Asset Reconstruction Company (ARC) is a specialized financial institution that buys the Non-Performing Assets (NPAs) from banks and financial institutions. It helps banks in cleaning up their balance sheets by buying their bad loans Bad loan = NPA (Non-Performing Asset).
ARCs clean up the balance sheets of banks when the latter sells these assets to the ARCs. This inturn helps banks to concentrate in normal banking activities. Banks rather than going after the defaulters by wasting their time and effort are able to sell the bad assets tot e ARCs at a mutually agreed sum. With a view to quicken the process of resolving the issue of Stressed Assets, RBI is framing an alternate route. Here is an excerpt on the above.
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