Explanation:

An Asset Reconstruction Company (ARC) is a specialized financial institution that buys the Non Performing Assets (NPAs) from banks and financial institutions so that they can clean up their balance sheets.

• A NPA is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.
• Typically, ARCs buy banks’ bad loans by paying a portion as cash upfront (15% as mandated by the RBI), and issue security receipts (SRs) for the balance (85%).
• This helps banks to concentrate on normal banking activities. Banks, rather than going after the defaulters by wasting their time and effort, can sell the bad assets to the ARCs at a mutually agreed value.
• The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 provides the legal basis for the setting up of ARCs in India.
• The Act helps reconstruction of bad assets without the intervention of courts. Since then, a large number of ARCs were formed and were registered with the RBI.
• The Reserve Bank of India (RBI) has got the power to regulate the ARCs.

Hence both statements are correct.