Have you ever wondered how banks deal with bad loans and non-performing assets (NPAs)? Or why some banks sell stressed assets to asset reconstruction companies (ARCs)? If you’re preparing for banking exams like JAIIB/CAIIB or working in the banking sector, this session is a must-watch for you!
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By the end of this session, you’ll understand:
- What securitization is and how it helps banks
- How banks sell NPAs and recover money
- The role of Asset Reconstruction Companies (ARCs)
- What the National Asset Reconstruction Company Limited (NARCL) does
- How marketing works in banking and why customer retention is key
💡 Excited? Watch the video and drop your thoughts in the comments!
👉 Before we dive in, watch this video for a complete breakdown:
Understanding Securitization & NPA Resolution
📌 What is Securitization?
Securitization is a financial process where banks convert assets into securities that can be sold to investors. This helps banks free up capital and improve liquidity.
🔹 Think of it like this: Imagine you own a shop and have a list of customers who owe you money. Instead of waiting for them to pay over time, you sell the entire list (your receivables) to an investor for an upfront cash payment. That’s securitization in action!
📌 Understanding Non-Performing Assets (NPAs)
NPA (Non-Performing Asset) = A loan where the borrower has defaulted for 91+ days
Banks categorize loans as NPAs when borrowers fail to make payments for more than 90 days. These bad loans hurt the bank’s financial health and need to be resolved quickly.
📌 How Do Banks Resolve NPAs?
Banks sell their NPAs to Asset Reconstruction Companies (ARCs) or financial institutions. ARCs recover the money by either collecting from borrowers or selling the assets in the market.
How Bad Banks Help in NPA Resolution
Bad banks are specialized financial institutions that take over NPAs from regular banks and attempt to recover them over time. In India, the National Asset Reconstruction Company Limited (NARCL) and India Debt Resolution Company Limited (IDRCL) play a significant role in managing stressed assets.
- NARCL: Acquires NPAs from commercial banks.
- IDRCL: Manages the resolution process by finding buyers.
This system helps banks clear bad loans from their books, allowing them to focus on fresh lending and economic growth.
Marketing in Banking
📌 What is Banking Marketing?
Marketing = Understanding customer needs + Creating the right products + Selling them efficiently
📌 The 7Ps of Banking Marketing
- Product – Loans, deposits, credit cards, mutual funds.
- Price – Interest rates, processing fees.
- Promotion – Ads, social media, personal selling.
- Place – Bank branches, online banking, mobile apps.
- People – Employees, customer service teams.
- Process – Loan approval process, KYC verification.
- Physical Evidence – ATM receipts, credit/debit cards.
[FREE EPDF] Management Information System | JAIIB RBWM | Chapter 15 Module B
Conclusion: Key Takeaways & Next Steps
To sum up, securitization and NPA resolution are essential for keeping banks financially healthy. Bad banks and ARCs play a major role in helping banks recover money from bad loans. Additionally, strong marketing strategies help banks grow, retain customers, and increase profitability.
✅ What You Should Do Next:
- Rewatch the video to reinforce your understanding.
- Comment below with your thoughts or questions!
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- Download the PDF notes below for quick revision.
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