Financial Institutions Current Affairs - 2019

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RBI permits ARC to buy financial assets from Peers

The Reserve Bank of India (RBI) has permitted Asset Reconstruction Companies (ARCs) to acquire financial assets from peers i.e. other such entities. However, RBI, the apex banking regulator cleared that all such transactions have to be settled in cash.

Key Highlights

The ARCs have been allowed to acquire financial assets from other ARCs, in the view of amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002.

Conditions: for transfer of assets by one ARC to another includes-

  • Price discovery for such transaction shall not be disadvantageous to interest of Security Receipt holders. Also selling ARC must utilise proceeds so received for redemption of underlying security receipts.
  • Redemption date of underlying Security Receipts and total Period of Realisation (conversion of assets, goods & services into cash or receivables through sale) should not extend beyond a period of 8 years from date of acquisition of financial asset by 1st ARC.
  • All such transactions have to be settled in cash.

Significance: This decision by RBI will help improve liquidity in Asset Reconstruction Companies’ market.

About SARFAESI Act, 2002

It lets banks as well as other financial institutions (FIs) of India auction commercial or residential properties (of defaulters) for purpose of loan recovery.

Asset Reconstruction Companies (ARC) was established under this act.

It was made to identify and rectify problem of Non-Performing Assets (NPAs) via multiple mechanisms.

Month: Categories: Business, Economy & Banking

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Proceeds from Disinvestments exceeds Target

The proceeds from the disinvestments have exceeded the disinvestment target for the fiscal 2018-19 by Rs 5,000 crore taking the total proceeds to Rs 85,000 crore against the targeted Rs 80000 Cr.

Disinvestments

Disinvestment refers to the process of public asset sales by the government of India. Industrial Policy provides that in order to raise resources and encourage wide public participation, a part of the government shareholding in the public sector would be offered to mutual funds, financial institutions, general public and employees.

Disinvestments are undertaken to fulfil the objectives such as modernisation of the public sector through strengthening R & D, initiating diversification/ expansion programmes, retraining and re-employment of employees, funding genuine needs of expansion, widening the capital market basis and mitigating fiscal deficit of the government.

Financial Year: Proceeds from Disinvestment

2014-15: Rs 26,068 crore

2015-16: Rs 23,997 crore

2016-17: Rs 46,247 crore

2017-18: Rs 1,00,056 crore

This is the second highest disinvestment proceeds in a financial year and the government in fiscal 2017-18 had mopped up a little over Rs 1 lakh crore against the target of Rs 72,500 crore. The government has set a target of Rs 90000 crore for fiscal 2019-20.

Month: Categories: Business, Economy & BankingUPSC

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