RBI allowed Lenders to Sell Fraud Loans to ARCs

Published on September 25, 2021
Current Context: The Reserve Bank of India (RBI) has allowed the transfer of loans which are classified as fraud by lenders to asset reconstruction companies (ARCs).
RBI allowed Lenders to Sell Fraud Loans to ARCs
  • This will give the way for the resolution of such accounts.
  • Post the transfer, the legal responsibilities like reporting, monitoring, filing of complaints with law enforcement agencies etc will move to the ARCs.
  • The decision by RBI will grant the way for focussed recovery efforts on loans that are trillions of rupees worth.
  • So, by taking the RBI’s permission and with subject to some conditions, the banks will now be able to sell stressed loans in default for more than 60 days or those classified as bad loans including fraudulent loans.
  • However, transfer of these exposures to ARC does not absolve the lender from fixing staff accountability which is required under the extant instructions on frauds.
  • Static Part: 
    • HQ of RBI: Mumbai
    • Governor of RBI: Shaktikanta Das

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