Q1. Asset Reconstruction Fund (ARF) was set up for the purpose of __________. Choose the most appropriate option from below.
A To assist the Reserve Bank of India in managing commercial banks
B To take over the bad and doubtful debts of nationalised banks and development finance institutions Correct
C To finance commercial banks at a low rate
D To finance development finance institutions at low rates
Explanation
The Asset Reconstruction Fund was meant to deal with non-performing or doubtful assets by taking over bad and doubtful debts from nationalised banks and development finance institutions. It was not created to help the Reserve Bank of India manage commercial banks. It was also not a cheap refinancing window for commercial banks or development finance institutions. The key purpose was asset reconstruction through the transfer of stressed debts, so the debt-takeover purpose is the matching answer.