What is Para in Banking?

By Balaji

Updated on: February 23rd, 2023

PARA in banking is an independent firm that identifies the largest and most troublesome NPA accounts held by banks and then purchases them. The Public Sector Asset Rehabilitation Agency is known as (PARA). Another moniker for it is the “Bad Bank.”. Toxic assets can be transferred to the Bad Bank, which exists specifically to assist in recovering risky assets and subsequently removed from the bank’s books. The development of a government-owned asset reconstruction corporation, PARA, was supported in the Economic Survey 2016-17.

Table of content

1. PARA in Banking
2. Activities of banks under Para Banking
3. What is Para in Banking?

PARA in Banking

Today, most well-known banks have affiliates that provide various financial services, including mutual fund trading, equipment leasing, and venture capital funds (VCFs) investments.

These services are referred to as “para-banking services.”
Para-banking activities are those a bank engages in that are not part of its regular business operations (such as deposits, withdrawals, etc).
Banking activities include serving as trustees of pension funds, providing portfolio management services, operating money market mutual funds, underwriting PSU bonds, investing in venture capital funds, and so on.
Banks are expected to follow the RBI’s entire set of regulations.

Activities of banks under Para Banking

The activities of banks that come under Para Banking are as follows:

Retail sale of government securities
Money market mutual funds (MMMF)
Review the writing tool for money market fund investors
Insurance business
Pension fund management (PFM) by banks
Membership in SEBI-approved stock exchanges
Portfolio management services
Investment by banks in venture capital funds (VCFs)
Banks as sponsors of infrastructure debt funds
Underwriting company shares and bonds
Underwriting of bonds of public sector enterprises
Disclosure of commissions/rewards

Summary: