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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?
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.
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.
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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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 2025 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 2025 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?.
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 2025 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 2025 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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