Module 2Bank & bankingBankerA banker is a dealer in capital or more properly a dealer in money. He is an intermediate party between the borrower and the lender. The banker is one who receives money, collects cheques and drafts, for customers, with an obligation to honour the cheques drawn by customers from time to time subject to availability of amounts in the account.

CustomerQualification of a Customer.A person/ company/entity who has an account with a bank is a customer. He should not be a minor.He should be a person of a sound mind (he understands the contract at the time of making it).He shall not have been debarred from entering into any contract under any law.He deposits money and bank accepts it.

Banker and Customer RelationshipThe relationship between the banker and customer is very important. It is generally studied under the following two heads.General RelationshipDebtor and CreditorCreditor and DebtorSpecial RelationshipPrincipal and AgentBailor and BaileeMortgagor and MortgagePledger and PledgeePawnee and pawner

Debtor and Creditor:The true relationship between banker and customer is primarily of a debtor and creditor.Depositor is the lender and the banker is the borrower.Depositor is the creditor and the banker is the debtor.The money once deposited in the bank becomes the money of the bank and it is prerogative of the bank to use that money as it deems fit. The depositor remains a creditor that too an unsecured creditor.General RelationshipWhen a bank grants loan or other credit facilities to the customer, relationship is reversed, that is now-- Customer is Debtor & Banker is Creditor. Creditor and Debtor Special Relationship

Special Relationship

Principal and agent:The special relationship between the customer and the banker is that of principal and agent.The customer (principal) deposits cheques, drafts, dividends for collection with the bank.He also gives written instructions to the bank to purchase securities, pay insurance premium, installments of loans etc on his behalf.When the bank performs such agency services, he becomes an agent of his customer.SPECIAL RELATIONSHIPBailment Defined- A bailment is the delivery of goods by oneperson to another for some purpose, upon acontract that they shall, when the purpose isaccomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called thebailor. The person to whom these are delivered is called the baileeA bailment is the delivery of goods in trust.

Bailor and Bailee RelationshipA bank may accept the valuables of his customer such as jewellary, documents, securities for safe custody.In such a case the customer is the Bailer and the bank is bailee.

Bailor and Bailee RelationshipPawner and Pawnee:When a customer Pledge goods and documents as security for an advance he then become Pawner (Pledger) and the bank becomes the pawnee (pledgee).The pledged goods are to be returned intact to the pawner after the debt is repaid by him. Mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan.

When a customer pledges a specific immovable property with the bank as security for advance, the customer becomes mortgager and banker is the mortgagee.

Mortgagor and Mortgagee Relationship Bank as a trusteeThe bank act as a trustee for his customer in those cases where he accept securities and other valuables for safe custody.In such cases the customer continues to be the owner of the valuables deposited with the bank.Executer, attorney, guarantorThe bank also acts as executor, attorney and guarantor for his customer.

Duties or obligations of a banker towards the customerTo honor a customers cheque:The banker is to honor the cheque of the customers, provided the cheque are:Properly drawnThe customer has balance to his creditThe loan contract has been signedThere is no legal bar or restriction attaching to the customers funds.

Standing ordersIt is the duty of the bank to abide by the standing orders of the customers in making periodical payments on his behalf such as club, library, insurance premium etc.Secrecy of the customers accountThe bank owes a contractual duty not to disclose the customers financial position without his consent.However the obligation of secrecy is not considered essential on the following occasions. When a banker is required to give evidence in the court.When there is national emergency and disclosure is essential in the public interest.When there are clear proofs of treason to the stateWhen a consent is given by the customer to provide information for the preparation of balance sheet.Garnishee order (order of the court)It is the duty of the banker to abide by the order of the court (garnishee order) and attached the funds of the customer to the creditors who has obtained the order in his favor. Rights of a bankerRight to set off:It is a right of the banker to adjust his outstanding loans in the name of the customer from his credit balance of any of the accounts he is maintaining with the bank. Right to charge interest, commission etcIt is the right of the banker to charge interest commission etc according to the rates for the services the banker has rendered to the customer as agent, trustee etc.

Right to lienA banker has the right to retain the property belonging to the customer until the debt due from him has been paid.

Types of BanksGlobal banks - full range of services - international capabilityCommercial banks - wide range of services - limited international capabilityInvestment banks - arranging, originating and distributing debt and equity issues and adviceSavings banks - taking deposits and making loans

Types of AccountsCurrent account Deposit/savings account Fixed depositRecurring deposit a/cMoney market depositCertificate of deposit a/cLoan a/cResident and Non-resident accounts

Types of AccountsCurrent account/ Checking a/c: Current Accounts are basically meant for businessmen and are never used for the purpose of investment or savings.These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day.Most of the current account are opened in the names of firm / company accounts. Cheque book facility is provided and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties.No interest is paid by banks on these accounts. On the other hand, banks charges certain service charges, on such accounts.Types of AccountsSavings accountsMost popular deposits for individual accounts.These accounts not only provide cheque facility but also have lot of flexibility for deposits and withdrawal of funds from the account.Banks pays interest for this account From the FY 2012-13, interest earned up to Rs 10,000 in a financial year on Saving Bank accounts is exempted from tax.

Types of AccountsCertificate of Deposit (CD): Certificates of deposit, or CDs, allow you to invest your money at a set interest rate for a pre-set period of time. CDs often have higher interest rates than traditional savings accounts because the money you deposit is tied up for the life of the certificateCD range from a few months to several years.

Money market account: Money market accounts are similar to savings accounts, but they require you to maintain a higher balance to avoid a monthly fee.Where savings accounts usually have a fixed interest rate, these accounts have rates that vary regularly based on money markets. Some money market accounts also allow you to write checks against your funds, but on a more limited basis. Types of AccountsRecurring depositThese are popularly known as RD accounts and are special kind of Term Deposits and are suitable for small investors. Normally, such deposits earn interest on the amount already deposited (through monthly installments) at the same rates as are applicable for Fixed Deposits / Term Deposits. Under these type of deposits, the person has to usually deposit a fixed amount of money every month (usually a minimum of Rs,100/- p.m.).Any default in payment within the month attracts a small penalty.Recurring Deposit accounts are normally allowed for maturities ranging from 6 months to 120 months. A Pass book is usually issued wherein the person can get the entries for all the deposits made by him / her and the interest earned

Asset Liability Managementin Banks

Components of a Bank Balance sheetLiabilitiesAssetsCapitalReserve & SurplusDepositsBorrowingsOther Liabilities Cash & Balances with RBIBal. With Banks & Money at Call and Short NoticesInvestmentsAdvancesFixed Assets6. Other AssetsContingent Liabilities Components of Liabilities Capital:Capital represents owners contribution/stake in the bank.Like, authorized capital, paid-up capital, issued capital & so on It serves as a cushion for depositors and creditors. It is considered to be a long term sources for the bank.

Components of Liabilities2. Reserves & SurplusComponents under this head includes:I. Statutory ReservesII. Capital Reserves III. Investment Fluctuation ReserveIV. Revenue and Other ReservesV. Balance in Profit and Loss Account

Components of Liabilities3. DepositsThis is the main source of banks funds. The deposits are classified as deposits payable on demand and time. They are reflected in balance sheet as under:I. Demand DepositsII. Savings Bank DepositsIII. Term Deposits

Components of Liabilities4. Borrowings(Borrowings include Refinance / Borrowings from RBI, Inter-bank & other institutions)I. Borrowings in India i) Reserve Bank of India ii) Other Banksiii) Other Institutions & AgenciesII. Borrowings outside IndiaComponents of Liabilities5. Other Liabilities & ProvisionsIt is grouped as under:

I. Bills Payable II. Inter Office Adjustments (Net) III. Interest Accrued IV. Unsecured Redeemable Bonds (Subordinated Debt for Tier-II Capital) V. Others(including provisions)

Components of AssetsCash & Bank Balances with RBI I. Cash in hand (including foreign currency notes) II. Balances with Reserve Bank of India In Current Accounts In Other Accounts

Components of Assets2. BALANCES WITH BANKS AND MONEY AT CALL & SHORT NOTICE I. In Indiai) Balances with Banks a) In Current Accounts b) In Other Deposit Accounts ii) Money at Call and Short Notice a) With Banks b) With Other InstitutionsII. Outside India a) In Current Accounts b) In Other Deposit Accounts c) Money at Call & Short Notice

Components of Assets3. InvestmentsA major asset item in the banks balance sheet. Reflected under 6 buckets as under: I. Investments in India in : * i) Government Securities ii) Other approved Securities iii) Shares iv) Debentures and Bonds v) Subsidiaries and Sponsored Institutions vi) Others (UTI Shares , Commercial Papers, COD & Mutual Fund Units etc.)II. Investments outside India in ** Subsidiaries and/or Associates abroadComponents of Assets4. AdvancesThe most important assets for a bank.A. i) Bills Purchased and Discounted ii) Cash Credits, Overdrafts & Loans repayable on demand iii) Term LoansB. Particulars of Advances : i) Secured by tangible assets (including advances against Book Debts) ii) Covered by Bank/ Government Guarantees iii) Unsecured

Components of Assets5. Fixed Asset I. PremisesII. Other Fixed Assets (Including furniture and fixtures)6. Other Assets I. Interest accrued II. Tax paid in advance/tax deducted at source (Net of Provisions) III. Stationery and Stamps IV. Non-banking assets acquired in satisfaction of claims V. Deferred Tax Asset (Net)VI. OthersContingent LiabilityBanks obligations under LCs, Guarantees, Acceptances on behalf of constituents and Bills accepted by the bank are reflected under this heads.Banks Profit & Loss AccountA banks profit & Loss Account has the following components:Income: This includes Interest Income and Other Income.II. Expenses: This includes Interest Expended, Operating Expenses and Provisions & contingencies.Components of IncomeINTEREST EARNED

I. Interest/Discount on Advances / BillsII. Income on InvestmentsIII.Interest on balances with Reserve Bank of India and other inter-bank fundsIV. OthersComponents of Income 2. OTHER INCOME

I. Commission, Exchange and BrokerageII. Profit on sale of Investments (Net)III.Profit/(Loss) on Revaluation of InvestmentsIV. Profit on sale of land, buildings and other assets (Net)V. Profit on exchange transactions (Net)VI. Income earned by way of dividends etc. from subsidiaries and Associates abroad/in IndiaVII. Miscellaneous IncomeComponents of ExpensesINTEREST EXPENDED

I. Interest on DepositsII. Interest on Reserve Bank of India / Inter-Bank borrowingsIII. OthersComponents of Expenses2. OPERATING EXPENSES

I. Payments to and Provisions for employees II. Rent, Taxes and LightingIII. Printing and Stationery IV. Advertisement and PublicityV. Depreciation on Bank's property VI. Directors' Fees, Allowances and ExpensesVII. Auditors' Fees and Expenses (including Branch Auditors)VIII.Law Charges IX. Postages, Telegrams, Telephones etc. X. Repairs and Maintenance XI. InsuranceXII. Other ExpenditureASSET LIABILTY MANAGEMENTBusiness of banking involves the identifying, measuring, accepting and managing the risk. Which is called as Asset Liability Management.Risk management is the heart of bank financial management.Traditionally, administered interest rates were used to price the assets and liabilities of banks. However, in the deregulated environment, competition has narrowed the spreads of banks. ASSET LIABILTY MANAGEMENTAsset Liability Management is concerned with strategic balance sheet management involving risks caused by changes in interest rates, exchange rate, credit risk and the liquidity position of bank.Implementing Asset Liability Management (ALM) function in banks is not only a regulatory requirement in India but also an imperative for strategic bank management.Assets Liability Management ALMIt is a dynamic process of Planning, Organizing & Controlling of Assets & Liabilities- their volumes, mixes, maturities, yields and costs in order to maintain liquidity and Net Interest income.Reasons for Significance of ALMVolatilityProduct Innovations & ComplexitiesRegulatory EnvironmentManagement RecognitionObjectives of Asset-Liability ManagementTo protect and enhance the net worth of the institution.Formulation of critical business policies and efficient allocation of Capital.To increase the Net Interest Income (NII) It is a quantification of the various risks in the balance sheet and optimizing of profit by ensuring acceptable balance between profitability, growth and risks.ALM should provide liquidity management within the institution and choose a model that yields a stable net interest income consistently while ensuring liquidity.

Objectives of Asset-Liability ManagementFunding of banks operation through capital planning.Product pricing and introduction of new products.To control volatility of market value of capital from market risk.Working out estimates of return and risk that might result from pursuing alternative programs.

3 imp tools to measure banks performance Net Interest Income- Interest Income-Interest Expenses.

Net Interest Margin- Net Interest Income/Average Total Assets

Economic Equity Ratio-The ratio of the shareholders funds to the total assetsmeasures the shifts in the ratio of owned funds to total funds.The fact assesses the sustenance capacity of the bank.

Categories of RiskRisk is the chance or probability of loss or damage

Credit RiskMarket RiskOperational RiskTransaction Risk /default risk /counterparty riskCommodity riskProcess riskPortfolio risk /Concentration riskInterest Rate riskInfrastructure riskSettlement riskForex rate riskModel riskEquity price riskHuman riskLiquidity risk

LIQUIDITY RISKBanks need liquidity to meet deposit withdrawal and to fund loan demands.The variability of loan demands and variability of deposits determine banks liquidity needs.It lowers the size of the default risk premium the bank must pay for funds.It demonstrates the market place that the bank is safe and therefore capable of repaying its borrowings.Liquidity risk arises from funding of long term assets by short term liabilities, thus making the liabilities subject to refinancing

LIQUIDITY RISKEFFECTS OF LIQUIDITY CRUNCH Risk to banks earningsReputation riskContagion effectLiquidity crisis can lead to runs on institutionsBank / FI failures affect economy

Factors affecting liquidity riskOver extension of creditHigh level of NPAsPoor asset qualityMismanagementNon recognition of embedded option riskReliance on a few wholesale depositorsLarge undrawn loan commitmentsLack of appropriate liquidity policy & contingent plan

LIQUIDITY RISKRBI GUIDELINESStructural liquidity statementDynamic liquidity statementBoard / ALCOALM Information SystemALM organisationALM process (Risk Mgt process)Mismatch limits in the gap statement

Statement of Structural LiquidityAll Assets & Liabilities to be reported as per their maturity profile into 8 maturity Buckets:1 to 14 days15 to 28 days29 days and up to 3 monthsOver 3 months and up to 6 monthsOver 6 months and up to 1 yearOver 1 year and up to 3 years Over 3 years and up to 5 years Over 5 years

Statement of structural liquidityPlaces all cash inflows and outflows in the maturity ladder as per residual maturity

Maturing Liability: cash outflow

Maturing Assets : Cash Inflow

Mismatches in the first two buckets not to exceed 20% of outflows

Banks can fix higher tolerance level for other maturity buckets.

ADDRESSING TO MISMATCHESMismatches can be positive or negativePositive Mismatch: M.A.>M.L. and vice-versa for Negative MismatchIn case of +ve mismatch, excess liquidity can be deployed in money market instruments, creating new assets & investment swaps etc.For ve mismatch,it can be financed from market borrowings(call/Term),Bills rediscounting,repos & deployment of foreign currency converted into rupee.DYNAMIC LIQUIDITYPrepared every fortnight for ALCOProjection is given for the next three monthsTools for assessing the day to day liquidity needs of the bank

Currency RiskThe increased capital flows from different nations following deregulation have contributed to increase in the volume of transactions

Dealing in different currencies brings opportunities as well as risk

To prevent this banks have been setting up overnight limits and undertaking active day time trading

Value at Risk approach to be used to measure the risk associated with forward exposures. Value at Risk estimates probability of portfolio losses based on the statistical analysis of historical price trends and volatilities.

Interest Rate RiskInterest Rate risk is the exposure of a banks financial conditions to adverse movements of interest rates

Though this is normal part of banking business, excessive interest rate risk can pose a significant threat to a banks earnings and capital base

Changes in interest rates also affect the underlying value of the banks assets, liabilities and off-balance-sheet item

Interest rate risk refers to volatility in Net Interest Income (NII) or variations in Net Interest Margin(NIM)

NIM = (Interest income Interest expense) / Earning assets

Sources of interest rate riskRe-pricing Risk: The assets and liabilities could re-price at different dates and might be of different time period. For example, a loan on the asset side could re-price at three-monthly intervals whereas the deposit could be at a fixed interest rate or a variable rate, but re-pricing half-yearly

Basis Risk: The assets could be based on LIBOR rates whereas the liabilities could be based on Treasury rates or a Swap market rate

Yield Curve Risk: The changes are not always parallel but it could be a twist around a particular tenor and thereby affecting different maturities differently

Option Risk: Exercise of options impacts the financial institutions by giving rise to premature release of funds that have to be deployed in unfavourable market conditions and loss of profit on account of foreclosure of loans that earned a good spread.

STATEMENT OF INTEREST RATE SENSITIVITYGenerated by grouping RSA,RSL & OFF-Balance sheet items in to various (8)time buckets.RSA:MONEY AT CALLADVANCES ( BPLR LINKED )INVESTMENTRSLDEPOSITS EXCLUDING CDBORROWINGS

Effects of Interest Rate Risk on LoansEffects on the Loan PortfolioInterest Rates (Up)Adverse Price EffectFavorable Reinvestment Effect

Interest Rates (Down)Favorable Price EffectAdverse Reinvestment Effect

Old Loans Worth Less

New Loans Worth MoreOld Loans Worth More

New Loans Worth Less

Effects of Interest Rate Risk on DepositsEffects on DepositsInterest Rates (Up)Early Withdrawal (Depositors Seek Higher Rates)Banks Must Attract New Depositors at Higher Rate or Face Liquidity Problems

Interest Rates (Down)Loan Prepayments Due to RefinancingBanks Must Issue New Loans at Lower Rates or Face Shrinking Balance SheetRisk Measurement TechniquesVarious techniques for measuring exposure of banks to interest rate risks

Maturity Gap AnalysisDurationSimulationValue at Risk

MATURITY GAP METHOD(IRS)THREE OPTIONS: A) RSA>RSL= Positive Gap B) RSL>RSA= Negative Gap C) RSL=RSA= Zero Gap

IMPACT ON NIIGapInterest rate ChangeImpact on NIIPositiveIncreasesPositivePositiveDecreasesNegativeNegativeIncreasesNegativeNegativeDecreasesPositiveIt basically refers to the average life of the asset or the liability

It is the weighted average time to maturity of all the preset values of cash flows

The larger the value of the duration, the more sensitive is the price of that asset or liability to changes in interest rates

As per the above equation, the bank will be immunized from interest rate risk if the duration gap between assets and the liabilities is zero.

Duration Analysis

SimulationBasically simulation models utilize what if scenarios, for example: What if:The absolute level of interest rates shiftMarketing plans are under-or-over achievedMargins achieved in the past are not sustained/improvedBad debt and prepayment levels change in different interest rate scenariosThere are changes in the funding mix e.g.: an increasing reliance on short-term funds for balance sheet growth

This dynamic capability adds value to this method and improves the quality of information available to the management

Value at Risk (VaR)Refers to the maximum expected loss that a bank can suffer in market value or income:Over a given time horizon,Under normal market conditions,At a given level or certainty

It enables one to calculate the net worth of the organization at any particular point of time so that it is possible to focus on long-term risk implications of decisions that have already been taken or that are going to be taken

Three-tier organizational set-up for ALM Implementation :ALM Information SystemALM organisationALM process (Risk Mgt process)

Management Committee of the Board (MC)Oversees the ALM implementation by ALCOReviews the ALM implementation periodicallyFunding strategies for correcting the mismatches in ALM Statements.ASSET LIABILITY MGMTALM OrganizationThe board should have overall responsibilities and should set the limit for liquidity, interest rate, foreign exchange and equity price risk

Is responsible for balance sheet planning from risk - return perspective including the strategic management of interest rate and liquidity risksThe role of ALCO includes product pricing for both deposits and advances,Develops a view on future direction of interest rate movements and decide on a funding mix

ASSET-LIABILITY MANAGEMENT COMMITTEE (ALCO)ALCO headed by E.D. GM (T) (Nodal Officer). GMs:Central Accounts, Credit, Risk Management International Division are the members.GM (IT) & AGM (Economist) are the invitees for ALCO meetings.FUNCTIONS OF ALCO Implementation of ALM SystemMonitor the risk levels of the Bank.Articulate the Interest Rate Position & fix interest rate on Deposits & Advances.Fix differential rate of interest rate on Bulk Deposits.Facilitating and coordinating to put in place the ALM System in the Bank.

ALM STATEMENTS TO BE SUBMITTED TO RBIStatement of Structural Liquidity (Annexure - I) Statement of Interest Rate Sensitivity (Annexure - II) Statement of Dynamic Liquidity (Annexure - III)Statement of Maturity and Position (MAP) (Annexure - IV) - ForexStatement of Sensitivity to Interest Rate (SIR)(Annexure - V)- ForexALM Information SystemsUsage of Real Time information system to gather the information about the maturity and behavior of loans and advances made by all other branches of a bankABC Approach : analysing the behaviour of asset and liability products in the top branches, which account for significant businessthen making rational assumptions about the way in which assets and liabilities would behave in other branchesThe data and assumptions can then be refined over time as the bank management gain experience

ALM ProcessRisk parameters Risk identification, Risk measurement,Risk management,Risk policies and procedures, Prudential limits & auditing, Reporting & reviewCAMEL RATINGIn 1995, RBI had set up a working group under the chairmanship of Shri S. Padmanabhan to review the banking supervision system.The Committee made certain recommendations and based on such suggestions a rating system for domestic and foreign banks based on the international CAMELS model combining financial management and systems and control elements was introduced for the inspection cycle commencing from July 1998. CAMELS evaluates banks on the following six parameters key components of CAMELS ratings

Capital adequacyAsset qualityManagementEarningsLiquiditySensitivity to market

Capital AdequacyCapital adequacy is measured by the ratio of capital to risk-weighted assets .

A sound capital base strengthens confidence of depositorsASSET QUALITYOne of the indicators for asset quality is the ratio of non-performing loans to total loans (GNPA). The gross non-performing loans to gross advances ratio is more indicative of the quality of credit decisions made by bankers. Higher GNPA is indicative of poor credit decision-making.

ManagementManagement includes all key managers and the Board of DirectorsQuality of the monitoring and support of the activities by the board and management and their ability to understand and respond to the risksDevelopment and implementation of written policies, procedures, MIS, risk monitoring system, reporting, safeguarding of documents,EarningsAll income from operations, non-traditional sources, extraordinary itemsIt can be measured as the return on asset ratioLiquidityCash maintained by the banks and balances with central bank, to total asset ratio is an indicator of bank's liquidity. In general, banks with a larger volume of liquid assets are perceived safe, since these assets would allow banks to meet unexpected withdrawals. Sensitivity to Market RisksSensitivity to adverse changes in interest rates, foreign exchange rates, commodity prices, fixed assetsPurpose of CAMELS ratingsThe purpose of CAMELS ratings is to determine a banks overallcondition and to identify its strengths and weaknesses:

FinancialOperationalManagerialSCORINGBank supervisory authorities assign each bank a score on a scale of 1 (best) to 5 (worst) for each factor. If a bank has an average score less than 2 it is considered to be a high-quality institution while banks with scores greater than 3 are considered to be less-than-satisfactory establishments. The system helps the supervisory authority identify banks that are in need of attention. Bank Instruments Bank instruments serve the following functions:Substitute for moneyCredit deviceRecord-keeping device

Some of the Bank instruments are Bank DraftChequeTravellers ChequeCredit & debit card``DraftsA draft is a three-party instrument that is an unconditional written order by one party that orders the second party to pay money to a third partyDrawer of a draftDrawee of a draftPayee of a draftIt is also known as demand drafts as they are always payable on demand

Cheque

A cheque is an unconditional order on the bank made by the client instructing the bank to pay a certain sum of money to the person named in the cheque or his order or the bearer. This instrument is very safe and convenient method of making payments or withdrawing money from a bank.

DIFFERENCE BETWEEN CHEQUE AND DEMAND DRAFT

DEMAND DRAFT

It cannot be made payable to bearer.Its payment cannot be stopped.It is drawn by a bank upon itself.

CHEQUE

It may be drawn payable to bearer. It is countermanded

A cheque is drawn by one person upon anotherE- ChequeThe electronic cheques are modeled on paper checks, except that they are initiated electronically. They use digital signatures for signing and endorsing and require the use of digital certificates to authenticate the payer, the payers bank and bank account. They are delivered either by direct transmission using telephone lines or by public networks such as the Internet.E- ChequeBenefits of E-ChequeReduced processing costFunds received soonerIncreased salesSimple, smart & safefewer errors & reduced fraud

Travelers ChequeA medium of exchange that can be used in place of hard currency. Available in all major currencies and in a variety of different denominations.A traveler's cheque is a preprinted, fixed-amount cheque designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.They were generally used by people on vacation instead of cash as many businesses used to accept traveler's cheques as currency.If a traveler's cheque were lost or stolen, they could be replaced by informing the serial numbers on the cheque to issuing financial institution.The cheque were first introduced by American Express back in 1891.

Travelers cheque

Credit cardA credit card is a thin plastic card, which authorizes the person named on it to purchase goods and services or obtain cash advances on credit till certain time period.

The card holder can choose to pay for the items at the end of each month or carry the debt over into the next month. If the balance is not paid in full by the payment-due date interest is charged on the outstanding amount.

Credit cards are primarily used for short-term financing.

Borrowing limits are pre-set according to the individual's credit rating. Debit CardDebit Card is a direct account access card. Unlike a credit card, in the case of a debit card, the entire amount transacted gets debited from the customer's account as soon as the debit card is used for purchase of goods and services. The amount permitted to be transacted in debit card is to the extent of the amount standing to the credit of the card user's accountDebit Vs credit

Universal BankingUniversal Banking is a multi-purpose and multi-functional financial supermarket (a company offering a wide range of financial services e.g. stock, insurance and real-estate brokerage) providing both banking and financial services through a single window.

Definition of Universal Banking: As per the World Bank, "In Universal Banking, large banks operate extensive network of branches, provide many different services, hold several claims on firms(including equity and debt) and participate directly in the Corporate Governance of firms that rely on the banks for funding or as insurance underwriters".

Universal BankingAdvantages of Universal Banking Economies of scaleProfitable diversionsResource utilizationEasy Marketing on the Foundation of a Brand NameOne-stop shopping