New How to prepare ESI for NABARD Prelims & Mains- Sources & Strategy
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Question

What action should lenders take when a stressed loan is transferred to an ARC at a price below the Net Book Value (NBV)?

A Debit the shortfall to the profit and loss account Correct Answer Incorrect Answer
B Reverse the excess provision on transfer to the profit and loss account Correct Answer Incorrect Answer
C Credit the difference to the capital reserve account Correct Answer Incorrect Answer
D Create a separate provision for the shortfall Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

According to the provided paragraph, when a stressed loan is transferred to an ARC at a price below the Net Book Value (NBV), lenders should debit the shortfall to the profit and loss account for the year in which the transfer takes place.

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