NPA Current Affairs - 2019
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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.
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.
The Reserve Bank of India (RBI) has slashed the key interest rate, repo rate by 25 basis points or 0.25 per cent to 6 per cent and has decided to maintain the neutral policy stance.
Financial Statement of the RBI
- RBI projected GDP growth at 7.2 per cent for the financial year 2019-20.
- Reverse repo rate under the LAF stands adjusted to 5.75% and the marginal standing facility (MSF) rate and the Bank Rate to 6.25%.
- RBI expects economic growth to be in the range of 6.8-7.1 per cent in the first half of the current financial year, and in the range of 7.3-7.4 per cent in the second half with “risks evenly balanced”.
- Inflation is likely to remain benign in the short term. Assuming a normal monsoon in 2019, the RBI lowered its CPI inflation projection to 2.4 per cent in the fourth quarter of 2018-19.
- For the first half of the current financial year 2019-20, RBI expects inflation at 2.9-3.0 per cent, and 3.5-3.8 per cent in the second half.
- RBI to issue a fresh circular for Banks on how to tackle NPAs since the Supreme Court has struck down the February 2018 circular which gave lender banks six months to resolve their stressed assets or move under the Insolvency Code against private entities who have defaulted in loans worth over Rs 2000 crore.
The rate cut will provide commercial banks more room to pass on the benefit of lower lending rates to loan borrowers. At the same time, it would also translate into a lower interest rate earned by depositors.