Change or takeover of Management or Sale or Lease of Business of the Borrower, Rescheduling of Debts, Enforcement of Security Interest, and Settlement of dues payable by the borrower.
    • ARCs take over a portion of the bank’s debts, which qualify as Non-Performing Assets (NPAs). Therefore, ARCs are involved in the business of asset reconstruction, securitisation, or both.
  • Statement 3: Correct
    • All the rights previously held by the lender (the bank) in regard to the debt are transferred to the ARC. The required funds to purchase such debts can be raised from Qualified Buyers.
    • Qualified Buyers include Financial Institutions, Insurance companies, Banks, State Financial Corporations, State Industrial Development Corporations, trustees or ARCs registered under SARFAESI and Asset Management Companies registered under SEBI that invest on behalf of mutual funds, pension funds, FIIs, etc.
    • The Qualified Buyers are the only persons from whom the ARC can raise funds.
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Most Upvoted Answer
Consider the following statements about Asset Reconstruction Companies...
Explanation:

Correct Statement:
- The correct statement is statement 2: ARCs purchase the bad debts of a bank at a mutually agreed value and attempt to recover those debts or associated securities by themselves.

Incorrect Statements:
- Statement 1 is incorrect as ARCs are not regulated under The Banking Regulation Act, 1949. They are regulated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
- Statement 3 is incorrect as not all rights held by the lender are transferred to the ARC. Some rights may be retained by the lender.
Therefore, only statement 2 is correct, making the correct answer option 'B' - Only two.
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Read the following passage carefully and answer the questions given below it. Certain words/phrases have been underlineto help you locate them while answering some of the questions.The modern world requires us to repose trust in many anonymous institutions. We strap ourselves in a flying tin can with two hundred other people not because we know the pilot but because we believe that airline travel is safe. Our trust in these institutions depends on two factors : skills and ethics. We expect that the people who run these institutions know what they are doing, that they build and operate machines that work as they are supposed to and that they are looking out for our welfare even though we are strangers.When one of these factors is weak or absent, trust breaks down and we either pay a high price in safety- as in the Bhopal tragedy -or a large ‘welfare premium’ such as the elaborate security measures at airports. Trust-deficient environments work in the favour of the rich and powerful, who can commandpremiumtreatment and afford welfare premiums. Poor people can command neither; which is why air travel is safer than train travel, which in turn is safer than walking by the road side.Every modern society depends on the trust in the skills and ethics of a variety of institutions such as schools and colleges, hospital and markets. If we stopped believing in theexpertiseof our teachers, doctors and engineers, we will stop being a modern society.As the Institution among institutions, it is the duty of the state to ensure that all other institutions meet their ethicalobligations. The Indian state has failed in its regulatory role. Consequently, we cannot trust our schools to turn out good graduates, we cannot ensure that our colleges turn out well trained engineers and we cannot guarantee that our engineers will turn out to be good products.Last year, I was invited to speak at an undergraduate research conference. Most of the participants in this conference were students at the best engineering colleges in the State. One student who was driving me back and forthrecounteda story about the previous year’s final exam. One of his papers had a question from a leading textbook to which the textbook’s answer was wrong. The student was in a dilemma : should he write the (wrong) answer as given in the textbook or should he write the right answer using his own analytical skills. He decided to do the latter and received a zero on that question. Clearly, as the student had suspected, the examiners were looking at the textbook answer while correcting the examination papers instead of verifying its correctness.The behaviour of these examiners is a breakdown of institutional morals, with consequences for the skills acquired by students. I say institutional morals, for the failure of these examiners is not a personal failure. At the same conference I met a whole range of college teachers, all of whom were drafted as examiners at some time or the other. Without exception, they were dedicated individuals who cared about the education and welfare of their students. However, when put in the institutional role of evaluating an anonymous individual, they fail in fulfilling their responsibilities. When some of our best colleges are run in this fashion, is it any wonder that we turn outunskilledengineers and scientists ? If, as we are led to expect, there is a vast increase in education at all levels and the regulatory regime is as weak as it is currently, isn’t it likely that the trust deficit is only going to increase ?We are all aware of the consequences of ignoring corruption at all levels of society. While institutional failures in governance are obvious, I think the real problem lies deeper, in the failure of every day institutions that are quite apart from institutions that impinge on our lives only on rare occasions. It is true that our lives are made more miserable by government officials demanding bribes for all sorts of things, but what about the everyday lying andcheating and breaking of rules with people who are strangers ?Let me give you an example that many of us have experienced. I prefer buying my fruits and vegetables from roadside vendors rather than chain stores. To the vendor, I am probably an ideal customer, since I do not bargain and I do not take hours choosing the best pieces, instead, letting the vendor do the selecting. The market near my house is quite busy; as a result, most vendors are selling their wares to strangers. It takes a while before a particular vendor realises that I am arepeatcustomer. In such a situation trust is crucial. I have a simple rule : if a vendorpalms offa bad piece whose defects are obvious, I never go back to that person again. It is amazing how often that happens.In my opinion, the failure of institutional ethics is as much about these little abuses of trust as anything else. Everyday thievery is like roadside trash; if you let it accumulate the whole neighbourhood stinks.Q. Why, according to the author, do people repose trust in Institutions they do not know ?

Read the following passage carefully and answer the questions given below it. Certain words/phrases have been underlineto help you locate them while answering some of the questions.The modern world requires us to repose trust in many anonymous institutions. We strap ourselves in a flying tin can with two hundred other people not because we know the pilot but because we believe that airline travel is safe. Our trust in these institutions depends on two factors : skills and ethics. We expect that the people who run these institutions know what they are doing, that they build and operate machines that work as they are supposed to and that they are looking out for our welfare even though we are strangers.When one of these factors is weak or absent, trust breaks down and we either pay a high price in safety- as in the Bhopal tragedy -or a large ‘welfare premium’ such as the elaborate security measures at airports. Trust-deficient environments work in the favour of the rich and powerful, who can commandpremiumtreatment and afford welfare premiums. Poor people can command neither; which is why air travel is safer than train travel, which in turn is safer than walking by the road side.Every modern society depends on the trust in the skills and ethics of a variety of institutions such as schools and colleges, hospital and markets. If we stopped believing in theexpertiseof our teachers, doctors and engineers, we will stop being a modern society.As the Institution among institutions, it is the duty of the state to ensure that all other institutions meet their ethicalobligations. The Indian state has failed in its regulatory role. Consequently, we cannot trust our schools to turn out good graduates, we cannot ensure that our colleges turn out well trained engineers and we cannot guarantee that our engineers will turn out to be good products.Last year, I was invited to speak at an undergraduate research conference. Most of the participants in this conference were students at the best engineering colleges in the State. One student who was driving me back and forthrecounteda story about the previous year’s final exam. One of his papers had a question from a leading textbook to which the textbook’s answer was wrong. The student was in a dilemma : should he write the (wrong) answer as given in the textbook or should he write the right answer using his own analytical skills. He decided to do the latter and received a zero on that question. Clearly, as the student had suspected, the examiners were looking at the textbook answer while correcting the examination papers instead of verifying its correctness.The behaviour of these examiners is a breakdown of institutional morals, with consequences for the skills acquired by students. I say institutional morals, for the failure of these examiners is not a personal failure. At the same conference I met a whole range of college teachers, all of whom were drafted as examiners at some time or the other. Without exception, they were dedicated individuals who cared about the education and welfare of their students. However, when put in the institutional role of evaluating an anonymous individual, they fail in fulfilling their responsibilities. When some of our best colleges are run in this fashion, is it any wonder that we turn outunskilledengineers and scientists ? If, as we are led to expect, there is a vast increase in education at all levels and the regulatory regime is as weak as it is currently, isn’t it likely that the trust deficit is only going to increase ?We are all aware of the consequences of ignoring corruption at all levels of society. While institutional failures in governance are obvious, I think the real problem lies deeper, in the failure of every day institutions that are quite apart from institutions that impinge on our lives only on rare occasions. It is true that our lives are made more miserable by government officials demanding bribes for all sorts of things, but what about the everyday lying andcheating and breaking of rules with people who are strangers ?Let me give you an example that many of us have experienced. I prefer buying my fruits and vegetables from roadside vendors rather than chain stores. To the vendor, I am probably an ideal customer, since I do not bargain and I do not take hours choosing the best pieces, instead, letting the vendor do the selecting. The market near my house is quite busy; as a result, most vendors are selling their wares to strangers. It takes a while before a particular vendor realises that I am arepeatcustomer. In such a situation trust is crucial. I have a simple rule : if a vendorpalms offa bad piece whose defects are obvious, I never go back to that person again. It is amazing how often that happens.In my opinion, the failure of institutional ethics is as much about these little abuses of trust as anything else. Everyday thievery is like roadside trash; if you let it accumulate the whole neighbourhood stinks.Q. Why, according to the author, is the behaviour of examiners a breakdown of institutional morals ?

Read the following passage carefully and answer the questions given below it. Certain words/phrases have beenunderlineto help you locate them while answering some of the questions.The modern world requires us to repose trust in many anonymous institutions. We strap ourselves in a flying tin can with two hundred other people not because we know the pilot but because we believe that airline travel is safe. Our trust in these institutions depends on two factors : skills and ethics. We expect that the people who run these institutions know what they are doing, that they build and operate machines that work as they are supposed to and that they are looking out for our welfare even though we are strangers.When one of these factors is weak or absent, trust breaks down and we either pay a high price in safety- as in the Bhopal tragedy -or a large ‘welfare premium’ such as the elaborate security measures at airports. Trust-deficient environments work in the favour of the rich and powerful, who can commandpremiumtreatment and afford welfare premiums. Poor people can command neither; which is why air travel is safer than train travel, which in turn is safer than walking by the road side.Every modern society depends on the trust in the skills and ethics of a variety of institutions such as schools and colleges, hospital and markets. If we stopped believing in theexpertiseof our teachers, doctors and engineers, we will stop being a modern society.As the Institution among institutions, it is the duty of the state to ensure that all other institutions meet their ethicalobligations. The Indian state has failed in its regulatory role. Consequently, we cannot trust our schools to turn out good graduates, we cannot ensure that our colleges turn out well trained engineers and we cannot guarantee that our engineers will turn out to be good products.Last year, I was invited to speak at an undergraduate research conference. Most of the participants in this conference were students at the best engineering colleges in the State. One student who was driving me back and forthrecounteda story about the previous year’s final exam. One of his papers had a question from a leading textbook to which the textbook’s answer was wrong. The student was in a dilemma : should he write the (wrong) answer as given in the textbook or should he write the right answer using his own analytical skills. He decided to do the latter and received a zero on that question. Clearly, as the student had suspected, the examiners were looking at the textbook answer while correcting the examination papers instead of verifying its correctness.The behaviour of these examiners is a breakdown of institutional morals, with consequences for the skills acquired by students. I say institutional morals, for the failure of these examiners is not a personal failure. At the same conference I met a whole range of college teachers, all of whom were drafted as examiners at some time or the other. Without exception, they were dedicated individuals who cared about the education and welfare of their students. However, when put in the institutional role of evaluating an anonymous individual, they fail in fulfilling their responsibilities. When some of our best colleges are run in this fashion, is it any wonder that we turn outunskilledengineers and scientists ? If, as we are led to expect, there is a vast increase in education at all levels and the regulatory regime is as weak as it is currently, isn’t it likely that the trust deficit is only going to increase ?We are all aware of the consequences of ignoring corruption at all levels of society. While institutional failures in governance are obvious, I think the real problem lies deeper, in the failure of every day institutions that are quite apart from institutions that impinge on our lives only on rare occasions. It is true that our lives are made more miserable by government officials demanding bribes for all sorts of things, but what about the everyday lying andcheating and breaking of rules with people who are strangers ?Let me give you an example that many of us have experienced. I prefer buying my fruits and vegetables from roadside vendors rather than chain stores. 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Direction: Non-Banking Financial Companies (NBFCs) are financial institutions that provide banking services without holding a banking license. They operate in various segments such as consumer finance, vehicle finance, housing finance, and microfinance, among others. Banks provide finance to NBFCs in the form of term loans, working capital loans, and credit lines. The finance is typically used by NBFCs to fund their lending activities, purchase assets, and other operational expenses. Banks also provide credit enhancement facilities such as guarantees and letters of credit to support NBFCs in raising funds from the market. The Reserve Bank of India (RBI) regulates the lending activities of banks to NBFCs. The RBI has mandated that banks should classify their lending to NBFCs as per their risk assessment and ensure that the exposure to individual NBFCs does not exceed the prescribed limits.Q. Which of the following institutions is not included in the definition of NBFC?

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Consider the following statements about Asset Reconstruction Companies (ARCs): ARCs are specialized financial institutions regulated under The Banking Regulation Act, 1949. ARCs purchase the bad debts of a bank at a mutually agreed value and attempt to recover those debts or associated securities by themselves. All the rights previously held by the lender (the bank) in regard to the debt are transferred to the ARC.How many of the statements given above are correct?a)Only oneb)Only twoc)All threed)None of the aboveCorrect answer is option 'B'. Can you explain this answer?
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Consider the following statements about Asset Reconstruction Companies (ARCs): ARCs are specialized financial institutions regulated under The Banking Regulation Act, 1949. ARCs purchase the bad debts of a bank at a mutually agreed value and attempt to recover those debts or associated securities by themselves. All the rights previously held by the lender (the bank) in regard to the debt are transferred to the ARC.How many of the statements given above are correct?a)Only oneb)Only twoc)All threed)None of the aboveCorrect answer is option 'B'. Can you explain this answer? for Bank Exams 2024 is part of Bank Exams preparation. The Question and answers have been prepared according to the Bank Exams exam syllabus. Information about Consider the following statements about Asset Reconstruction Companies (ARCs): ARCs are specialized financial institutions regulated under The Banking Regulation Act, 1949. ARCs purchase the bad debts of a bank at a mutually agreed value and attempt to recover those debts or associated securities by themselves. All the rights previously held by the lender (the bank) in regard to the debt are transferred to the ARC.How many of the statements given above are correct?a)Only oneb)Only twoc)All threed)None of the aboveCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Bank Exams 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements about Asset Reconstruction Companies (ARCs): ARCs are specialized financial institutions regulated under The Banking Regulation Act, 1949. ARCs purchase the bad debts of a bank at a mutually agreed value and attempt to recover those debts or associated securities by themselves. All the rights previously held by the lender (the bank) in regard to the debt are transferred to the ARC.How many of the statements given above are correct?a)Only oneb)Only twoc)All threed)None of the aboveCorrect answer is option 'B'. Can you explain this answer?.
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