What is Para-in-Banking?

By Ritesh|Updated : September 7th, 2022

Public Sector Asset Rehabilitation Agency is called (PARA). It's sometimes referred to as the "Bad Bank."

  • Toxic assets can be transferred to the Bad Bank, which exists solely to assist in recovering risky assets, and then erased from the bank's books.
  • The establishment of a government-owned asset reconstruction firm, PARA, was recommended by the Economic Survey 2016-17.

Concept of 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.

  • The term "Para-Banking services" refers to these offerings.
  • A bank's activities that are not part of its routine business operations are sometimes referred to as para banking activities (such as deposits, withdrawals, etc.).
  • As trustees of pension funds, providers of portfolio management services, operators of money market mutual funds, underwriters of PSU bonds, investors in venture capital funds, etc., are examples of banking activities.
  • Banks are required to abide by the RBI's complete set of regulations.

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:

What is Para-in-Banking?

PARA bank is a Public asset Rehabilitation Agency. The bank's function is to eliminate the toxic assets from the bank books and recover the risky assets. They also have a set of guidelines provided by RBI to follow.

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