New RBI Grade B 2025 Notification will come Soon! Enroll Here

    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.

    Practice Next

    Relevant for Exams: