Economics • Banking & FinanceHard
What is the primary role of the 'Asset Reconstruction Company' (ARC) operating within the Indian financial resolution landscape?
A. To provide fresh equity capital to newly established public sector banks
B. To acquire non-performing assets from banks and financial institutions to facilitate their recovery and resolution✓ Correct Answer
C. To construct physical infrastructure assets financed by municipal bonds
D. To regulate retail lending rates charged by non-banking financial companies
💡 Solution & Explanation
Asset Reconstruction Companies are specialized financial institutions that buy non-performing assets or bad loans from banks and financial institutions at a mutually agreed value, helping clean up bank balance sheets and focusing on asset recovery and resolution. Alternative options misattribute equity infusion or municipal infrastructure development to ARCs. They act as critical intermediaries in resolving banking sector stress under the SARFAESI Act.
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