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Kerala PSC Indian Economy Book Study Materials Page 571Book's First Page
onomi on epts and erminolo ies 22.5 good-will, credit-worthiness, knowledge, different economies (i.e., countries) borrow each know-how, etc. other’s currency and agree to repay (such loans) (iii) Financial Assets: All financially valid at a specified future date. Each company gets full valuables other than tangibles and amount of the loan on the repayment date in their intangibles such as currencies, bank domestic currency without any risk of losses due deposits, bonds, securities, shares, etc. to exchange rate fluctuations. It has developed as a popular tool of minimising the exchange- AssigneD revenue rate exposure risk among the multi-national companies. This is also known as the parallel loan. The term is used to refer to various tax/duty/ cess/surcharge/levy etc., proceeds of which are (traditionally) collected by state government (on bAD bAnk behalf of) local bodies (the PRIs), and subsequently A bank created specially to buy the bad debts adjusted with / assigned to the PRIs. Collection of (called ‘non-performing assets’ in India) of the such revenue is governed by relevant Acts of the existing banks to clear such loans of the latter. local bodies. This way the banks with NPAs clear their ‘balance Some examples of assigned revenue in India, sheet’ and again start lending to the customers. include, entertainment tax, surcharge on stamp The bad bank now tries to recover the bad debts it duty, local cess/surcharge on land revenue, lease amount of mines and minerals, sale proceeds of has bought through available legal means. Though social forestry plantations, etc. State Finance such banks were set up in 20th century itself in the Commissions recommend devolution of assigned USA, it came in recent use once the US central revenue to local bodies on objective criteria, which banks’ chief (Ben Bernanke) proposed the idea may be specified by them in specific context. of using a government-run bad bank to clean up the ‘sub-prime’ loans of the private banks in the AutArky country (in wake of the sub-prime crisis of 2007). It made news in India once the Economic Survey The idea of self-sufficiency and ‘no’ international 2016-17 suggested the Government of India to set trade by a country. None of the countries of the world has been able to produce all the goods and such a body— public sector asset rehabilitation services required by its population at competitive agency (PARA)—to solve the ‘twin balance sheet’ prices, however, some tried to live it up at the cost (TBS) problem the country is faced with. At one of inefficiency and comparative poverty. hand the public sector banks are faced with high NPAs while on the other the corporate sector (who bAckwArDAtion are the borrowers of these banks) of the country is also hit with negative balance sheet (unable to A term of future trading which means a commodity service or clear the loans due on them). The PARA is valued higher today (i.e., spots market) than is supposed to clear the balance sheets of both in the futures (i.e., future market). When the banks as well the corporate sector. The Survey has situation is opposite, it is known as contango. quoted the South East Asian economies where such agencies were used very effectively during bAck-to-bAck loAn the currency crises of 1996-97. By March 2017, it A term of international banking, is an arrangement looked that the Government was prepared to set under which two firms (i.e., companies) in up such an agency (bank).