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[@stutishrivastav7542]

One doubt sir what is tenure of MD and CEO
Tenure of MD/ CEO or WTD shall not be for a period of more than five years at a time and the individual shall be eligible for re-appointment.
These lines I have taken from RBI , can you please explain it

[@anshulikhanna9653]

What are the major challenges faced by asset reconstruction companies in India ? What are the potential solutions ?
Asset reconstruction companies (ARC) are the financial institutions which buy NPA assets to clear their balance sheets and further reconstruct the NPA’s by either restructuring them, enforcement of securities or takeover the management of the business.
Although ARC plays a pivotal tool in managing recovery of NPA , but still various challenges are faced by the arc ‘s as mentioned below :
1.High acquisition cost of assets
ARC buys the NPA from bank or other financial institutions at discounted price which is near book value of assets as accepted by bank which is quite high as compared to losses recovered. The NPA acquired by ARC are valued at Rs 3.8 trillion but recovery is modest showing cost recovery mismatch.
2. Limited funding options
Since ARC are prohibited from raising money by way of deposits and must Ely on equity and debt instruments. According to financial stability report , arc face difficulty in raising funds which makes it difficult for them to scale their operations.
3. Regulatory hurdles
NOF required for ARC is minimum Rs 300 cr which is quite high which can be challenging for small ARC for their existence.
4. Low recovery rate
Recovery rate for stressed assets is very low as compared to their acquisition cost. The average recovery rate for ARC has been around 26 percent affecting the sustainability and profitability of ARC.
5. Decline the volume of stress assets transferred to ARC
IN 2021-22 only 3.2% of gross NPA were transferred from PSU to ARC. Consequently, since the volume of stressed assets transferred is low and recovery rate is also low, hence affecting the profitability of ARC.
6.Other competitors
ARC face challenges from other recovery mechanism which offer quick resolution and faster management of stressed assets like IBC- Insolvency bankruptcy code and direct sales to assets management companies
7. Operational and management challenges
This requires very specialised skills and most to arc lack them, thus posing an efficient system of stress management.
Despite the above challenges, ARC is a very robust concept towards effective management of stressed assists and now we shall discuss the potential solutions to challenges faced by ARC
- ARC to broaden the horizon and should be permitted to acquire seats from FPI and other NBFC irrespective of size of the assets . This would provide more opportunities and valuable assets .
- Regulatory disincentives in the form of penalty to be charged in order of delay of sale of stressed assets which affect the profitability and effectiveness of ARC.
- Regulatory lenders to prepare list of stressed assets which should be disclosed to ARC after entering to confidentiality agreement. This would increase predictability and transparency regarding availability of stressed assets.
-Fraud accounts to be handled efficiently by ARC so that they can be profitable to both banks as well as arc as well.
ARC plays a pivotal role in management of stressed assets is very robust concept for Indian Banking system. However various challenges are faced by ARC whose potential solutions are also discussed which will make this recovery mechanism more stronger and efficient and reduce the NPA considerably.

[@eduttaplearning2031]

Dear @anshulikhanna9653
First, we would like to appreciate your efforts. Remember, Practice transforms potential into mastery; write your path to success, one answer at a time. Here is the detailed feedback on your answer.
Introduction Competence
1. Relevance
a) Feedback - The introduction is relevant, defining ARCs, their purpose, and setting the context for discussing their challenges and solutions.
b) Area of Improvement with proper example - Including a recent context or specific data can make the introduction more engaging. Example: "Despite their critical role, as of 2023, NPAs in the banking sector remain high, necessitating a closer look at the challenges faced by ARCs."
2. Conciseness
a) Feedback - The introduction is concise and within the word limit guidelines.
b) Area of Improvement with proper example - Minor tightening could be beneficial. Example: "ARCs are financial institutions that buy NPAs to clear balance sheets and reconstruct these assets through restructuring, enforcement, or management takeover."
3. Linking to the body
a) Feedback - The introduction ends with a statement that smoothly transitions to the discussion of challenges, effectively linking to the body.
b) Area of Improvement with proper example - A more explicit linking sentence could be added. Example: "Despite their crucial role, ARCs face several significant challenges which we will now explore."
Body Competence
1. Structural Competence
a) Feedback - The body is well-organized with clear points addressing each challenge and solution, making it easy to follow.
b) Area of Improvement with proper example - Using subheadings for each challenge could improve clarity. Example: "1. High Acquisition Costs, 2. Limited Funding Options," etc.
2. Content Competence
a) Feedback - The content is relevant and comprehensive, covering multiple aspects of the challenges faced by ARCs.
b) Area of Improvement with proper example - Each challenge could be expanded with more specific details or examples. Example: "According to a 2023 report by the RBI, ARCs bought ₹3.8 trillion worth of NPAs, but only 25% of the amount was recovered."
3. Use of Examples/Reports
a) Feedback - The answer includes relevant data and reports, enhancing the credibility of the points made.
b) Area of Improvement with proper example - More recent and varied examples would strengthen the argument. Example: "The RBI's Financial Stability Report highlights the capital constraints faced by ARCs due to restricted funding options."
Conclusion Competence
1. Optimistic/Solution
a) Feedback - The conclusion provides forward-looking solutions and emphasizes the importance of addressing these challenges.
b) Area of Improvement with proper example - More specific future projections or initiatives could be included. Example: "Implementing these measures can significantly reduce NPAs and enhance the financial stability of India's banking sector."
2. Synthesis
a) Feedback - The conclusion effectively summarizes the main points discussed in the body and aligns with the introduction.
b) Area of Improvement with proper example - A brief recap of the main challenges and solutions could make the synthesis more effective. Example: "In summary, addressing capital constraints, regulatory hurdles, and skill shortages through comprehensive reforms can revitalize ARCs."
Language Competence
1. Grammar
a) Feedback - The answer has several grammatical errors that affect readability.
b) Area of Improvement with proper example - Attention to minor grammatical details can improve clarity. Example: "ARCs face numerous challenges, including high acquisition costs, low recovery rates, and regulatory hurdles."
2. Spelling
a) Feedback - Spelling is mostly accurate with minor errors.
b) Area of Improvement with proper example - Ensure consistent spelling accuracy. Example: "Reconstruction" instead of "Recontruction."
3. Word Limit
a) Feedback - The answer is within the 400-word limit.
b) Area of Improvement with proper example - Maintain concise content while ensuring all points are well-covered.
Total Marks: 6/10
The answer demonstrates a clear understanding of the challenges and solutions related to ARCs, with well-organized content and relevant examples. Improving grammatical accuracy and providing more detailed examples would enhance the overall quality.