In a recent announcement, the Reserve Bank of India has allowed Indian lenders to sell loans that have been identified as fraudulent or bad loans to asset reconstruction companies. The new policy will allow banks and other lending institutions to offload their risk by selling these loans.
“The RBI is giving lenders more options for dealing with fraud, which can lead to increased loan losses or reduced profit margins,” said RBI leader, principal at Digital Finance Data. “It’s an option they may not have had before.”
What is the new policy for ARCs?
This new policy should provide relief for banks who are facing pressure from regulators on how best to deal with the rise in fraud cases over the last decade. It should also help them avoid having to take drastic measures like raising interest rates or cutting back on lending.
Why RBI had chosen asset reconstruction companies only? (reason explained)
In the wake of the 2008 financial crisis, lenders have been selling stressed loans to Asset-backed security companies at a discount. This has helped reduce their balance sheets and improve their capital ratios.
The practice of selling off bad debt is an example of risk management in banking — a necessary function in order to create sustainable growth. Lenders with too many problem loans can take advantage of ARCs who are willing to buy these loans for less than what they’re worth in order for them to be removed from the bank’s balance sheet.
These sales help banks maintain or build up their capital levels, which improves lending capacity by freeing up money that would otherwise be used on loan cleanup costs instead. Banks also benefit by getting fees when customers.
That’s why, RBI Team has chosen ACRs to handle this effected lending process assets to recover.
Cutting-edge software helps banks solve compliance issues with no false positives for legitimate customers
Banks can reduce fraud and improve customer experience without sacrificing privacy.
The finance industry is constantly changing. New innovations, regulations and new technologies are popping up every day. One of the newest developments in this space is a proprietary technology that can help banks reduce fraud while also improving customer experience.
The company’s software has been proven to reduce instances of fraudulent transactions by more than 50% with no false positives for legitimate customers, meaning there are fewer delays when it comes to deposits or withdrawals from accounts. This innovative solution will make bank KYC compliance easier for both banks and their customers, without sacrificing on security or performance levels.
PMLA charges against duo for Rs 1.8 crore scam
Recently, the Enforcement Directorate (ED) arrested two individuals in connection with a bank loan fraud. The duo has been charged under Prevention of Money Laundering Act (PMLA) for allegedly siphoning off Rs 1.8 crore from Shakti Bhog Bank Ltd.
These arrests come just days after ED raided and seized cash worth Rs 2.4 crores from an individual’s residence in Mumbai – which is believed to be part of this scam as well- and will help authorities unravel the full extent of the scheme and bring those involved to justice quickly and efficiently.