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What is public sector asset rehabilitation agency?

Author

James Craig

Updated on February 18, 2026

What is public sector asset rehabilitation agency?

The Public Sector Asset Rehabilitation Agency (PARA) colloquially called “Bad Bank” is a proposed agency to assume the Non-Performing Assets (NPA) of public sector banks in India and to deal with the recovery of the bad loans. This agency has been proposed in Economic Survey 2016-17.

Just so, what is Asset Reconstruction Company?

An Asset Reconstruction Company is a specialized financial institution that buys the NPAs or bad assets from banks and financial institutions so that the latter can clean up their balance sheets. Or in other words, ARCs are in the business of buying bad loans from banks.

Furthermore, what is para bank? Banks can undertake certain eligible financial services or activities either departmentally or by setting up subsidiaries is called Para Banking. We could also define Para banking activities as the activities which are done by a Bank apart from its normal day to day activities (like deposit, withdrawal etc.).

Additionally, what is twin balance sheet Syndrome?

Twin balance sheet problem refers to the stress on balance sheets of banks due to non-performing assets (NPAs) or bad loans on the one hand, and heavily indebted corporates on the other.

How does asset reconstruction work?

An Asset Reconstruction Company is a specialized financial institution that buys the NPAs or bad assets from banks and financial institutions so that the latter can clean up their balance sheets. This helps banks to concentrate in normal banking activities.

How do arcs work?

Asset Reconstruction Companies (ARC), purchases the bad loans or non performing assets (NPA) issued by commercial and other banks. Example: Suppose a bank has issued a loan worth 100 crore to a company which has turned out to be bad, an asset reconstruction company purchases that loan from bank for less than 100 crore.

Who is the head of asset reconstruction company?

Anil Bhatia is the Managing Director and Chief Executive Officer of JM Financial Asset Reconstruction Company since the last 8 years.

How do asset reconstruction companies make profit?

Asset reconstruction companies are in the business of buying bad loans from banks. For instance, if a bank lends money to a person or company, they expect to receive periodic payments of principal and interest. If they are able to recover the money, they make a profit, if not they lose the money.

What is securitization with example?

Securitization is the process of turning assets into securities. An asset that takes longer to convert to cash and will likely sell for a price lower than market value is called an illiquid asset. For example, a money market account is an account at a bank used to store cash.

How do I register an asset reconstruction company?

Hence it can be stated that the simple procedure to be followed to obtain registration of an ARC from RBI is
  1. Registration of company under companies act as a public limited or private limited company.
  2. Arranging a start-up net worth of Rs 100cr.
  3. Registering under RBI by meeting to the eligibility criteria.

What is ARC in finance?

Accounts receivable conversion (or ARC) is a process that allows paper checks to be electronically scanned and converted into an electronic payment through the Automated Clearing House (ACH). Both the vendor and the bank on which the payment was drawn receive instead an electronic image of the check.

What is Securitisation and reconstruction company?

"Securitisation companies or reconstruction companies" means a company formed under Recovery of debts due to Banks and financial institutions act, 1993 and registered under the Companies Act for the purpose of asset reconstruction.

How do you solve twin balance sheet problems?

Earlier steps to address the problem of NPA or TBS
  1. 5/25 Refinancing of Infrastructure Scheme.
  2. Private Asset Reconstruction Companies (ARCs)
  3. The Strategic Debt Restructuring (SDR) scheme.
  4. Asset Quality Review (AQR)
  5. The Scheme for Sustainable Structuring of Stressed Assets (S4A)

What is triple balance sheet?

Triple balance sheet problem
When banks refrained from lending in the wake of their struggle to contain NPAs, NBFCs became major lenders. This credit flow not only boosted investment but private consumption as well.

What is balance sheet Syndrome?

Balance sheet syndrome is a depiction or expression of unhealthy balance sheet which is due to either by cooked figures or window dressed or when investments are met by debts or similar situations resulting in difficulty for the firms to even service the debt. Balance sheet syndrome with Indian characteristics.

What is bad bank concept?

A bad bank is a corporate structure which isolates illiquid and high risk assets held by a bank or a financial organisation, or perhaps a group of banks or financial organisations. In these circumstances, the bank may wish to segregate its "good" assets from its "bad" assets through the creation of a bad bank.

What do you mean by balance sheet?

Definition: Balance Sheet is the financial statement of a company which includes assets, liabilities, equity capital, total debt, etc. at a point in time. Balance sheet includes assets on one side, and liabilities on the other. Balance Sheet has two main heads –assets and liabilities. Let's understand each one of them.

What is twin balance sheet problem mrunal?

Twin Balance Sheet Problem (TBS) deals with two balance sheet problems. Thus, TBS is two two-fold problem for Indian economy which deals with: Overleveraged companies – Debt accumulation on companies is very high and thus they are unable to pay interest payments on loans.

What is double balance sheet crisis?

Twin balance sheet problem refers to the stress on balance sheets of banks due to non-performing assets (NPAs) or bad loans on the one hand, and heavily indebted corporates on the other.

What is an offshore bank account?

An offshore bank is a bank regulated under international banking license (often called offshore license), which usually prohibits the bank from establishing any business activities in the jurisdiction of establishment. An account held in a foreign offshore bank, is often described as an offshore account.

What is meant by universal banking?

A universal bank is a bank that combines the three main services of banking under one roof. Universal banking is a type of financial service that combines the aspects of investment, retail, and wholesale banking. A typical universal bank also offers other financial services such as insurance.

What are the types of bank?

Types of Banks: They are given below:
  • Commercial Banks: These banks play the most important role in modern economic organisation.
  • Exchange Banks: Exchange banks finance mostly the foreign trade of a country.
  • Industrial Banks:
  • Agricultural or Co-operative Banks:
  • Savings Banks:
  • Central Banks:
  • Utility of Banks:

Which is the first universal bank in India?

Universal Banking :Banknet India. Finally, first Indian Universal Bank will be born on March 31 2002. In effect, this means ICICI will become a bank on that day (provided the Reserve Bank of India gives it nod) fulfilling all the statutory requirements.

What is meant by base rate?

Definition: Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers. Description: Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers.

Which of the following defines para banking services?

Which of the following defines 'Para Banking' services? Para Banking activities that a bank normally involves are Global Debit Card, Global Credit Card, Bancassurance, Life insurance products, Non life insurance products, cash management.

What do you mean by narrow banking?

Narrow banking is the idea that we could create banks that take a "narrow" type of risk by investing only in very high-quality assets like central bank reserves or government bonds. Requiring a bank to fully reserve its deposits does not mean the bank's total assets are safer.

What is para in economics?

The Public Sector Asset Rehabilitation Agency (PARA) colloquially called “Bad Bank” is a proposed agency to assume the Non-Performing Assets (NPA) of public sector banks in India and to deal with the recovery of the bad loans. This agency has been proposed in Economic Survey 2016-17.

What is Islamic banking system?

Key Takeaways. Islamic banking, also known as non-interest banking, is a system based on the principles of Islamic or Sharia law and guided by Islamic economics. Islamic banks make a profit through equity participation which requires a borrower to give the bank a share in their profits rather than paying interest.

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