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).