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RBI asks ARCs to have a minimum net corpus of Rs100 crore by 2019

The Reserve Bank of India (RBI) has asked all the existing asset reconstruction companies (ARCs) to have a minimum net owned fund (NOF) of Rs100 crore by March 2019. This decision has been taken by RBI in accordance with its last bi-monthly monetary policy in which it had proposed to stipulate a minimum NOF of Rs100 crore taking into consideration the enhanced role and greater cash based transactions carried out by ARCs.

As per amended SARFAESI Act, 2016, ARCs cannot carry on the business of securitisation or asset reconstruction without having NOF of not less than Rs 2 crore or any other amount stipulated by the RBI. As per the notification of RBI,

the existing ARCs not meeting the minimum NOF criteria need to achieve the minimum NOF of Rs100 crore latest by 31 March 2019.

Asset Reconstruction companies (ARCs)

ARC is a company registered under Section 3 of the Securitization and reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. ARCs are regulated by the RBI. They are the specialised agencies with a main role of resolving the stressed assets issue of the Indian banking system. They are involved in buying bad loans from Indian banks to turn them around.

ARCs are similar to the asset management companies present in countries like Malaysia, Korea and several other countries. Narsimham Committee – II (1998) proposed setting up of ARCs on the similar lines with that of asset management companies present globally. The main advantage of ARCs is they help the banks to concentrate on normal banking operations rather than dealing with stressed assets

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India’s Forex reserves increase by $1.25 billion

According to the Reserve Bank of India’s weekly statistical supplement, India’s foreign exchange (Forex) reserves have increased by $1.25 billion to reach $371.13 billion from $369.88 billion as on April 21, 2017. The current reserves are just short of a lifetime high of USD 371.99 billion reached in the week to September 30, 2016.

Components

The components of India’s Foreign Exchange Reserves include:

  • Foreign currency assets (FCAs)
  • Gold
  • Special Drawing Rights (SDRs)
  • RBI’s Reserve position with International Monetary Fund (IMF)

FCAs constitute the largest component of the Forex Reserves. It was augmented by $1.23 billion to $347.48 billion as on April 21, 2017. FCAs consist of US dollar and other major non-US global currencies. It also comprises of investments in US Treasury bonds, bonds of other selected governments, deposits with foreign central and commercial banks.

The gold reserves stand at $19.86 billion.

SDRs’ value has increased $5 million to $1.45 billion.

RBI’s reserve position with the IMF stands to $2.33 billion.

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