BANKING QUIZ FOR S.B.I P.O. - 2013

1.    Which among the following statements is true about the 5th BRICS Summit?(A)  South Africa hosted the fifth BRICS Summit at the Durban International Convention Centre(B) BRICS are creating a Development Bank focused on infrastructure, with a common currency pool to assist with development and loans as an alternative to the IMF and other international financial institutions; (C) China and Russia discuss a $30 million currency swap.(D) This completed the second cycle of BRICS summits.(1) Only A                         (2) Only B & D(3) Only A & B                  (4) Only B & C            (5) All are true

2.    Which among the following statements is true about the Union Budget 2013-14 introduce recently by Finance Minister P. Chidambaram?(A) Total fund allocated for Mid-day meal scheme is Rs 13,215 crore.(B) Revenue Deficit seen at 3.3 % 2013/14(C) Rs 10,000 crore to NABARD to finance construction of godowns and warehouses(D)  Total capital infusion for Public Sector banks in budget is  Rs 14,000 crore.(1) Only A & B                              (2) Only B & C                       (3) Only A & D                              (4) Only A, B & D                   (5) All A, B, C & D

3.    Recently Eurozone finance ministers and the International Monetary Fund signed a deal in Brussels to aid Cyprus with a bailout worth 10 billion Euros. Which of the following statements is true regarding this deal?(A)  Cyprus which accounts for just 0.2 percent of the combined eurozone economy ,thus becomes the fifth member state to secure a debt rescue package from its eurozone partners in the three-year debt crisis(B) Under the deal, Cyprus agreed for increasing the nominal corporate tax rate to 12.5 percent, increasing it by 2.5 percent.(C) Originally, Cyprus had estimated its requirement for 20 billion Euros, which was the amount that it required for restoration of its economy. (1) Only A                         (2) Only A & B            (3) Only B & C                  (4) Only A & C            (5) All A, B, & C

4.    Which among the following committee is set up for giving clear definitions to FDI and FII with an aim to remove ambiguity over the two types of foreign investments?(1) Gopinath committee    (2) Subir Gokran committee(3) Arvind Mayaram committee   (4) Sushma Nath committee(5) None of these

5.    As per the new final guidelines released by the Reserve Bank of India (RBI) for issuing new banking licenses norms to allow private and the public sector as well as non-banking financial companies to enter the fray. Which of the following statements is Correct in this regard?(A) The final guidelines sets 49 per cent cap on foreign holding in new banks and minimum paid-up equity capital is Rs 1000 crore.(B) New banks will have to set up 25 per cent of its branches in unbanked rural areas.(C) The paid-up equity capital should be Rs 500 crore and they will have to get listed within three years of operations.(1) Only A & B                              (2) Only B & C                        (3) Only A & C                              (4) All A, B & C           (5) None of these

6.    The rate of interest, banks charge to its main/major and prime; customers is popularly called as1) Prime Lending Rate                  2) Repo Rate  3) Cost of Fund                             4) Risk Premium         5) Reverse Repo Rate

7.    Currency Swap is an instrument to manage?1) interest rate risk            2) currency risk3) currency and interest rate risk  4) cash flows in different currencies5) All of the above

8.    When a bank dishonours a cheque ____?1) it is called withdrawing of the cheque   2) it is called settlement of the cheque3) it is called nullifying of the cheque        4) it is called return of the cheque unpaid5) it is called truncating of the cheque

9.    Loans of very small amounts given to low income groups is called:1) Micro Credit                  2) Cash Credit     3) Simple Overdraft          4) Rural Credit   5) No Frills Loan

10.  Under provisions of which one of the following Acts, the Reserve Bank of India (RBI) issues directives to the Banks in India?1) Banking Regulation Act   2) Essential Commodities Act3) Banking Regulation Act4) RBI and Banking Regulation Act5) None of these

11.  In banking terms, BCSBI stands for which of the following?1) Banking Credit and Securities Board of India  2) Banking Codes and Standards Board of India3) Banking Consumer and State Board of India  4) Banking Commerce and Secretarial Board of India5) Banking Communications and Systems Board of India

12.  When we deposit a cheque issued in our name in the bank, the bank always checks if the cheque has been crossed or not? Why is this done?1) It is a process by which the person who has issued the cheque comes know whether the cheque is enchased or not2) It ensures that the money is deposited only in the account of the person in whose name the cheque has been drawn3) The bank insists on it only when the party wants the payment immediately and that too in cash only           4) This is the instruction of RBI that all the cheques of the amount of Rs 10,000 should be accepted only if they are crossed5) None of these

13.  When the loan is guaranteed for purchase of white goods it is called?1) White goods loan                      2) Consumer durable loan3) Business loan                            4) Consumption loan 5) Proprietary loan

14.  Lack of access to financial services is technically known as:1) financial inclusion         2) financial stability3) financial instability         4) financial exclusion5) poverty 

15.  IIP stands for:(1) India’s Industrial Production    (2) Index of Industrial Production (3) Index of Intermediate Productions(4) Index of Industrial Potential(5) None of these

16.  Who among the following is appointed to head a 10-member global task force to prepare a Knowledge management system for promoting global cooperation in anti-corruption measures and keep a check on black money?(1) Kuldeep Khoda                        (2) Pradeep Kumar(3) Vinod Mehta                            (4) Rajesh Chauhan(5) None of these

17.  Which among the following is not directly controlled by RBI?(1) Bank Rate                   (2) Base Rate  (3) Repo Rate                   (4) CRR                      (5) SLR

18.  A loan bearing low rate of interest is known as:(1) Hard loan                     (2) Soft loan    (3) Capital loan                  (4) Real loan   (5) None of these

19.  World Bank Group announced the appointment of an Independent panel of experts to conduct a review of it’s Doing Business report. Who among the following from India has been appointed as one of the ten International experts to this panel?(1) Dr. K. Kasturirangan                (2) B.K. Chaturvedi(3) Narendra Jadhav                    (4) Arun Maira(5) None of these

20.  Which among the following is the High-level committee that went into the Commonwealth Games related projects, has suggested changes in the functioning and structure of top audit and vigilance bodies like the Comptroller and Auditor General making it a three-member body?(1) U.C. Banerjee Committee       (2) Shunglu Committee(3) Palekar Committee                 (4) A Ghosh Committee(5) None of these

21.  Sub – Prime lending refers to:(1) lending to the customers who are most value for the banks(2) lending to the customers who visit bank for the very first time(3) lending to the people with less than standard credit status(4) lending to the people who live a sub – standard life(5) None of these

22.  Which of the following is the deadline set by RBI for Indian Banks to complete their conformation to the Basel – III norms?(1) March 2020                 (2) March 2016(3) March 2018                 (4) March 2014(5) None of these

23.  CAPART is associated with which of the following?(1) Energy Sector             (2) Rural Development(3) Infrastructure               (4) Foreign trade(5) None of these

24.  To which of the following banks of Russia, the Reserve Bank of India (RBI) has granted permission to open its branch in New Delhi?(1) Aktive Bank                 (2) Bank BFT(3) Inkas Bank                  (4) Gazprom Bank(5) MDM Bank

25.  Certificates of Deposits have a minimum value of :(1) Rs 1 lakh                     (2) Rs 10 lakh(3) Rs 25 lakh                   (4) Rs 1 core(5) None of these

26.  Commercial paper can be issued:(1) By all corporate                       (2) By all corporate with net worth of at least Rs 10 crore(3) By all corporate with net worth of at least Rs 5 crore(4) Can be issued only by banks(5) None of these

27.  Which of the following is not true?(1) Call money deals with overnight loans(2) As special cases, few FIs like LIC, UTI can borrow in the call money market(3) Call loans are made on a ‘clean basis’(4) Is a part of organized money market(5) None of these

28.  Planning Commission has set up a high level expert committee to suggest measures for efficient management of public – expenditure under the chairmanship of ____(1) Prof. Ravindra Dholakia           (2) C. Rangarajan(3) K. Kasturirangan                      (4) Nitin Desai(5) None of these

29.  A bank accepts a deposit from a corporate house. The feature of the deposit are:(A) accepted at a discounted value(B) stamp duty is borne by the bank(C) issued as issuance of promissory note(D) TDS is not applicableIdentify the deposit:(1) Commercial paper               (2) Certificate of deposit(3) Flexi deposit                         (4) Caution deposit(5) None of these

30.  National Savings Certificate matures at the end of-(1) 6 years                  (2) 3 years       (3) 5 years                  (4) 10 years     (5) None of these

31.  Many a Times, we read in Financial Newspapers about a term called “Loan Syndication”. What exactly is Loan Syndication?

(1) In Loan Syndication, more than one debtors applying for a loan to one creditor(2) In Loan Syndication, more than one creditors coming together to provide single loan(3) Loan Syndication, more than one creditors coming together to provide multiple loans(4) All of the above                       (5) None of these

32.  This committee is associated with finance to small scale industries.(1) C. E. Kamath               (2) Malegam   (3) G.S. Patel                    (4) Chatelier    (5) Khanna

33.  If the government chooses to spend money freshly printed by the RBI against government securities, it should be kept in which among the following?(1) Fiscal Adjustment                 (2) Deficit Financing(3) Mandatory spending            (4) Retrenchment(5) None of these

34.  The newly inaugurated helpline ‘Udyami’ is to assist:(1) Micro, Small and Medium Enterprises(2) Large Capital industries(3) Only Female Entrepreneurs(4) Farmers introducing technology in farming(5) None of these

35.  The Statutory Liquidity Ratio (SLR), the amount of liquid assets such as cash, precious metals and other short-term securities are kept with:(1) RBI                                          (2) Individual banks     (3) Finance Ministry                    (4) A bank designated by RBI            (5) None of these

36.  Who has been appointed as New Chief Economic Advisor?(1) Anup Sankar Bhattacharya  (2) Raghuram G Rajan(3) Leila Semson      (4) M V Nair          (5) Kaushik Basu

37.  RBI hike policy rates by 25 basis point in percentage term it is equivalent to-(1) 0 .25%                         (2) 25%(3) 0.025%                        (4) 2.5%                      (5) .0025%

38.  Bhandari Committee is related to:(1) Entry of private players in telecommunication sector(2) Organization of Railway Zones(3) Reconstruction of RRBs (4) Reforms in oil sector(5) None of these

39.  Which among the following committee has looked into the maladies affecting the proper functioning of the public distribution systems (PDS) in India?(1) Suresh Tendulkar Committee (2) Kaushik Basu Committee(3) Wadhwa Committee(4) Rangarajan Committee(5) None of these

40.  Which among the following countries had hosted the 14th meeting of BASIC Environment Ministers?(1) India                             (2) China         (3) Brazil                            (4) South Africa          (5) None of these

41.  World Bank slashed the Global Growth Forecast to ___?(1) 4.5%                            (2) 2.4%(3) 5.5%                            (4) 3.4%(5) 6%

42.  Recently UN projected how much percent of economic growth this year (2013) for India?(1) 7.5%                                        (2) 8%(3) 6.2%                                        (4) 9%

(5) None of these

43.  ARCIL is an example of:(1) A financial institution                (2) A mutual fund(3) An asset management company set up to acquire NPAs of banks(4) A discount and financing house(5) None of these

44.  What is the current SLR requirement of the banks?(1) 40% of the deposits(2) 25% of the deposits(3) 31% of the deposits(4) 24 % of the deposits(5) None of the above

45.  What is the CRR currently prescribed by RBI?(1) 5.5%                            (2) 4.25%(3) 4.75%                          (4) 6%(5) 4 %

46.  What is the stipulated share of the priority sector in the net bank credit?(1) 35%                             (2) 20%(3) 40%                             (4) 45%(5) None of these

47.  Which of the following statements is true about the G-20 group? (A)  The objective of the G-20 refers to: Policy coordination between its members in order to achieve global economic stability, sustainable growth.(B) G20 members represent almost 90% of global GDP.(C) Until now eight G20 Leaders' Summits took place.(1) Only A                                     (2) Only B & C            (3) Only A & C                             (4) Only A & B            (5) All A, B & C

48.  FDI and FII both terms are used in the context of foreign exchange investment by the foreigners into the country; however there are many differences between the two. Find out the incorrect statement(s) among the given options?(A) FDI brings the foreign exchange which results in increase in employment opportunities, whereas FII does not offer these advantages.(B) FDI is short term in nature as the company doing foreign direct investment comes into the country for short period of time, whereas FII is long term in nature because foreign institutional investor tends to rotate their money across many countries.(C) FDI is concentrated to one sector only whereas in case of FII there is no such restriction as they tend to invest across all the listed companies in the stock market.(1) Only A                         (2) Only B       (3) Only C                         (4) Only A & C            (5) Only B & C              

49.   Income limit under Rajiv Gandhi Equity Savings Scheme (RGESS) will be raised from Rs. 10 lakh to ____?(1) Rs 11 lakh                               (2) Rs 13 lakh(3) Rs 12 lakh                               (4) Rs 15 lakh(5) None of these

50.  Fiscal deficit for 2013-14 is pegged at how much per cent of GDP?(1) 4.9%                                        (2) 5.2%(3) 6.2%                                        (4) 4.8%(5) None of these

NOTE:

1. China and Brazil discuss a $30 million currency swap.This completed the first cycle of BRICS summits

2. Rs 5,000 crore to NABARD to finance construction of godowns and warehouses

3. Originally, Cyprus had estimated its requirement for 17 billion Euros, which was the amount that it required for restoration of its economy. 

5. The final guidelines sets 49 per cent cap on foreign holding in new banks and minimum paid-up equity capital is Rs 500 crore.

30. The maturity period of NSCs (VIII Issue) reduced from 6 years to 5 years.

47. Until now seven G20 Leaders' Summits took place.

48. FDI is long term in nature as the company doing foreign direct investment comes into the country for short period of time, whereas FII is short term in nature because foreign institutional investor tends to rotate their money across many countries.

Answers:1 3 11 2 21 3 31 2 41 2

2 4 12 2 22 3 32 2 42 3

3 2 13 2 23 2 33 2 43 3

4 3 14 4 24 3 34 1 44 5

5 2 15 2 25 1 35 2 45 5

6 1 16 2 26 3 36 2 46 3

7 4 17 2 27 2 37 1 47 4

8 4 18 2 28 2 38 3 48 2

9 1 19 4 29 2 39 3 49 3

10 4 20 2 30 3 40 1 50 4

BUDGET QUIZ FOR SBI PAPER 2013

1.    Total budget estimates of Union budget 2013-14 is____?(1) Rs 16, 64, 300 crore                (2) Rs 16, 65, 297 crore(3) Rs 16, 70, 400 crore                (4) Rs 16, 75, 297 crore(5) None of these2.    What is the total capital infusion for Public Sector banks in budget 2013-14?(1) Rs 15,000 crore                       (2) Rs 30,000 crore(3) Rs 12,000 crore                       (4) Rs 14,000 crore(5) None of these

3.    Fiscal deficit for 2013-14 is pegged at how much per cent of GDP?(1) 4.9%                                        (2) 5.2%(3) 6.2%                                        (4) 4.8%(5) None of these

4.    Revenue deficit for 2012-13 is pegged at how much per cent of GDP?(1) 3.9%                                        (2) 4.9%(3) 4.4%                                        (4) 5.5%(5) None of these

5.    How much fund has been allocated for Mid-day meal scheme?(1) Rs 17,412 crore                       (2) Rs 15,000 crore(3) Rs 13,215 crore                       (4) Rs 22,510 crore(5) None of these

6.    How much fund has been allocated for Defence sector?(1) Rs 2,05,275 crore                    (2) Rs 2,03,672 crore(3) Rs 2,04,575 crore                    (4) Rs 2,02,452 crore(5) None of these

7.    Income limit under Rajiv Gandhi Equity Savings Scheme (RGESS) will be raised from Rs. 10 lakh to ____?(1) Rs 11 lakh                               (2) Rs 13 lakh(3) Rs 12 lakh                               (4) Rs 15 lakh(5) None of these

8.    Refinancing capacity of SIDBI raised to ___?(1) Rs 11,000 crore                       (2) Rs 10,000 crore(3) Rs 12,000 crore                       (4) Rs Rs 13,000 crore(5) None of these

9.    Which among the following statements is true about the Union Budget 2013-14 introduce recently by Finance Minister P. Chidambaram?(A) Fiscal Deficit seen at 4.8% of GDP in 2013/14(B) Revenue Deficit seen at 3.3 % 2013/14(c) Rs 5,000 crore to NABARD to finance construction of godowns and warehouses

(D) Headline WPI inflation to 7 percent (1) Only A & B                              (2) Only B & C                        (3) Only A & D                              (4) Only A, B & D                    (5) All A, B, C & D

10.  How much fund allocated to Eastern Indian States for improving agricultural production?(1) Rs 15,00 crore                         (2) Rs 1000 crore(3) Rs 2000 crore                          (4) Rs 500 crore(5) None of these

11.  Education sector gets Rs 65, 867 crore an increase of how much percent for 2012-13?(1) 15%                                         (2) 17%(3) 18%                                         (4) 16%(5) None of these 

12.  Headline WPI inflation for 2013/14 is ___?(1) 6%                                           (2) 8% (3) 7%                                           (4) 5%(5) None of these

13.  Core inflation for 2013/14 is ___?(1) 3.3%                                        (2) 4.2%(3) 5.2%                                        (4) 3.2%(5) None of these

14.  A total of 80194 crore Rupees was allocated for Rural Development Ministry, an increase by how much  percent in 2013-14 fiscal year?(1) 45%                                         (2) 46%(3) 55%                                         (4) 50%(5) None of these

15.  Pradham Mantri Gram Sadak Yojana (PMGSY)-II was proposed for the benefit of those states which have substantially fulfilled the objectives of PMGSY. Name the six out of two states?(1)  Punjab & Haryana                  (2) Haryana & Uttar Pradesh(3) Maharashtra & Madhya Pradesh(4) Punjab & Bihar(5) None of these

Answers1 2 7 3 13 2

2 4 8 2 14 2

3 4 9 5 15 1

4 1 10 2

5 3 11 2

6 2 12 3

BANKING AWARENESS

1.    Inflation low to 6.62 percent in January 2013i. The inflation rate of India dropped down to the three year low in the chart to 6.62 percent in January 2013 from the 7.18 percent, measured in December 2012. ii. The inflation was measured based upon monthly Wholesale Price Index. iii. The official Wholesale Price Index for All Commodities (Base: 2004-05 = 100) in January, 2013 rose by 0.4 percent to 169.2 (Provisional) from 168.6 (Provisional) for the previous month.

2.    NTPL signs 1,000 MW project with banks:i. A groups of banks which includes Bank of India, Indian Bank and Central Bank of India has agreed to lend Rs 937 crore for the 1,000 –MW NTPL power project, a joint venture of the Neyveli Lignite Corporation and the Tamil Nadu Power Generation and Distribution Corporration.ii. The project is being set up at Tuticorin in Tamil Nadu. The Project would be taken up at an estimated cost of Rs. 4,909.54 crore.iii. The power generated from the project would be distributed among Tamil Nadu, Kerala, Karnataka and Puducherry.

3.    SBI launched “Tatkal Scheme”...

i. Recently “Tatkal” scheme is launched by SBI (State Bank of India) that enables the people to transfer money to their families in their native towns and villages without actually opening an account.

4.    Saxo Bank enters Indian market:i. Saxo Banks has announced its entry into the Indian market to provide trading platform for foreign equities.About Saxo Bank:i. An online Danish investment Bank:Headquater: Copenhagen, DenmarkChairman: Kurt K. LarsenService offered:i. Trading via an online platform Saxo Trader in Forex, stocks, futures, funds and Bondsii. Private wealth management services.iii. The bank provides online trading and investment across global financial markets.iv. Saxo Bank is well known internationally for its success in Internet brokerage and it has bagged numbers of awards for the same.

5.    50% increases in Bad loans of listed banks:i. The bad loans or Non Performing Assets of listed banks swelled by 50% at Rs 30,840 crore in the first nine months of the current financial year ended December 31,2012. ii. The net Non-Performing Assets (NPAs) of 40 listed banks surged to Rs 92,398 crore as on December 31, 2012, from Rs 61,558 crore as on March 31, 2012.iii. The net NPAs in State Bank of India, Punjab National Bank and Bank of Baroda rose by 60%, 70% and 118% respectively.

6.    Govt. increase NABARD capital base to Rs 20,000 crorei. The Govt. has increased the capital base of India’s apex development bank NABARD to Rs 20,000 crore from existing Rs 5000 crore.ii. The increase will augment the operations and broaden the activities of NABARD. Following these changes NABARD would be able to undertake short term lending operations and introduce new credit products.

7.    Financial institutions Syndicated deal Award goes to Yes Bank:i. YES Bank has been awarded the Financial Institutions Syndicated Deal of the Year 2012 in its Asia Pacific Region.ii. The award was given for $155 million loan syndicated by YES bank which was distributed across 9 different countries from 14 banks.iii. The award was given away by Asia Pacific Loan Market Association (APLMA), which is a leading trade association for syndicated loan market in this region.

8.    Exports of India Increased By 0.8 Per Cent in January 2013i. The exports of India increased by 0.8 percent in the month of January 2013 to 25.58 billion US dollars. ii. Comparatively, exports in January 2012 were 25.37 billion US dollars. iii. Imports on the other hand, increased by 6.12 percent to 45.5 billion iv. Oil imports in January 2013 increased by 6.91 percent to 15.89 billion US dollars in comparison to 14.87 billion US dollars in January 2012.

9.    Net Direct Tax Collection Grew 12 Percent in April-January in FY 2012-2013i. Net Direct Tax collections registered a growth of 12.49 percent, i.e., 390310 crore Rupees in 2012-2013 fiscal year against 346959 crore Rupees in 2011-2012 fiscal year. ii. Gross Direct Tax collection from the period of April to January in fiscal year 2012-2013 increased by 7.02 percent at 455125 crore Rupees against 425274 crore Rupees in same period in 2011-2012 fiscal year. iii. 2.85 percent growth was recorded in wealth tax. It increased to 685 crore Rupees in 2012-2013 financial year in comparison to 666 crore Rupees in 2011-2012 financial year.iv. Gross collection of the corporate taxes increased 3.71 percent, i.e., 296451 crore Rupees in 2012-2013 fiscal year against 285837 crore Rupees in 2011-2012. v. Gross collection of personal income tax increased by 13.81 percent, i.e., 157913 crore Rupees in 2012-2013 fiscal year against 138746 crore in 2011-2012 fiscal year. 

10.  Dell ready to become private in $24 billion deali. PC manufacturer Dell is ready to go private in a $24 billion buyout. ii. The  company which is facing slump will pay its stockholders $13.65 share to leave the company on its own.iii. The company will be sold to a group of investors that includes investment firm Silver Lake.iv. Once this is done, Dell will stop trading on the NASDAQv. Dell’s sale is the highest –priced leveraged buyout of a technology company.NOTE: i. Dell did rapid growth through the 1990s which brought its founder Michael Dell into one of the world’s richest people. ii. Michael Dell, who owns nearly 16% stake in the company will remain the CEO after the sale closes.

BANKING AWARENESS

1. Bank for Women, by the Women and to the Women:

i. India to have first public sector women’s Bank. An initial capital of Rs 1,000 crore has been committed in current Budget for the establishment of India’s first public sector Women’s Bank by the end of 2013ii. The bank will run mostly by women and it would provide funds for the entrepreneurial initiatives by women.iii. There is still not much clarity on what will be the specific features of this bank, how many branches, locations etc.iv. On the whole, the first women’s bank is going to increase job opportunities for women and will help in the emergence of many women entrepreneurs in the country.

NOTE: i. As per RBI, the women’s bank would be set up as a PSB and would not require separate guidelines.ii. Currently, there are all-women banks in the co-operative sector. For example, the Self-Employed Women’s Association (SEWA) set up a women-only bank in 1974. iii. The bank is owned by self-employed women as shareholders, and policies are formulated by their own elected board of women workers.

2.    RBI cuts interest rate by 0.25 per cent: i. Recently Reserve Bank of India (RBI) decided to reduce the key repo rate by 25 basis points from 7.75 per cent to 7.5 per cent with immediate effect.ii. The RBI has left the cash reserve ratio (CRR) unchanged at 4 per cent.iii. Consequently, the reverse repo rate stands adjusted to 6.5 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 8.5 per cent with immediate effect. NOTE: This is the second policy rate cut by the RBI this calendar year to help revive a faltering economy, taking comfort from moderating core price pressures and the government's commitment to trim the fiscal deficit.

CURRENT RBI RATES:1. CRR – 4%    (unchanged)                             2. Repo Rate – 7.5%                Previously – 7.75%       3. Reverse Repo Rate – 6.5%  Previously – 6.75%4. MSF – 8.5%                          Previously – 8.75%5. Bank Rate – 8.5%                 Previously – 8.75%     6. SLR – 23%         (unchanged)                             

3.    Government  to Infuse Rs. 14,000 cr. in PSU Banks i. In the Budget speech it has been announced that the government will infuse Rs 14,000 crore in public sector banks in next fiscal (2013-14).Objective:To ensure that PSU Banks meet the Basel III regulations regarding capital adequacy.NOTE: i. Implementation of Basel III capital regulations envisages enhancing the requirement of core equity capital by banks due to higher capital ratios.The Basel III capital ratios will be fully phased in as on March 31, 2018.ii. The RBI has extended the date for implementing Basel III regulations by 3 months to April 1, 2013.iii. The Government had poured in about Rs 20,117 crore in public sector banks during 2010-11 and Rs 12,000 crore in 2011-12.

4.    United Bank ties up with Tata Power Solari. United Bank of India has entered into a memorandum of understanding (MoU) with Tata Power Solar to provide credit to the non-renewable energy sector.ii. Under the MoU, Tata Power will leverage the bank’s branch network in the eastern region to make easy finance available to the purchaser of the off-grid solar home lighting or water heating system.iii. The bank, in turn, will utilise the Tata Power outlets to increase its reach in the country.iv. Deepak Narang, Executive director, United Bank. said: The arrangement will facilitate the bank to further increase its exposure to the micro sector.

5.    Banks can sell Insurance products of Multiple firmsi. As per Budget 2013-14, banks will also act as brokers for selling insurance products of multiple companies.ii. Life insurers such as LIC and general insurers such as GIC will also be asked to open one branch each in towns with a population of over 10,000.iii. The FM has also asked insurance companies to sell policies to people who have completed KYC obligations with banks.iv. Insurance companies will be allowed to open branches in non-metropolitan cities without approval from the insurance regulator.v. Insurance companies will be directly allowed to trade in debt market. It will mean some reduction in costs and may help deepen debt markets.vi. According to Finance Minister P. Chidambaram, the know-your-customer (KYC) details gathered by banks will be sufficient to purchase an insurance policy, and group insurance products will now be offered to groups such as self-help groups, domestic workers' associations, among others.

NOTE:i. Currently, banks can sell products of one life, one non-life and a standalone health insurer. ii. The bancassurance guidelines are still under consideration of the Insurance Regulatory and Development Authority (IRDA). iii. Reserve Bank of India (RBI) had recently shown concerns about banks becoming brokers.

6.    RBI extends deadline for issuance of new format chequesi. The RBI has once again extended the deadline for issuance of new format cheque till July-end. ii. It has asked the banks to issue new cheque books only under the new format and gave them time till July-end to withdraw the old format cheques.

iii. All cheques currently with customers in the old format (non-Cheque Truncation System) will continue to be valid for another four months (the earlier deadline was March 31), the apex bank said.iv. The Reserve Bank also said the system of post dated cheques and payment via Equated Monthly Installment (EMI), in either the old or new format, will be banned from now wherever electronic debit facilities are available.v. "All cheques issued by banks (including DDs/POs) with effect from the date of this circular shall necessarily conform to CTS-2010 standard," vi. The CTS-2010 eliminates the current practice of physically presenting a cheque to the payee bank, thereby substantially reducing the time for cheque clearance.

7.    Cheque signature mismatch may lead to criminal proceedings: Supreme Courti. A person may face criminal proceedings if a cheque issued by him gets dishonoured on the ground that his signature does not match the specimen signature available with the bank.ii. "Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138 of Negotiable Instrument Act, so also dishonour on the ground that the 'signatures do not match' or that the 'image is not found', which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act,"

8.    SEBI enables two-way fungibility of IDRsi. The Securities and Exchange Board of India (SEBI) has issued detailed guidelines which will allow shareholders to convert their depository receipts into equity shares of the issuer company and vice-versa.ii. The issuer could provide exchangeability to IDR holders by converting IDRs into underlying shares; or converting IDRs into underlying shares and selling the underlying shares in the foreign market where the shares of the issuer are listed and providing the sale proceeds to the IDR holders.iii. Existing IDR issuers can follow the new framework, and have to provide the option of redemption/conversion within three months from the date of completing a year of listing.

About Indian Depository Receipts (IDRs)IDRs are generally instruments denominated in rupees and allow overseas companies to raise funds from the Indian market.

How this step would help India’s capital market?i. This move of allowing for two-way fungibility of IDRs will encourage greater foreign participation in the Indian capital market. ii. So far only the UK-based banking major Standard Chartered PLC was listed as an IDR.

9.    India Bhutan Sign Currency Swap Agreementi. India and Bhutan have inked a currency swap agreement for up to $100 million to promote economic co-operation b/w the two nations.ii. The pact was signed by the Reserve Bank of India and the RoyalMonetary Authority of Bhutan (RMAB).iii. It enables RMAB to make withdrawals of US dollar, euro or Indian rupee in multiple tranches up to a maximum of $100 million or its equivalent.NOTE: i. The agreement is in line with RBI announcement in May 2012 to offer swap facilities aggregating $2 billion, both in foreign currency and Indian rupee, to SAARC member nations — Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.ii. This pact will provide emergency funding for SAARC member countries to meet any balance of payments and liquidity crisis till longer term arrangements are made or if there is need for short-term liquidity due to market upheaval.iii. The arrangement would be for a 3-year period and would help bring financial stability in the region.

10.  Direct Cash Transfer scheme from Govt: Aapka Paisa, Aapke Haath i. Government’s direct cash transfer programme- the Direct Benefit Transfer Scheme which began on January 1, 2013 which benefitted 11 lakh poor people throughout the country.

Main Objective:i. As per Finance Minister, P.Chidambaram, it costs the government Rs 3 to transfer 1 rupee to the pockets of beneficiaries. The rest goes on administrative expenses, waste and corruption. Cash transfers will do away with mediators of all sorts, thus reducing corruption and administrative burdens.ii. No delay in transfer of money to beneficiariesiii. Elimination of falsification and duplication with regard to subsidiesiv. Beneficiaries can access it themselves or via banking correspondents who are being set up in all the areasv. At present, beneficiaries have to furnish various paperwork for availing benefit. vi. CTS has the potential to merge all paperwork, thus reducing red tape and improving efficiency.

Role of Banks:i. Banks would be the distribution point for cash subsidy initiallyii. Subsidies would directly be electronically transferred to the bank accounts of the beneficiariesiii. The electronic cash transfers will be based on Aadhaar platform

Target:i. By January 1, 2013, 51 districts with high Aadhar penetration will be covered.ii. By December 2013, the entire nation will be covered

Challenge regarding DCTs:

i. Most BPL families don’t have bank accountsii. Several villages don’t even have bank branchesiii. At present, only about 10% of population has Aadhar cardsiv. Politically difficult to withdraw benefits from once-poor folk who become better off.

FORMAL LETTER FOR DESCRIPTIVE

Formal letter for Descriptive purpose, important for upcoming exams.

NOTE: Please note, you have to mention a random address in the below format and not an actual one, as you are not supposed to divulge any personal information.

Q. Write a letter to the MCD about the problem of open manholes in your area.Ans.

ABCBlock – J 88/3Ashok ViharDelhi

ToThe Commissioner Municipal Corporation of Delhi

Subject – Problem of Open Manholes in Laxmi Nagar

Sir,    With due regards, I wish to bring to your kind notice that the conditions of man holes in our area are very unsatisfactory.Recently, a six year old child had a providential escape when he fell into an open manhole in our area. Luckily a passerby rescued him. The frightening fact is that open manholes have become the source of imminent danger to the lives of the residents of this area, especially small children. These manholes with their gaping mouths can be death-traps for unsuspecting passerby. They can also cause major motor accidents.     I would request you to instruct the concerned staff to take immediate necessary action to get these open manholes covered before they claim any life.

Your’s faithfullyABC

Banking Concepts: Finance Commission

The government recently constituted the 14th Finance Commission under the chairmanship of former RBI Governor YV Reddy. The commission will submit its report by October 31, 2014.

WHAT IS THE ROLE OF FINANCE COMMISSIONS?A finance commission is set up very five years by the President under Article 280 of the Constitution. Its main function is to recommend how the Union government should share taxes levied by it with the states. These recommendations cover a period of five years. The commission also lays down rules by which the centre should provide grants-in-aid to states out of the Consolidated Fund of India. It is also required to suggest measures to augment the resources of states and ways to supplement the resources of panchayats and municipalities.

WHY DOES THE CONSTITUTION PROVIDE FOR SHARING OF TAX PROCEEDS?Under the federal structure envisaged in the Constitution, most of the taxation powers are with the Centre but the bulk of spending is done by the states. Such a federal structure requires transfer of resources from the Centre, which levies and collects the big taxes such as income tax and indirect taxes like excise and customs, to the states. Canada and Australia, which also have federal governments, have a similar tax-sharing system.

CAN THE COMMISSION EXAMINE OTHER FISCAL ISSUES AS WELL?Yes. The government can ask the commission to make suggestions on specific fiscal issues that it may want addressed. For instance, the government has asked the 14th Finance Commission to deliberate on the level of subsidies and explore statutory measures to insulate pricing of public utility services like drinking water, irrigation, power and public transport from policy fluctuations. The new commission will also look at the impact of GST and suggest a mechanism to compensate states in case of revenue loss. Besides, it will deliberate on listing, disinvestment and sale of state-owned companies.

WHAT IS THE FORCE OF THE COMMISSION'S RECOMMENDATIONS?The Constitution does not make the recommendations of the Finance Commission binding on the government of the day. However, there is a

strong precedent that governments generally go by the suggestions as far as sharing of revenues is concerned. These recommendations relating to distribution of Union taxes and duties and grants-in-aid are usually implemented by a presidential order.

Banking Concepts - New Ideas in Budget

Dear Aspirants,

We came across a very nice article in Economic Times on some new concepts and ideas which were introduced in Budget 2013.

SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEMEA one-time amnesty for those who have collected service tax but not deposited the same with the government. Those service tax providers that have not filed service tax return since October 2007 can disclose true liability and get an interest or penalty waive off.

COMMODITIES TRANSACTION TAX (CTT):This is on the lines of securities transaction tax levied on sale and purchase of shares on stock exchanges. The tax will be levied on nonagricultural commodities futures at 0.01 per cent of the trade value, the same rate as that on equity futures.

INVESTMENT ALLOWANCEA tax break given to companies for high value investment in plant and machineries, over and above depreciation benefits enjoyed by them. A company investing Rs 100 crore or more in plant and machinery during the April 2013 to March 2015 will be entitled to deduct an investment allowance of 15 per cent of the investment. This is expected to see enormous spill-over benefits to small and medium enterprises.

INFLATION-INDEXED BONDSThe government hopes this will help increase financial savings instead of buying gold. In the recent years the rate of return on debt investments has often been below inflation, which effectively means that inflation was eroding savings. Inflation indexed bonds provide will provide returns that are always in excess of inflation, ensuring that price rise does not erode the value of savings.

BANKING CONCEPTS: RAJIV GANDHI EQUITY SAVINGS SCHEME

Rajiv Gandhi Equity Savings SchemeRajiv Gandhi Equity Savings Scheme or RGESS is a new equity tax advantage savings scheme for equity investors in India, with the stated objective of "encouraging the savings of the small investors in the domestic capital markets."

It was approved by The Union Finance Minister, Shri. P. Chidambaram on September 21, 2012.

Important Facts about the Scheme:

1. Who can invest under this scheme?

i. Anybody who has not invested in equities before and has a gross total annual income of Rs12 lakh or less. Which means, you have not opened a demat account in the past. You have not made any transactions in equity and derivatives in the past (until November 23, 2012.) 

ii. However, if you do have a demat account but have not done equity or futures and options transaction in the past (until November 23, 2012), you can invest in RGESS. If you are a joint demat account holder (2nd or 3rd account holder), you can open a new demat account as the 1st holder and invest in RGESS.

2. How much you can invest?

i. You can make any amount of investments, but the amount eligible for an income tax deduction is a maximum amount of Rs 50,000.

3. How to invest?

i.  To invest in RGESS, you will need to open a demat account. You will also have to fill in declaration Form A to the Depositary Participant (DP).

4. What is the lock in period?

There is a lock-in period of total three years. This lock-in period is further divided into two – fixed and flexible.

i. Fixed Lock-in: The first one year from the date of investment is a fixed lock-in. During this period, you cannot sell any securities or pledge them to get loans.

ii. Flexible Lock-in: The flexible lock-in period is for next two years from the date of the end of the fixed lock-in period. During this period, you are permitted to buy and sell eligible securities, provided that for a cumulative period of 270 days each year, you are

maintaining the value of your initial investment. In short, the value of the investment portfolio should be equal to or more than the amount you’ve claimed as investments for the purpose of deduction under Section 80 CCG.

5. Expiry of period?

Once the period of holding expires, the demat account will be converted automatically into an ordinary demat account.

6. Tax benefits?

i. To avail of tax deduction, an investor has to open a new RGESS designated demat account or designate for this purpose his existing demat account, where no trading has taken place before 23 November. 

ii. As per the Indian Income tax, a deduction is up to 50 percent of the amount invested in such equity shares to the extent such deduction does not exceed Rs 25,000. So, if you are in the lowest tax bracket of 10 percent your tax benefit will be Rs 2,500. And, if you are in the 20 percent tax bracket, your tax benefit will be Rs 5,000.

7. Listed securities in which investment can be made?

The eligible securities include stocks listed on the BSE-100, CNX 100 indices, Maharatna, Navratna or Miniratna PSU companies, IPOs of PSUs with an annual turnover of more than Rs 4,000 crore and RGESS-compliant mutual fund ETFs.

NOTE: i. A first-timer has been defined as the one who has not opened a demat account as a 'first holder' before the notification date of 23 November 2012, even if his name appears in a joint demat account opened before this date.

ii. The investor who has opened a demat account as first holder before the notification date but has not bought any shares or traded in the futures and options segment will also be considered as a first-time investor.

Banking Concepts: Terms Useful for Banking Aspirants

Dear Readers,

The following post is very helpful for all banking aspirants. These are few select definition sourced from RBI which will clear your conceptual level requirement. All these terms will be covered in greater details in  separate post in future. Few of the terms are very beneficial for upcoming Specialist Officer Exam for Financial Executive - Scale II and also for Chartered Accountant Scale II.

Capital Funds: Equity contribution of owners. The basic approach of capital adequacy framework is that a bank should have sufficient capital to provide a stable resource to absorb any losses arising from the risks in its business. Capital is divided into different tiers according to the characteristics / qualities of each qualifying instrument. For supervisory purposes capital is split into two categories: Tier I and Tier II.

Tier I Capital: A term used to refer to one of the components of regulatory capital. It consists mainly of share capital and disclosed reserves (minus goodwill, if any). Tier I items are deemed to be of the highest quality because they are fully available to cover losses Hence it is also termed as core capital.

Tier II Capital: Refers to one of the components of regulatory capital. Also known as supplementary capital, it consists of certain reserves and certain types of subordinated debt. Tier II items qualify as regulatory capital to the extent that they can be used to absorb losses arising from a bank's activities. Tier II's capital loss absorption capacity is lower than that of Tier I capital.

Revaluation reserves: Revaluation reserves are a part of Tier-II capital. These reserves arise from revaluation of assets that are undervalued on the bank's books, typically bank premises and marketable securities. The extent to which the revaluation reserves can be relied upon as a cushion for unexpected losses depends mainly upon the level of certainty that can be placed on estimates of the market values of the relevant assets and the subsequent deterioration in values under difficult market conditions or in a forced sale.

Leverage: Ratio of assets to capital.

Capital reserves: That portion of a company's profits not paid out as dividends to shareholders. They are also known as undistributable reserves and are ploughed back into the business.

Deferred Tax Assets: Unabsorbed depreciation and carry forward of losses which can be set-off against future taxable income which is considered as timing differences result in deferred tax assets. The deferred Tax Assets are accounted as per the Accounting Standard 22.

Deferred Tax Liabilities: Deferred tax liabilities have an effect of increasing future year's income tax payments, which indicates that they are accrued income taxes and meet definition of liabilities.

Subordinated debt: Refers to the status of the debt. In the event of the bankruptcy or liquidation of the debtor, subordinated debt only has a secondary claim on repayments, after other debt has been repaid.

Hybrid debt capital instruments: In this category, fall a number of capital instruments, which combine certain characteristics of equity and certain characteristics of debt. Each has a particular feature, which can be considered to affect its quality as capital. Where these instruments have close similarities to equity, in particular when they are able to support losses on an ongoing basis without triggering liquidation, they may be included in Tier II capital.

BASEL Committee on Banking Supervision: The BASEL Committee is a committee of bank supervisors consisting of members from each of the G10 countries. The Committee is a forum for discussion on the handling of specific supervisory problems. It coordinates the sharing of supervisory responsibilities among national authorities in respect of banks' foreign establishments with the aim of ensuring effective supervision of banks' activities worldwide.

BASEL Capital accord: The BASEL Capital Accord is an Agreement concluded among country representatives in 1988 to develop standardised risk-based capital requirements for banks across countries. The Accord was replaced with a new capital adequacy framework (BASEL II), published in June 2004. BASEL II is based on three mutually reinforcing pillars hat allow banks and supervisors to evaluate properly the various risks that banks face. These three pillars are:

         Minimum capital requirements, which seek to refine the present measurement framework         supervisory review of an institution's capital adequacy and internal assessment process;         market discipline through effective disclosure to encourage safe and sound banking practices

Risk Weighted Asset: The notional amount of the asset is multiplied by the risk weight assigned to the asset to arrive at the risk weighted asset number. Risk weight for different assets vary e.g. 0% on a Government Dated Security and 20% on a AAA rated foreign bank etc.

CRAR(Capital to Risk Weighted Assets Ratio): Capital to risk weighted assets ratio is arrived at by dividing the capital of the bank with aggregated risk weighted assets for credit risk, market risk and operational risk. The higher the CRAR of a bank the better capitalized it is.

Credit Risk: The risk that a party to a contractual agreement or transaction will be unable to meet its obligations or will default on commitments. Credit risk can be associated with almost any financial transaction. BASEL-II provides two options for measurement of capital charge for credit risk 1.standardised approach (SA) - Under the SA, the banks use a risk-weighting schedule for measuring the credit risk of its assets by assigning risk weights based on the rating assigned by the external credit rating agencies.2. Internal rating based approach (IRB) - The IRB approach, on the other hand, allows banks to use their own internal ratings of counterparties and exposures, which permit a finer differentiation of risk for various exposures and hence delivers capital requirements that are better aligned to the degree of risks. The IRB approaches are of two types:a) Foundation IRB (FIRB): The bank estimates the Probability of Default (PD) associated with each borrower, and the supervisor supplies other inputs such as Loss Given Default (LGD) and Exposure At Default (EAD). b) Advanced IRB (AIRB): In addition to Probability of Default (PD), the bank estimates other inputs such as EAD and LGD. The requirements for this approach are more exacting. The adoption of advanced approaches would require the banks to meet minimum requirements relating to internal ratings at the outset and on an ongoing basis such as those relating to the design of the rating system, operations, controls, corporate governance, and estimation and validation of credit risk components, viz., PD for both FIRB and AIRB and LGD and EAD for AIRB. The banks should have, at the minimum, PD data for five years and LGD and EAD data for seven years. In India, banks have been advised to compute capital requirements for credit risk adopting the SA.

Market Risk: Market risk is defined as the risk of loss arising from movements in market prices or rates away from the rates or prices set out in a transaction or agreement. The capital charge for market risk was introduced by the BASEL Committee on Banking Supervision through the Market Risk Amendment of January 1996 to the capital accord of 1988 (BASEL I Framework). There are two methodologies available to estimate the capital requirement to cover market risks: 1) The Standardised Measurement Method: This method, currently implemented by the Reserve Bank, adopts a ‘building block’ approach for interest-rate related and equity instruments which differentiate capital requirements for ‘specific risk’ from those of ‘general market risk’. The ‘specific risk charge’ is designed to protect against an adverse movement in the price of an individual security due to factors related to the individual issuer. The ‘general market risk charge’ is designed to protect against the interest rate risk in the portfolio.2) The Internal Models Approach (IMA): This method enables banks to use their proprietary in-house method which must meet the qualitative and quantitative criteria set out by the BCBS and is subject to the explicit approval of the supervisory authority.

Operational Risk: The revised BASEL II framework offers the following three approaches for estimating capital charges for operational risk:1) The Basic Indicator Approach (BIA): This approach sets a charge for operational risk as a fixed percentage ("alpha factor") of a single indicator, which serves as a proxy for the bank’s risk exposure. 2) The Standardised Approach (SA): This approach requires that the institution separate its operations into eight standard business lines, and the capital charge for each business line is calculated by multiplying gross income of that business line by a factor (denoted beta) assigned to that business line.3) Advanced Measurement Approach (AMA): Under this approach, the regulatory capital requirement will equal the risk measure generated by the banks’ internal operational risk measurement system. In India, the banks have been advised to adopt the BIA to estimate the capital charge for operational risk and 15% of average gross income of last three years is taken for calculating capital charge for operational risk.

Internal Capital Adequacy Assessment Process (ICAAP): In terms of the guidelines on BASEL II, the banks are required to have a board-approved policy on internal capital adequacy assessment process (ICAAP) to assess the capital requirement as per ICAAP at the solo as well as consolidated level. The ICAAP is required to form an integral part of the management and decision-making culture of a bank. ICAAP document is required to clearly demarcate the quantifiable and qualitatively assessed risks. The ICAAP is also required to include stress tests and scenario analyses, to be conducted periodically, particularly in respect of the bank’s material risk exposures, in order to evaluate the potential vulnerability of the bank to some unlikely but plausible events or movements in the market conditions that could have an adverse impact on the bank’s capital.

Mortgage Back Security: A bond-type security in which the collateral is provided by a pool of mortgages. Income from the underlying mortgages is used to meet interest and principal repayments.

Derivative: A derivative instrument derives its value from an underlying product. There are basically three derivatives

a) Forward Contract- A forward contract is an agreement between two parties to buy or sell an agreed amount of a commodity or financial instrument at an agreed price, for delivery on an agreed future date. Future Contract- Is a standardized exchange tradable forward contract executed at an exchange. In contrast to a futures contract, a forward contract is not transferable or exchange tradable, its terms are not standardized and no margin is exchanged. The buyer of the forward contract is said to be long on the contract and the seller is said to be short on the contract.b) Options- An option is a contract which grants the buyer the right, but not the obligation, to buy (call option) or sell (put option) an asset, commodity, currency or financial instrument at an agreed rate (exercise price) on or before an agreed date (expiry or settlement date). The buyer pays the seller an amount called the premium in exchange for this right. This premium is the price of the option.c) Swaps- Is an agreement to exchange future cash flow at pre-specified Intervals. Typically one cash flow is based on a variable price and other on affixed one.

Duration: Duration (Macaulay duration) measures the price volatility of fixed income securities. It is often used in the comparison of interest rate risk between securities with different coupons and different maturities. It is defined as the weighted average time to cash flows of a bond where the weights are nothing but the present value of the cash flows themselves. It is expressed in years. The duration of a fixed income security is always shorter than its term to maturity, except in the case of zero coupon securities where they are the same.

Modified Duration: Modified Duration = Macaulay Duration/ (1+y/m), where ‘y’ is the yield (%), ‘m’ is the number of times compounding occurs in a year. For example if interest is paid twice a year m=2. Modified Duration is a measure of the percentage change in price of a bond for a 1% change in yield.

Non Performing Assets (NPA): An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank.

Net NPA: Gross NPA – (Balance in Interest Suspense account + DICGC/ECGC claims received and held pending adjustment + Part payment received and kept in suspense account + Total provisions held).

Coverage Ratio: Equity minus net NPA divided by total assets minus intangible assets.

Restructuring: A restructured account is one where the bank, grants to the borrower concessions that the bank would not otherwise consider. Restructuring would normally involve modification of terms of the advances/securities, which would generally include, among others, alteration of repayment period/ repayable amount/ the amount of installments and rate of interest. It is a mechanism to nurture an otherwise viable unit, which has been adversely impacted, back to health.

Substandard Assets: A substandard asset would be one, which has remained NPA for a period less than or equal to 12 months. Such an asset will have well defined credit weaknesses that jeopardize the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected.

Doubtful Asset: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, - on the basis of currently known facts, conditions and values - highly questionable and improbable.

Doubtful Asset: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, - on the basis of currently known facts, conditions and values - highly questionable and improbable.

Loss Asset: A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.

Off Balance Sheet Exposure: Off-Balance Sheet exposures refer to the business activities of a bank that generally do not involve booking assets (loans) and taking deposits. Off-balance sheet activities normally generate fees, but produce liabilities or assets that are deferred or contingent and thus, do not appear on the institution's balance sheet until and unless they become actual assets or liabilities.

Total income: Sum of interest/discount earned, commission, exchange, brokerage and other operating income.

Total operating expenses: Sum of interest expended, staff expenses and other overheads.

Operating profit before provisions: Net of total income and total operating expenses.

Net operating profit: Operating profit before provision minus provision for loan losses, depreciation in investments, write off and other provisions.

Profit before tax (PBT):  (Net operating profit +/- realized gains/losses on sale of assets)

Profit after tax (PAT): Profit before tax – provision for tax.

Retained earnings: Profit after tax – dividend paid/proposed.

Average Yield:  (Interest and discount earned/average interest earning assets)*100

Average cost:  (Interest expended on deposits and borrowings/Average interest bearing liabilities)*100

Return on Asset (ROA)- After Tax: Return on Assets (ROA) is a profitability ratio which indicates the net profit (net income) generated on total assets. It is computed by dividing net income by average total assets. Formula- (Profit after tax/Av. Total assets)*100

Return on equity (ROE)- After Tax: Return on Equity (ROE) is a ratio relating net profit (net income) to shareholders’ equity. Here the equity refers to share capital reserves and surplus of the bank. Formula- Profit after tax/(Total equity + Total equity at the end of previous year)/2}*100

Net Non-Interest Income: The differential (surplus or deficit) between non-interest income and non-interest expenses as a percentage to average total assets.

Net Interest Income ( NII): The NII is the difference between the interest income and the interest expenses.

Net Interest Margin: Net interest margin is the net interest income divided by average interest earning assets.

Cost income ratio (Efficiency ratio): The cost income ratio reflects the extent to which non-interest expenses of a bank make a charge on the net total income (total income – interest expense). The lower the ratio, the more efficient is the bank. Formula: Non interest expenditure / Net Total Income * 100.

CASA Deposit: Deposit in bank in current and Savings account.

Liquid Assets: Liquid assets consists of: cash, balances with RBI, balances in current accounts with banks, money at call and short notice, inter-bank placements due within 30 days and securities under “held for trading” and “available for sale” categories excluding securities that do not have ready market.

ALM: Asset Liability Management (ALM) is concerned with strategic balance sheet management involving all market risks. It also deals with liquidity management, funds management, trading and capital planning.

ALCO: Asset-Liability Management Committee (ALCO) is a strategic decision making body, formulating and overseeing the function of asset liability management (ALM) of a bank.

Banking Book: The banking book comprises assests and liabilities, which are contracted basically on account of relationship or for steady income and statutory obligations and are generally held till maturity.

Venture Capital Fund: A fund set up for the purpose of investing in startup businesses that is perceived to have excellent growth prospects but does not have access to capital markets.

Held Till Maturity (HTM): The securities acquired by the banks with the intention to hold them up to maturity.

Held for Trading (HFT): Securities where the intention is to trade by taking advantage of short-term price / interest rate movements.

Available for Sale (AFS): The securities available for sale are those securities where the intention of the bank is neither to trade nor to hold till maturity. These securities are valued at the fair value which is determined by reference to the best available source of current market quotations or other data relative to current value.

Yield to maturity (YTM) or Yield: The Yield to maturity (YTM) is the yield promised to the bondholder on the assumption that the bond will be held to maturity and coupon payments will be reinvested at the YTM. It is a measure of the return of the bond.

Foreign Currency Convertible Bond (FCCB): A bond issued in foreign currency abroad giving the investor the option to convert the bond into equity at a fixed conversion price or as per a pre-determined pricing formula.

Trading Book: Investments in trading book are held for generating profits on the short term differences in prices/yields. Held for trading (HFT) and Available for sale (AFS) category constitute trading book.

CRR: Cash reserve ratio is the cash parked by the banks in their specified current account maintained with RBI.

SLR: Statutory liquidity ratio is in the form of cash (book value), gold (current market value) and balances in unencumbered approved securities.

LIBOR: London Inter Bank Offered Rate. The interest rate at which banks offer to lend funds in the interbank market.

Basis Point: Is one hundredth of one percent. 1 basis point means 0.01%. Used for measuring change in interest rate/yield.

Securitization: A process by which a single asset or a pool of assets are transferred from the balance sheet of the originator (bank) to a bankruptcy remote SPV (trust) in return for an immediate cash payment.

Special Purpose Vehicle (SPV): An entity which may be a trust, company or other entity constituted or established by a ‘Deed’ or ‘Agreement’ for a specific purpose.

Custodian: An entity, usually a bank that actually holds the receivables as agent and bailee of the trustee.

Value at Risk (VAR): VAR is a single number (currency amount) which estimates the maximum expected loss of a portfolio over a given time horizon (the holding period) and at a given confidence level. VaR is defined as an estimate of potential loss in a position or asset/liability or portfolio of assets/liabilities over a given holding period at a given level of certainty.

Banking Concepts - SLR Non SLR Investments

What are SLR investments?As part of prudential guidelines, central banks require lenders to maintain a portion of their deposits in liquid assets. These liquid assets can be cash, gold or government securities.The ratio of prescribed liquid investments to deposits is termed as statutory liquidity ratio. In India, banks invest in bonds issued by the government and notified by the Reserve Bank of India as qualifying for SLR to meet the prescribed ratio. Currently, the prescribed statutory liquidity ratio for banks is 23% of their deposits. SLR is occasionally used as monetary policy tool and the stipulation is made by authorities, keeping in mind the monetary policy objectives.

What are non-SLR investments?Besides giving loans to businesses and individuals, RBI has also allowed banks to invest in various capital market instruments such as stocks and bonds issued by public and private sector companies and commercial papers. In addition, banks are also allowed to invest in various mutual fund schemes. Unlike SLR investments, there is no compulsion on banks to invest in these instruments. Investments are entirely guided by commercial considerations and many such investments are in accordance with the prescribed guidelines.

How are non-SLR investments and loans linked?RBI treats both loans extended by commercial banks and the non-SLR investments as a resource flow to the commercial sector. Hence, it includes both while making credit projections it is comfortable with to achieve the targeted economic growth at the time of the monetary policy formulation during the beginning of the fiscal year.

Is there any differential treatment for the two types of investments?Since SLR investments in bonds are issued by the government or its bodies, these enjoy a sovereign protection, and hence, are perceived to be risk-free. However, in case of non-SLR investments, the central bank attaches risk weights, depending on the industry and the state of the perceived risk on that sector as a prudential measure.

BANKING AWARENESS

1.    PNB buys 30% stake in Met Life India Punjab National Bank has acquired a 30% stake in the Indian subsidiary of the biggest US life insurer MetLife at an unrevealed amount.

2.    ICICI Bank ties with Aircel for Mobile Money i. India’s largest private sector bank, ICICI Bank has partnered with Aircel to launch a mobile banking service, ‘Mobile Money’.ii. With the help of this service the unbanked customers of these two companies will be able to transfer money securely and instantly through their mobile phones without getting connected to data services.iii. The service will work towards financial inclusion of those who face problems in transferring money due to absence of branches or ATMs closer to them by offering a range of financial services such as deposits and cash withdrawals, money transfer to third parties, self-reload of prepaid mobile credit, and various utility bill payments.NOTE: i. The service will be initially rolled out in Tamil Nadu, specifically for the Chennai – Tirunelveli corridor – to help migrant labourers send back money to their villages.ii. It is similar to Vodafone’s M-Pesa service which first pioneered to great success in Africa.

3.    Naseer Ahmed is the new Director of Syndicate Banki. C R Naseer Ahmed has been appointed as the Director of Syndicate Bank. The Government of India has nominated Ahmed as part-time non-official director on the Board of Directors of Syndicate Bank for a period of 3 years.

4.    SBI slashes base rate to 9.7%i. India’s largest public sector bank, State Bank of India, has cut its base rate (minimum lending rate) marginally from current 9.75% to 9.70%.ii. The decision came following RBI cut its key policy rate and the cash reserve ratio by 25 basis points each.NOTE: After RBI announced cut, IDBI Bank was the first off the block to reduce base rate as well as its benchmark prime lending rate by 25 basis points each.

5.    Canara Bank to launch e-Lounge servicesi. Canara Bank is about to unveil its e-Lounge services in Bangalore and Delhi.ii. The bank would launch first e-Lounge at Koramangala Branch, BangaloreAbout e-Lounge servicesi. e-Lounge will cater to the needs of corporate, IT and business professionals. ii. It would offer Services of ATM, cash deposit kiosk, check deposit kiosk, pass book update, internet banking terminal, online trading terminal, corporate web site terminal to offer latest information of bank’s services all under one roof.

6.    S S Mundra appointed as the new CMD of BoBS S Mundra has been appointed by the Government of India as the Chairman and Managing Director (CMD) of India’s second largest lender- Bank of Baroda. He is the former Executive Director of Union bank of India.

7.    Axis Bank offers e-Gift Card serviceAxis Bank has launched ‘Axis Bank e- Gift Card’ which is an online version of physical plastic gift cards.About e-Gift Card servicei. The e-Gift card allows the customers to buy gift cards in an alternate way. The card carrying a particular value can be bought by using debit or credit card.ii. This card can be gifted via email or SMS to the recipient who can use it to purchase anything online across categories like apparels, airline tickets, books etc.iii. It also saves the sender from the puzzling situation of “what to buy for gift”.iv. All purchase transactions shall be limited to sites that support verified by Visa and MasterCard secure code for two factor authentication.

8.    World Bank slashed Global Growth to 2.4%i. World Bank sharply slashed the global growth outlook for 2013 to 2.4% from earlier estimate of 3%.The report includes updates to the World Bank's forecasts for growth.  i. 2.3 percent global GDP growth in 2012 (down from 2.5 percent)ii. 2.4 percent global GDP growth in 2013 (down from 3.0 percent)iii. 3.1 percent global GDP growth in 2014 (down from 3.3 percent)iv. 3.3 percent global GDP growth in 2015

9.    IMF forecasted World Economic Growth Rate would be 3.5 percent in 2013i. International Monetary Fund (IMF) in at update to World Economic Outlook (WEO) on 23 January 2013, projected that the global economic growth rate would be 3.5 percent in 2013.ii. The update mentioned that the global economic growth would strengthen gradually as the limitations of the economic activities have seen a positive note with the start of the year.

10.  IMF forecasted Indian Economic Growth Rate to be 5.9 percent in 2013i. The International Monetary Fund (IMF) on 23 January 2013 projected that the economic growth rate of India in 2013 would be 5.9 percent.ii. The IMF also projected an increased growth rate of 6.4 percent for 2014 looking forward towards the gradual strengthening of the global expansion in India’s context.

BANKING CONCEPTS: UNION BUDGET – PROCESS EXPLAINED

The government's annual budget is no different from that of a household, only it has a lot more jargon. In this article, we explain the basic architecture of the budget: 

ANNUAL FINANCIAL STATEMENT: The ordinary man confuses the finance minister's budget speech for the annual budget. But as laid down in the constitution, the budget actually refers to the annual financial statement tabled in Parliament along with the 13-15 other documents. Divided into three parts -- Consolidated Fund, Contingency Fund and Public Account -- it has a statement of receipts and expenditure of each.

CONSOLIDATED FUND: This is the core of the govt's finances. All revenues, money borrowed and receipts from loans it has given flow into this account. All government expenditure is made from this fund. Any expenditure from this fund requires the nod of Parliament.

CONTINGENCY FUND: All urgent or unforeseen expenditure is met from this ` 500-crore fund, which is at the disposal of the President. Any amount withdrawn from this fund is made good from the Consolidated Fund.

PUBLIC ACCOUNT: All money in this fund belongs to others, such as public provident fund. The government is merely working as a banker in respect of this fund.

REVENUE RECEIPT/EXPENDITURE: All receipts like taxes and expenditure like salaries, subsidies and interest payments that do not entail sale or creation of assets fall under the revenue account.

CAPITAL RECEIPT/EXPENDITURE: Capital account shows all receipts from liquidating (eg. selling shares in a public sector company) of assets and spending to create assets (lending to receive interest).

REVENUE VS CAPITALThe budget has to distinguish all receipts/expenditure on revenue account from other expenditure. So all receipts in, say, the consolidated fund, are split into Revenue Budget (revenue account) and Capital Budget (capital account), which include non-revenue receipts and expenditure.

REVENUE/CAPITAL BUDGET

The govt has to prepare a Revenue Budget (detailing revenue receipts and revenue expenditure) and a Capital Budget (capital receipts & capital expenditure).

Banking Concepts: CASA

What is Casa Ratio?

Casa is basically the current and savings sccount deposits. Casa ratio is the share of current and savings account deposits to the total deposits of the bank. In India, interest rates paid on current and savings account deposits is administered by banking regulator - the Reserve Bank of India.

Why are banks keen on garnering a higher share of CASA?Interest rate paid on Casa is much lower compared to other deposits like term deposits or recurring deposits. While banks do not pay any interest on current account, interest paid on savings account deposit is 4%. Banks therefore make maximum effort to increase the share of Casa on their books to reduce their overall cost of deposits. HDFC Bank has the highest share of Casa to total deposits at 52%, followed by the State Bank of India at 48% and ICICI Bank at 45%.

What does Casa mean for customers?Recently, RBI increased interest paid on savings account deposits from 3.5% to 4%. Further a year ago, RBI told banks to pay interest on savings deposits on a daily basis rather than paying on the minimum balance maintained by them in six months. As a result, savings account customers earn better returns compared to what they earned a year ago. Further, interest earned on savings account deposits does not attract TDS (tax deduction at source). Interest income above 10,000 a year attracts TDS of 10% in case of term deposits. However, there is no major benefit for current account deposits, which is mainly maintained by corporates and traders.

What are the disadvantages of high CASA?These deposits can move out of banks' books anytime, leading to asset-liability mismatches. While in case of term deposits, banks are almost certain that the depositor may not withdraw money before the maturity of the deposit and may also renew the deposit on maturity. Further, to finance long-term projects, banks need to have long-term liabilities on their books to avoid mismatches. Banks cannot rely on Casa deposits to fund long-term loans.

Banking Concepts: Fiscal Cliff

What is Fiscal Cliff?The phrase "fiscal cliff" was first used by Fed chairman Ben Bernanke to refer to the combination of tax increases and spending cuts that would come into effect.

What impact will the fiscal cliff have?A number of tax cuts, including Bush-era tax cuts, and unemployment benefits will expire almost together at the year-end. The result would be a drop in government spending and lower disposable incomes. These tax benefits and higher government spending had supported the economic recovery at a time when private sector demand was low. Expiry of tax benefits and lower government spending would help reduce the federal budget deficit but could temporarily arrest economic recovery, possibly even driving the US into a recession during the first half of the next year.

What does it imply for the rest of the world?The current fiscal policy in the US has raised concerns over the country's long term fiscal stability and solvency. The increase in taxes and lower government spending are part of the solution. But if the tax increases and spending cuts are allowed, the resulting recessionary climate would then cloud the prospects of even the fastest-growing economies, China and India.

So what is the alternative?The two parties could arrive at a compromise before the elections start, which could calm financial markets. But so far they haven't shown any inclination to talk; probably both are waiting to see who will have more negotiating leverage after the November elections.

Article Source: Newspaper

Banking Concepts: Qualified Foreign Investors

Who are qualified foreign investors?Qualified foreign investors, or QFIs, can be individuals, groups or associations based abroad who are allowed by the government to invest directly in mutual funds and stocks of Indian companies. In 2011, the government opened a new window for this class of investors to buy into Indian mutual funds directly. It has now gone one step further and allowed them to buy into stocks, too, just like registered foreign institutional investors or nonresident Indians, or NRIs.

Are QFIS a separate class of foreign investors compared to FIIs?Qualified Foreign Investors will be distinct from foreign portfolio investors and non-resident Indians. A QFI can, for instance, be a foreign individual investor in Singapore or Russia, who can buy into stocks of a Tata group company or Coal India or any other listed stock after fulfilling the Know Your Customer norms through an Indian depository participant and obtaining the approval of the RBI. QFIs can buy up to 5% of the paid-up capital of a company, with the overall limit capped at 10% in a company. And these investment limits are separate or over and above that for FIIs and NRIs.

How does it help by opening up the markets to one more category of investors?Indian policy makers reckon that a diverse set of investors in the local markets will help ensure more capital inflows, reduce market volatility and deepen the markets. It would also mean facilitating the entry of a set of relatively wealthy investors who could not access the Indian markets as there were regulatory restrictions on their entry. For a long time, the government and regulators kept foreign individual investors at bay owing to concerns relating to money laundering and due diligence. With restrictions in place, foreign individual investors had to either buy into Indian stocks through Participatory Notes, or PNs, or invest in India-focused offshore funds. By allowing a new set of investors, the government and regulators are hoping that it will lead to more inflows at a time when capital inflows have virtually dried up.

On January 1, the government decided to allow Qualified Foreign Investors, or QFIs, to invest directly in the Indian equities market, a move which it hopes will help boost capital inflows.

Banking Concepts - External Commercial Borrowings

What is ECB?Under the ECB window, companies in India are allowed to borrow from overseas, under certain conditions, through different instruments. The Reserve Bank of India (RBI), in its master circular on external commercial borrowing and trade credits (January 2012), defined ECB as “commercial loans in the form of bank loans, buyers’ credit, suppliers’ credit, securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares) availed of from non-resident lenders with a minimum average maturity of three years”. ECB is allowed through both direct and approval routes. Under the direct route, companies in businesses, such as hotel, hospitals and software, can access the international market for raising debt up to a limit. Special economic zones and non-government organizations engaged in micro finance activities are also allowed to access the ECB window. Companies of industries that can apply through the direct route can also take the approval route if they need to borrow more than the allowed limit under the direct route.

Why do companies take the ECB route?The biggest incentive for companies raising money from overseas is the interest rate arbitrage. For example, even if a company borrows in the international market at 300 basis points (one basis point is a hundredth of a percentage point) above Libor (London Interbank Offered Rate), it will be able to borrow at just about 4% for one year; the cost of borrowing for a similar tenor will cost close to 10% in the domestic market. The idea behind opening up this window for sectors such as infrastructure and healthcare was to promote investment in these by providing the option of low-cost capital.

The downside riskIt is not that ECB is always beneficial to a company and the country and does not carry any risk. The borrower can be in trouble if the position is not hedged properly and the currency depreciates sharply, which will lead to increase in the company’s liability. Also, at the macro level, higher level of borrowing from overseas may push the currency to appreciate, which makes exports uncompetitive in the international market. It is also argued that access to overseas market and cheaper credit is an advantage for bigger companies that can borrow abroad, while smaller companies have to deal with higher cost of capital in the domestic market. Finally, economists are worried that the dependence of the country on short-term debt flow, including ECB, is rising to fund the current account deficit and can have negative consequences

Banking Concepts: All About Stock Market Index

What is a stock market index?A stock market index is a number that measures the relative value of a group of stocks. As the value of stocks in this group change when they are traded, the value of the index changes as well. If an index goes up by 1%, then it means the total value of the securities which constitute the index has increased 1%. The most common indices such as the Sensex, Nifty or Dow Jones Industrial Average, are stock indices, but there are also indices for bonds, commodities, real estate, to name a few. Usually, the index value is expressed in points. For example, if the Sensex fell by 200 points, it means the Sensex was at 17,700 and closed at 17,500. In isolation the points don't mean anything — you have to compare it with a value such as the previous day's number.

Why are indices important?

Indices provide a historical comparison of returns on money invested in the stock market against other forms of investments such as gold or debt. Many indices are used by financial services firms to benchmark the performance of their portfolios. Indices also serve as a yardstick for measuring the performance of fund managers and their respective funds. For gauging the performance of individual sectors or sectoral mutual funds, sector-specific indices can be used. If you invest in mutual funds or individual stocks, you always want to measure the performance of your investments against a relevant index. So, if your investments are always ahead of the index then your strategy is right. However, if your investment consistently lags behind the index then it might be time to come up with a new investment strategy.

What does the index mean?A stock market index in reality reflects the mood of the market. A good stock index captures the movement of well-diversified and highly-liquid stocks. For a layman, it is the pulse rate of the economy. So, if the Nifty moves up today, it implies that the stock markets expect higher future returns from the stocks as compared to the expectations on the previous day and vice-versa. Indices are derived from individual stocks and it is quite possible that a few stocks account for a major portion of the index. Thus, fluctuation in prices of a few stocks may affect the overall index too, which will give an incomplete picture.

How is an index constructed?One of the most popular methods of constructing a market index is the value-weighted method. In this method, the initial market value of these stocks is assigned a base index value. An index is calculated with reference to a base period and a base index value. Say, we take the base year as 1993 and take 50 stocks which have a total market capitalization of Rs 1,000 crore. Let us assume that the base value on the first day is 100. Suppose the market capitalization on the next day of these 50 stocks increases to Rs 1,100 crore. To calculate the index, you take that day's market capitalization  divide it by the base figure and multiply by 100 to get the new index. In this case it will be, 1100/1000 multiplied by 100, and so the index on the next day is 110 points. There are various indices constructed by BSE on sectors, such as metals, banks and so on.

Banking Concepts - Islamic Finance

What is Islamic finance?Islamic finance refers to a financial system that is consistent with the principles of Sharia, the sacred law of Islam. It is different from regular banking in that it prohibits earning of interest (or riba) through the business of lending. It also prohibits direct or indirect association with businesses involving alcohol, pork products, firearms and tobacco. It also does not allow speculation, betting and gambling.

How does it work?Islamic finance takes the form of Islamic banking and Islamic insurance, also known as Takaful.Islamic banking is done in five ways:1. Mudarabah, a profit-sharing agreement2. Wadiah, a safe keeping arrangement3. Musharakah, or a joint venture for a specific business4. Murabahah, cost plus arrangement where goods are sold with a pre-determined margin of profit5. Ijirah, a leasing arrangementTakaful is a form of mutual insurance based on partnership and collective sharing of risk by a group of individuals.

How has Islamic banking progressed in recent years?Islamic banking is most prevalent in Malaysia. It is spreading rapidly in West Asia, where the population is predominantly Muslim. New global financial centres such as Singapore, Hong Kong, Geneva, Zurich and London have made changes in regulations to accommodate the Islamic finance industry, which is nearly a trillon dollar in size now. Indian regulations do not allow Islamic banking but the government is considering allowing it.

What restricts the growth of Islamic finance?Most banks conducting Islamic operations have a panel of Muslim scholars called Sharia committee or Sharia board, which determines whether a product or practice complies with Islamic provisions. Also, the accounting is done differently for which there is an official standard-setting body known as the accounting and auditing organization for Islamic financial institutions. The strict code makes Islamic banking a very niche product.

Banking Concepts - Cheque Truncation System (CTS)

What is Cheque Truncation?It is one of the major innovations in cheque clearing after the Magnetic Ink Character Recognition (MICR) cheques introduced in the 80s. Cheque truncation is a system between clearing and settlement of cheques based on electronic images. This form of clearing does not involve any physical exchange of instrument. Bank customers would get their cheques realised faster as local cheques are cleared almost the same day as the cheque is presented to the clearing house, while intercity clearing happens the next day. Besides speedy clearing of cheques, banks also have additional advantage of reduced reconciliation and clearing frauds. It is also possible for banks to offer innovative products and services based on CTS.

Why is it needed?

Though MICR technology helped improve efficiency in cheque handling, clearing is not very speedy as cheques have to be physically transported all the way from the collecting branch of a bank to the drawee bank branch. The CTS is more advanced and more secure. Many countries have sought to address this issue with cheque truncation, in which the movement of the physical instruments is curtailed at a point in the clearing cycle, beyond which the process is completed, purely based only on the electronic data and images of the cheques.What has been the international experience in this regard?Denmark and Belgium are pioneers in CTS. They adopted complete cheque truncation system more than two decades ago. Sweden is the typical example for having achieved complete truncation where all the cheques can be presented and encashed at any branch; irrespective of the bank on which they are drawn. CTS also takes care of the needs of future electronic transactions.

What has RBI and banks done?RBI has already enabled CTS to be fully functional in New Delhi. Soon even cheque clearing in Chennai will be settled through CTS. Banks have also taken steps to introduce appropriate technology to facilitate this system.

What are the salient features of CTS?The physical cheque is truncated within the presenting bank itself. Settlement is generated on the basis of current MICR code line data. These images will be archived electronically and be preserved for eight years. A centralised agency per clearing location will act as an image warehouse for the banks.

Banking Concepts - Understanding BASEL III

What are the Basel-III norms?These are rules written by the Bank of International Settlement's Committee on Banking Supervision (BCBS) whose mandate is to define the reform agenda for the global banking community as a whole. The new rule prescribes how to assess risks, and how much capital to set aside for banks in keeping with their risk profile.

What are the changes which have been made to the way in which capital is defined?Going by the new rules, the predominant component of capital is common equity and retained earnings. The new rules restrict inclusion of items such as deferred tax assets, mortgage-servicing rights and investments in financial institutions to no more than 15% of the common equity component. These rules aim to improve the quantity and quality of the capital.

What do these new rules say?While the key capital ratio has been raised to 7% of risky assets, according to the new norms, Tier-I capital that includes common equity and perpetual preferred stock will be raised from 2-4.5% starting in phases from January 2013 to be completed by January 2015. In addition, banks will have to set aside another 2.5% as a contingency for future stress. Banks that fail to meet the buffer would be unable to pay dividends, though they will not be forced to raise cash.

How different is the approach now?The new norms are based on renewed focus of central bankers on macro-prudential stability. The global financial crisis following the crisis in the US sub-prime market has prompted this change in approach. The previous set of guidelines, popularly known as Basel II focused on macro-prudential regulation. In other words, global regulators are now focusing on financial stability of the system as a whole rather than micro regulation of any individual bank.

How will these norms impact Indian banks?According to RBI governor D Subbarao, Indian banks are not likely to be impacted by the new capital rules. As such, RBI does not expect our banking system to be significantly stretched in meeting the proposed new capital rules, both in terms of the overall capital requirement and the quality of capital. There may be some negative impact arising from shifting some deductions from Tier-I and Tier-II capital to common equity

BANKING AWARENESS

1.    RBI introduces Dollar – Rupee Swap FacilityObjective: To increase the flow of Credit to the export Sector to support incremental Pr-Shipment Credit in Foreign Currency (PCFC) by banks.NOTE: i. As per RBI, Banks will have the option to avail rupee refinance to the extent of the Swap with RBI under a special export credit refinance facility. The facility will be available to banks from Jan 21 till June 28, 2013 for a fixed tenor of three or six months.

ii. The total limit for the banking system works out to $6.5 billion. Banks will be able to buy US dollars up to its eligible swap limit from RBI and at the same time sell the same amount of dollars forward as per the term of the Swap, at the prevailing markets rates for Swaps of similar tenor. At the end of the Swap term , the Bank will exchange the dollars against the Rupees with RBI.III. RBI will decide upon the number of the banks that can access the facility, the maximum amount of swap that RBI would contract with Banks and the maximum limit each bank can do on a particular day after taking into account market conditions.

2.    Banks to ask RBI to permit interest on current accounts:When central bank RBI will review its Monetary Policy, banks will ask the central bank to allow them to pay interest on current account deposits.

NOTE: i. Currently, there is no interest given by banks on Current Accounts. Banks are of the view that providing interest on current account will generate more cash flow into the system which otherwise stays with the establishments. ii. Current Accounts make 9.85% of total deposit with banks. iii. Banks will also demand a cut in CRR as well in Repo Rate. 

3.    Corporation Bank Unveils RuPay Aadhar Card:i. Corporation Bank has launched Corp RuPay Aadhar Card which has a primary aim to provide easy and smooth banking services to the financially excluded and underprivileged sections of the society having Aadhar number.ii. Corporation Bank is an associate in the direct cash/ benefit transfer scheme launched by the Govt. which will enable direct transfer of various social security and benefits and subsidies straight into the accounts of the beneficiaries.

4.    R.K. Dubey assumed charge as CMD of Canara Bank:i. R.K. Dubey has assumed charge as the Chairman and Managing Director of Canara Bank with effect from January 11. ii. Dubey has vast knowledge and multidimensional banking experience, spanning over three decades. His key areas of expertise include planning and budgeting, resource mobilization, credit, risk management, HR, IT and marketing. NOTE: He joined Punjab National Bank in 1977 as a management trainee and moved up to the ranks of a General Manager in 2008 and was appointed as Executive Director of Central Bank of India in 2010. 

5.    Allahabad Bank Signs MoU with CIMSME:i. Allahabad Bank has inked an MoU with the Chamber of Indian Micro, Small and Medium Enterprises (CIMSME) to pop its priority sector lending.ii. CIMSME communicates the interest of companies in MSME sector, with banks, financial institutions, concerned ministries and other organizations.About Agreement: As per the agreement, CIMSME would mobilize proposals from its members for consideration of the bank. Once the loan is approved, the organization would support the bank in – follow up and recovery of dues and provide early warning signals.NOTE: The agreement will help speed up the process of disposal of loan proposals under the MSME and help the bank collect quality proposals and enhance credit flow to the sector.

6.    Raj Kumar Goyal appointed as the new ED of Central Bank of IndiaRaj Kumar Goyal appointed as the new Executive Director of Central Bank of India. Goyal replace R.K Dubey, who has taken over the control of Canara Bank as its chairman & Managing Director.

7.    SBI unevils MobiCash Easy: SBI has unveiled its mobile wallet named State Bank MobiCash Easy which provides facility such as fund transfer, balance enquiry, mini statement, mobile top-ups and DTH recharge etc.How does it work:i. SBI is carrying out this plan with collaboration with a private service provider Oxigen which will do round the clock money transfer and other services. ii. To avail the facility one can contact Oxigen outlets by sending SMS to 9870888888.iii. After registration one can deposit money at the outlet and get his account recharged.iv. The sum of money one deposit with the bank, the money can be used to send remittances to any bank account, transfer funds to other wallets issued by SBI, simply by messaging.NOTE: The facility is available to SBI’s customers as well as non – customers. ii. SBI customers have an additional option of topping up the wallet using SBI’s mobile banking services.iii. The service is currently available in Delhi & Mumbai only.Aim: The service is aimed to migrant labourers who send money back home from SBI branches.It will also address the requirement of financial inclusion as it is facilities to extend financial services.

8.    Urjit Patel appointed as the new Deputy Governor of RBI:Urjit Patel succeeded Subir Gokaran to become new deputy governor at the RBI.Patel is PHD in Economics from the Yale University and a non-resident senior fellow at the Brooking Institution, a US-based think tank. He will have the 2 year term.

9.    RBI establishes Working group to review Banking Ombudsman Scheme:RBI has constituted a working group which will be headed by Suman Verma with an aim to review, update, and revise the Banking Ombudsman Scheme, 2006.As per the Annual Report of the Banking Ombudsman Scheme , 2011-12 released by the RBI:i. 72,889 number of customer complaints received in Banking Ombudsman office of the RBI in 2011-12.ii. Highest number of customer complaints received by Kanpur and New Delhi in 2011-12, followed by Chennai and Bhopal.iii. Largest no. (25%) of customer complaints were about failure to meet commitments/non observation of fair practices code.iv. 21 % related to (ATM/Debit/Card) complaints.v. 12 % related to deposit accounts.Types of complaints this scheme handles: It looks into a wide range of complaints pertaining to deficiency in banking services rendered by scheduled commercial banks, Scheduled Primary Urban Co-operative banks and the Regional Rural Banks.The Key areas of customer complaints covered under the scheme include:i. Credit card complaintsii. internet bankingiii. deficiencies in providing the promised services by bank.iv. levying service charges without prior notice to the customerv. non adherence to Banking codes and Standards Board of India’s Code of Bank commitment to customers.NOTE: There are 27 grounds on which customer can approach Banking Ombudsman mentioning deficiency in banking services.

SOME IMPORTANT BANKING TERMS:

1.    Balance of Trade:

The value of a country’s exports minus the value of its imports. Unless specified as the balance of merchandise trade, it normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets.

2.    Balanced Trade:When a balance of trade equal to zero. (exports – imports = 0)3.    Balance of Payments: A list of all of a country’s international transactions for a given time period, usually one year. Payments into the country (receipts) are entered as positive numbers, called credits; Payments out of the country (payments) are entered as negative numbers called debits. A single numbers summarize all of a country’s international transactions: the balance of payments surplus.

4.    MFN (Most Favoured Nation):The principle, fundamental to the GATT, of treating imports from a country on the same basis as that given to the most favoured other nation. That is, and with some exceptions, every country gets the lowest tariff that any country gets, and reductions in tariffs to one country are provided also to others.

5.    Balanced Budget:A government budget surplus that is zero, thus with net tax revenue equaling expenditure. A balanced budget changes in policy or behavior is one which a component of the government budget, usually taxes, is adjusted as necessary to maintain a balanced budget.

6.    Balanced Growth of an Economy:Growth of an economy in which all aspects of it, especially factors of production, grow at the same rate.

7.    Bank Rate:The interest rate charges by a central bank to commercial banks for very short term loans.

8.    Repo:Repo is “Repurchase Agreement”. An agreement to sell a security for a specified price and to buy it back later at another specified price. A repo is essentially a secured loan.

9.    Repo Rate:Whenever the banks have any shortage of funds they can borrow it form RBI. Repo rate is the rate at which commercial banks borrows rupees from RBI. A reduction in the repo rate will help banks to get money at cheaper rate. When the repo rate increases borrowing form RBI becomes more expensive. Current Repo Rate is: 8 %

10.  Reverse Repo Rate:Reverse Repo rate is the rate at which RBI borrows money from commercial banks. Banks are always happy to lend money to RBI since their money is in the safe hands with a good interest. An increase in reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. Current R Repo Rate: 7%

11.  CRR (Cash Reverse Ratio):CRR is the amount of funds that the banks have to keep with RBI. If RBI increases CRR, the available amount with the banks comes down. RBI is using this method (increase of CRR), to drain out the excessive money from the banks.Current CRR – 4.25%

12.  SLR (Statutory Liquidity Ratio):SLR is the amount a commercial banks needs to maintain in the form of cash, or gold, or govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by RBI in order to control the expansion of the bank credit.Current SLR is 23%

13.  Need of SLR:With the SLR, the RBI can ensure the solvency of a commercial banks. It is also helpful to control the expansion of the Bank credits. By changing SLR rates, RBI can increase or decrease bank credit expansion. Also through SLR, RBI compels the commercial banks to invest in the government securities like govt. bonds.

14.  Main use of SLR:SLR is used to control inflation and propel growth. Through SLR rate the money supply in the system can be controlled effectively.

15.  Fiscal Deficit:A deficit in the government budget of a country and represents the excess of expenditure over income. So this is the amount of borrowed funds require by the government to meet its expenditures completely.

16.  Direct Tax:A direct tax is that which is paid directly by someone to taxing authority. Income tax and property tax are an examples of direct tax. They are not shifted to somebody else.

17.  Indirect Tax:This type of tax is not paid by someone to the authorities and it is actually passed on to the other in the form of increased cost. They are levied on goods and services produced or purchased. Excise Tax, Sales Tax, Vat, Entertainment tax are indirect taxes.

18.  NOSTRO Account:A Nostro account is maintained by an Indian Bank in the foreign countries.

19.  VOSTRO Account:A Vostro account is maintained by a foreign bank in India with their corresponding bank.

20.  SDR (Special Drawing Rights):SDR are new form of International reserve assets, created by the International Monetary Fund in 1967. The value of SDR is based on the portfolio of widely used countries and they are maintained as accounting entries and not as hard currency or physical assets like Gold.Email This BlogThis! Share to Twitter Share to Facebook

BANKING CONCEPT: COMMERCIAL PAPER

1. What is Commercial Paper (CP)?Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.

2. When Commercial Paper was introduced?Commercial Paper was introduced in India in 1990.

3. Why Commercial Paper was introduced?It was introduced in India in 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors. Subsequently, primary dealers and all-India financial institutions were also permitted to issue CP to enable them to meet their short-term funding requirements for their operations.

4. Who can issue CP?

Corporates, primary dealers (PDs) and the All-India Financial Institutions (FIs) are eligible to issue CP.

5. Whether all the corporates would automatically be eligible to issue CP?No. A corporate would be eligible to issue CP provided –a. the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs. 4 croreb. company has been sanctioned working capital limit by bank/s or all-India financial institution/s; andc. the borrowal account of the company is classified as a Standard Asset by the financing bank/s/ institution/s.

6. Is there any rating requirement for issuance of CP? And if so, what is the rating requirement?Yes. All eligible participants shall obtain the credit rating for issuance of Commercial Paper either from Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd. or such other credit rating agency (CRA) as may be specified by the Reserve Bank of India from time to time, for the purpose.NOTE:-  The minimum credit rating shall be A-2 [As per rating symbol and definition prescribed by Securities and Exchange Board of India (SEBI)].The issuers shall ensure at the time of issuance of CP that the rating so obtained is current and has not fallen due for review.

7. What is the minimum and maximum period of maturity prescribed for CP?CP can be issued for maturities between a minimum of 7 days and a maximum of up to 1 year from the date of issue. However, the maturity date of the CP should not go beyond the date up to which the credit rating of the issuer is valid.

8. What is the limit up to which a CP can be issued?The aggregate amount of CP from an issuer shall be within the limit as approved by its Board of Directors or the quantum indicated by the Credit Rating Agency for the specified rating, whichever is lower.As regards FIs, they can issue CP within the overall umbrella limit prescribed in the Master Circular on Resource Raising Norms for FIs, issued by Department of Banking Operations and Development (DBOD) and updated from time-to-time.

9. In what denominations a CP that can be issued?CP can be issued in denominations of Rs.5 lakh or multiples thereof.

10. How long can the CP issue remain open?The total amount of CP proposed to be issued should be raised within a period of two weeks from the date on which the issuer opens the issue for subscription.

11. Whether CP can be issued on different dates by the same issuer?Yes. CP may be issued on a single date or in parts on different dates provided that in the latter case, each CP shall have the same maturity date. Further, every issue of CP, including renewal, shall be treated as a fresh issue.

12. Who can act as Issuing and Paying Agent (IPA)?Only a scheduled bank can act as an IPA for issuance of CP.

13. Who can invest in CP?Individuals, banking companies, other corporate bodies (registered or incorporated in India) and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs) etc. can invest in CPs. However, investment by FIIs would be within the limits set for them by Securities and Exchange Board of India (SEBI) from time-to-time.

14. Whether CP can be held in Dematerilaised (Demat) form?Yes. CP can be issued either in the form of a promissory note (Schedule I given in the Master Circular-Guidelines for Issue of Commercial Paper dated July 1, 2011 and updated from time –to-time) or in a dematerialised form through any of the depositories approved by and registered with SEBI. Banks, FIs and PDs can hold CP only in dematerialised form.

15. Whether CP is always issued at a discount?Yes. CP will be issued at a discount to face value as may be determined by the issuer.

16. Whether CP can be underwritten?No issuer shall have the issue of Commercial Paper underwritten or co-accepted.

17. Whether CPs are traded in the secondary market?Yes. CPs are actively traded in the Over The Counter (OTC) market. Such transactions, however, are to be reported on the Fixed Income Money Market and Derivatives Association of India (FIMMDA) reporting platform within 15 minutes of the trade for dissemination of trade information to market participation thereby ensuring market transparency.

18. What is the mode of redemption?Initially the investor in CP is required to pay only the discounted value of the CP by means of a crossed account payee cheque to the account of the issuer through IPA. On maturity of CP,(a) when the CP is held in physical form, the holder of the CP shall present the instrument for payment to the issuer through the IPA.(b) when the CP is held in demat form, the holder of the CP will have to get it redeemed through the depository and receive payment from the IPA.

19. Whether Stand by facility is required to be provided by the bankers/FIs for CP issue?CP being a `stand alone’ product, it would not be obligatory in any manner on the part of banks and FIs to provide stand-by facility to the issuers of CP.However, Banks and FIs have the flexibility to provide for a CP issue, credit enhancement by way of stand-by assistance/credit backstop facility, etc., based on their commercial judgement and as per terms prescribed by them. This will be subjected to prudential norms as applicable and subject to specific approval of the Board.

20. Whether non-bank entities/corporates can provide guarantee for credit enhancement of the CP issue?Yes. Non-bank entities including corporates can provide unconditional and irrevocable guarantee for credit enhancement for CP issue provided :a. the issuer fulfils the eligibility criteria prescribed for issuance of CP;b. the guarantor has a credit rating at least one notch higher than the issuer by an approved credit rating agency andc. the offer document for CP properly discloses: the networth of the guarantor company, the names of the companies to which the guarantor has issued similar guarantees, the extent of the guarantees offered by the guarantor company, and the conditions under which the guarantee will be invoked.Email This BlogThis! Share to Twitter Share to Facebook

BANKING CONCEPTS : THE RTGS SYSTEM

Q1. What is RTGS System?Ans. The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time.'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable.Q2. How RTGS is different from National Electronics Funds Transfer System (NEFT)?Ans. NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually. For example, currently, NEFT operates in hourly batches - there are eleven settlements from 9 am to 7 pm on week days and five settlements from 9 am to 1 pm on Saturdays. Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time Contrary to this, in the RTGS transactions are processed continuously throughout the RTGS business hours.Q3. Is there any minimum / maximum amount stipulation for RTGS transactions?Ans. The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is ` 2 lakh. There is no upper ceiling for RTGS transactions.Q4. What is the time taken for effecting funds transfer from one account to another under RTGS?Ans. Under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary's account within two hours of receiving the funds transfer message.Q5. Would the remitting customer get back the money if it is not credited to the beneficiary's account? When?Ans. Yes.It is expected that the receiving bank will credit the account of the beneficiary instantly. If the money cannot be credited for any reason, the receiving bank would have to return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer's account is reversed.Q6. Till what time RTGS service window is available?Ans. The RTGS service window for customer's transactions is available from 9.00 hours to 16.30 hours on week days and from 9.00 hours to 13.30 hours on Saturdays for settlement at the RBI end. However, the timings that the banks follow may vary depending on the customer timings of the bank branches.Q7. What about Processing Charges / Service Charges for RTGS transactions?Ans. With a view to rationalize the service charges levied by banks for offering funds transfer through RTGS system, a broad framework has been mandated as under:a) Inward transactions – Free, no charge to be levied.b) Outward transactions –Rs. 2 lakh to Rs. 5 lakh - not exceeding Rs. 30 per transaction.Above Rs. 5 lakh - not exceeding Rs. 55 per transaction.Q8. What is the essential information that the remitting customer would have to furnish to a bank for the remittance to be effected?Ans. The remitting customer has to furnish the following information to a bank for effecting a RTGS remittance:

1. Amount to be remitted2. Remitting customer’s account number which is to be debited3. Name of the beneficiary bank4. Name of the beneficiary customer5. Account number of the beneficiary customer6. Sender to receiver information, if any7. The IFSC Number of the receiving branchQ9. How would one know the IFSC code of the receiving branch?Ans. The beneficiary customer can obtain the IFSC code from his bank branch. The IFSC code is also available on the cheque leaf. This code number and bank branch details can be communicated by the beneficiary to the remitting customer.Q10. Do all bank branches in India provide RTGS service?Ans. No. All the bank branches in India are not RTGS enabled. As on September 29, 2011, there are more than 78,000 RTGS enabled bank branches. 

BANKING CONCEPTS :THE NEFT SYSTEM

Q.1. What is NEFT?Ans: National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme.Q.2. Are all bank branches in the country part of the NEFT funds transfer network?Ans: For being part of the NEFT funds transfer network, a bank branch has to be NEFT- enabled.Q.3. Who can transfer funds using NEFT?Ans: Individuals, firms or corporates maintaining accounts with a bank branch can transfer funds using NEFT. Even such individuals who do not have a bank account (walk-in customers) can also deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT. However, such cash remittances will be restricted to a maximum of Rs.50,000/- per transaction. Such customers have to furnish full details including complete address, telephone number, etc. NEFT, thus, facilitates originators or remitters to initiate funds transfer transactions even without having a bank account.Q.4. Who can receive funds through the NEFT system?Ans: Individuals, firms or corporates maintaining accounts with a bank branch can receive funds through the NEFT system. It is, therefore, necessary for the beneficiary to have an account with the NEFT enabled destination bank branch in the country.The NEFT system also facilitates one-way cross-border transfer of funds from India to Nepal. This is known as the Indo-Nepal Remittance Facility Scheme. A remitter can transfer funds from any of the NEFT-enabled branches in to Nepal, irrespective of whether the beneficiary in Nepal maintains an account with a bank branch in Nepal or not. The beneficiary would receive funds in Nepalese Rupees.Q.5. Is there any limit on the amount that could be transferred using NEFT?Ans: No. There is no limit – either minimum or maximum – on the amount of funds that could be transferred using NEFT. However, maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances and remittances to Nepal.Q.6. Whether the system is centre specific or has any geographical restriction?Ans: No. There is no restriction of centres or of any geographical area within the country. The NEFT system takes advantage of the core banking system in banks. Accordingly, the settlement of funds between originating and receiving banks takes places centrally at Mumbai, whereas the branches participating in NEFT can be located anywhere across the length and breadth of the country.Q.7. What are the operating hours of NEFT?Ans : Presently, NEFT operates in hourly batches - there are eleven settlements from 9 am to 7 pm on week days (Monday through Friday) and five settlements from 9 am to 1 pm on Saturdays.Q.8. How does the NEFT system operate?Step-1 : An individual / firm / corporate intending to originate  transfer of funds through NEFT has to fill an application form providing details of the beneficiary (like name of the beneficiary, name of the bank branch where the beneficiary has an account, IFSC of the beneficiary bank branch, account type and account number) and the amount to be remitted. The application form will be available at the originating bank branch. The remitter authorizes his/her bank branch to debit his account and remit the specified amount to the beneficiary. Customers enjoying net banking facility offered by their bankers can also initiate the funds transfer request online. Some banks offer the NEFT facility even through the ATMs. Walk-in customers will, however, have to give their contact details (complete address and telephone number, etc.) to the branch. This will help the branch to refund the money to the customer in case credit could not be afforded to the beneficiary’s bank account or the transaction is rejected / returned for any reason.Step-2 : The originating bank branch prepares a message and sends the message to its pooling centre (also called the NEFT Service Centre).Step-3 : The pooling centre forwards the message to the NEFT Clearing Centre (operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be included for the next available batch.Step-4 : The Clearing Centre sorts the funds transfer transactions destination bank-wise and prepares accounting entries to receive funds from the originating banks (debit) and give the funds to the destination banks(credit). Thereafter, bank-wise remittance messages are forwarded to the destination banks through their pooling centre (NEFT Service Centre).Step-5 : The destination banks receive the inward remittance messages from the Clearing Centre and pass on the credit to the beneficiary customers’ accounts.Q.9. What is IFSC?Ans : IFSC or Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT system. This is an 11 digit code with the first 4 alpha characters representing the bank, and the last 6 characters representing the branch. The 5th character is 0 (zero). IFSC is used by the NEFT system to identify the originating / destination banks / branches and also to route the messages appropriately to the concerned banks / branches.Q.10. What are the processing or service charges for NEFT transactions?Ans: The structure of charges that can be levied on the customer for NEFT is given below:a) Inward transactions at destination bank branches (for credit to beneficiary accounts)

– Free, no charges to be levied from beneficiariesb) Outward transactions at originating bank branches (charges for the remitter)-  For transactions up to Rs  1 lakh – not exceeding Rs 5 (+ Service Tax)-  For transactions above Rs 1 lakh and up to Rs 2 lakhs – not exceeding Rs 15 (+ Service Tax)-  For transactions above Rs 2 lakhs – not exceeding Rs 25 (+ Service Tax)c) Charges applicable for transferring funds from India to Nepal using the NEFT system (under the Indo-Nepal Remittance Facility Scheme).With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25 paise each per transaction to the clearing house as well as destination bank as service charge. However, these charges cannot be passed on to the customers by the banks.Q.11. Can remittances be sent abroad using NEFT?Ans: No. However, a facility is available to send outward remittances to Nepal under the Indo-Nepal Remittance Facility Scheme.Q.12. What are the other transactions that could be initiated using NEFT?Ans: Besides personal funds transfer, the NEFT system can also be used for a variety of transaction including payment of credit card dues to the card issuing banks. It is necessary to quote the IFSC of the beneficiary card issuing bank to initiate the bill payment transactions using NEFT.Q.13. Can a transaction be originated to draw (receive) funds from another account?Ans : No. NEFT is a credit-push system i.e., transactions can be originated only to transfer / remit funds to a beneficiary.Q.14.  What are the benefits of using NEFT?Ans: NEFT offers many advantages over the other modes of funds transfer:• The remitter need not send the physical cheque or Demand Draft to the beneficiary.• The beneficiary need not visit his / her bank for depositing the paper instruments.• The beneficiary need not be apprehensive of loss / theft of physical instruments or the likelihood of fraudulent encashment thereof.• Cost effective.• Credit confirmation of the remittances sent by SMS or email.• Remitter can initiate the remittances from his home / place of work using the internet banking also.• Near real time transfer of the funds to the beneficiary account in a secure manner.

IMPORTANT ABBREVIATIONS-2 (BANKING) for SBI/IBPS

1.       GDR – Global Depository Receipts2.       ALM- Asset Liability Management3.       ARC – Asset Reconstruction Companies

4.       FINO- Financial Inclusion Network Operation5.       CTT- Commodities Transaction Tax6.       CRM- Customer Relationship Management7.       KYC-Know Your Customer8.       SLR-Statutory Liquidity Ratio 9.       CRR-Cash Reserve Ratio 10.    MSF-Marginal Standing Facility11.    REPO-Repurchase Option12.    NBFC-Non Banking Finance Companies13.    OSMOS- Off-Site Monitoring & Surveillance14.    IFSC- Indian Financial System Code 15.    BSE-Bombay Stock Exchange16.    NSE-National Stock Exchange17.    SWIFT- Society for Worldwide Interbank Financial Telecommunication 18.    FSLRC – Financial Sector Legislative Reforms Commission19.    LAF – Liquidity Adjustment Facility20.    DRT – Debt Recovery Tribunals

Tagline of Banks

1.       India’s International Bank- Bank of Baroda2.       With you all the way- SBI3.       Relationship beyond banking – Bank of India

4.       We Understand Your World Indeed- HDFC Bank5.       Trusted Family Bank- Dena Bank6.       The Name You Can Bank Upon – Punjab National Bank7.       The world’s local bank – HSBC8.       One family one bank – Bank of Maharashtra

9.    A friend you can bank on-  Vijaya Bank10.  A Tradition of Trust-   Allahabad Bank

Important Banking Terms (IBPS 2012)

Given below are some of the important banking terms, important from the point of view of IBPS PO 2012 exam as well as IBPS Interview Preparation -

FII - Is a form of International Financial Institute investor registered outside India , investing in India .

FDI - Is a direct form of Investment by an Individual or a Corporation registered outside India , investing in India.

BOP - It is the difference between value of Exports and Imports of all goods and services during a particular period of Time.

BOT - The difference between value of merchandise (or visible) imports or exports of any country during any particular period of time.

Current Account - A form of Bank account which is maintained by Business men and traders which allows them to carry out transactions allowing them overdraft facilities and unlimited transactions . However they doesn't enjoy interest on deposits.

Capital Account Convertibility- It is the feature of a nation's financial regime that centers on the ability to conduct transactions of local financial assets into foreign financial assets freely and at market determined exchange rates.

GDP - Aggregate value of all Final goods and services Produced within the domestic territory of a country during any particular period of Time.

GNP - Aggregate value of all Final goods and services Produced within the domestic territory of a country during any particular period of Time less income earned by residents of India living abroad.

GDP of India - 

$1.53 trillion (nominal 2010)

$4.06 trillion (PPP 2010)

Private Equity - Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies .

ECONOMIC SURVEY 2011-12

Finance Minister Pranab Mukharjee tabled the Economic Survey 2011-12 in Parliament today.Following are the Highlights of Economic Survey 2011-12 :Rate of growth estimated to be 6.9% in FY 12Outlook for growth and stability promisingReal GDP growth expected at 7.6% in FY 13GDP pegged at 8.6% in FY 14Agriculture grows at 2.5 % growth in FY 12Services grow at 9.4 %, in FY 12, share in GDP at 59%Industrial growth pegged at 4-5 % in FY 13WPI food inflation dropped from 20.2% in February 2010 to 1.6% in January 2012India remains among the fastest growing economies of the worldIndia’s sovereign credit rating rose by 2.98 percent in 2007-12Exports grew at 40.5% in H1Imports grew by 30.4% in H1Forex reserves enhanced, cover nearly the entire external debt stockCentral spending on social services up at 18.5% in FY 12 Vs 13.4% FY 07MNREGA coverage of 5.49 crore households in FY 11Tenuous global economic environment turned sharply adverse in September, 2011Gross capital formation in Q3 of FY 12 as a ratio of GDP at 30%, down from 32% in FY 11Global economy remains fragile; efforts needed through G-20 for stabilityProgressive deregulation of interest rates on savings accounts recommendedBalance of Payments widens to USD 32.8 bn in H1 of FY 12 Vs USD 29.6 bn FY 11Forex reserves up from USD 279 bn in March ’10 to US USD 305 bn in March’11India’s share of trade to GDP of goods and services in world tripled in 1990-2010

InflationInflation to moderate further in FY 13Inflation expected to moderate at 6.5-7% by March endGap between WPI and CPI inflation narrows in FY 12Milk, eggs/meat/fish, gram & edible oils major drivers of food inflationMonetary market remained orderly in FY 12 2011-12

AgricultureAgriculture grows at 2.5% Vs target of 4% in five yr planAgriculture, allied activities account for 13.9 % of GDP in FY 12Foodgrains stocks at 55.2 million tonnesProduction of foodgrains in FY 12 estimated at 250.42 million tones

IndustryIndustrial growth pegged at 4-5% in FY 12

Employment in Industry increase from 16.2% in 1999-2000 to 21.9% in 2009-10 largely due tp construction sectorBasic goods and non-durables goods grew at 6.1%Gross Capital Formation in industry as percent to the overall GCF moderated to 48.3% in FY 11Manufacturing GCF growth rate declined to 7% in FY 11 Vs 42% in FY 10

Services SectorServices grow by 9.4% despite slowing GDP growthShare of services in GDP at increased from 55.1% in FY 11 to 56.3% in FY 12Financial & non-financial services, IT, Telecomm, Real Estate constituted 41.9 % of total FDI equity inflows during April 2000-December 2011FDI inflows to the Services Sector slowed down FY 10 & FY 11, dipping to negative zoneFDI inflows in FY 12 recovered; increased by 36.8 % to USD 9.3 billion (April-Dec)Growth in trade, hotels and restaurants robust at 11.2%

TradeIndia’s exports grew at 23.5% to reach USD 242.8 bn in April 2011 - Jan 2012Exports decelerated in Oct-Nov due to global downturn; recovered in Dec-JanKey performers in export - petroleum and oil products, gems and jewellery, engineering, cotton fabrics, electronics, readymade garments, drugsImports up 29.4% during April - Jan 2011-12 at USD 391.5 bnKey import areas -POL (petroleum, oil and lubricant), gold and silverTrade deficit in April-Jan 2011-12 at USD148.7 bn Vs USD 105.9 billion in last fiscalUAE India’s largest trading partner, followed by ChinaIndia’s services exports bounce back after contraction in FY 10India’s services exports grew 38.4 % to USD 132.9 bn in FY 11Growth in export of services moderated in H1 FY 12 to 17.1%Total investment in SEZs till 31 Dec 2011 at Rs. 2,49,630.80 croreFormal approvals granted for setting up of 583 SEZs of which 380 notifiedForex Reserves at USD 293 bnExternal Debt Stock at USD 326 bnNet capital flows at USD 41.1 billion (4.5% of GDP) in the H1 of FY 12External commercial borrowing at USD 10.6 billion in H1 of FY 12Portfolio investment shows large decrease in inflow to USD 1.3 bn in H1 of FY 12Trade deficit more than 8 % of GDP and current account deficit more than 3 % sign of growing imbalance in BOP

InfrastructureInvestment requirement at USD 1 trillion during Twelfth Plan50% investment to come from private sector as against the 36% anticipatedIncremental credit flow to the infra sector in April-December 2011 nearly 61% in same period year beforeTotal FDI inflows into majors infrastructure sectors during April-December 2011 registered growth of 23.6%

RupeeRupee falls by 12.4 % against USDRupee falls from 44.97 per USD in March 2011 to 51.34 per USD in January 2012

Banking and Micro FinancePublic sector banks show 19 % growth in priority sector lendingCredit Disbursement to agri sector exceeded target by 19 %Credit Disbursement helped over 12.7 mn new farmers98 % public sector bank branches fully computerisedSelf Help Group- bank linkage programme major successRs 12,000 provided in FY 12 for capital infusion in public sector banksGrowth in bank credit extended by Scheduled Commercial Banks grew at 17.1%Infrastructure Debt Funds to facilitate flow of funds into infrastructure projectsResource mobilization through primary market shows sharp decline in FY 11

Environment and Climate ChangeLower carbon sustainable growth to be central element of 12th planIndia’s per capita CO2 emissions much lower than those of developed countries even if historical emissions are excludedNeed for more sensitivity from developed countries to carbon emissionsEconomic pricing of energy, new technologies to be the keyFive main challenges include climate change, food security, water security, energy security and managing urbanization

Education and EmploymentAakash, low cost computing device launchedSarva Shiksha Abhiyan norms revised to correspond with the provisions of the RTE ActNational Council for Teacher Education notified as the academic authority for teacher qualificationsNumber of out-of-school children down from 134.6 lakh in 2005 to 81.5 lakh in 2009Employment in organized sector increased by 1.9 % in 2010Share of women in organized-sector employment at 20.4% in 2010 March end

MGNREGA: Coverage increases to 5.49 crore households in 2010-11Government sets up committee for developing index for fixing MGNREGA wage rates.

important Marketing Terms for SBI Exam

There are some important glossary terms used  by  marketers,  usually  at  the  management  level,  when  preparing  marketing plans and pitching for business. Some of these are explained here..Anti-competitive practice: A practice is considered anti-competitive if it prevents, distorts or restricts competition in a market for goods and services in Barbados.Anti-dumping: Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect.  Thus,  the  purpose  of  anti  dumping  duty is  to  rectify  the trade  distortive effect  of dumping  and  re-establish  fair  trade.  The  use  of  anti  dumping  measure  as  an  instrument  of  fair competition  is  permitted  by  the  WTO.  In  fact,  anti  dumping  is  an  instrument  for  ensuring  fair trade  and  is  not  a  measure  of  protection  for  the  domestic  industry.  It  provides  relief  to  the domestic  industry  against  the  injury  caused  by  dumping.  Anti  dumping  measures  do  not  provide protection  per  se  to  the  domestic  industry.  It only serves the purpose of providing remedy to the domestic industry against the injury caused by the unfair trade practice of dumping.Advertising: Advertising is a form of communication that typically attempts to persuade potential customers to purchase or to consume more of a particular brand of product or service. Many advertisements are designed  to  generate  increased  consumption  of  those  products  and   services  through  the  creation and  reinforcement  of  "brand  image"  and  "brand  loyalty".  For these purposes, advertisements sometimes embed their persuasive message with factual information.Barter: A Trade Exchange or  Barter is a  type of trade in which  goods or  services  are directly exchanged for other  goods  and/or  services,  without  the  use  of  money.  It  can  be  bilateral  or  multilateral,  and usually  exists  parallel  to  monetary systems  in  most  developed  countries,  though  to  a  very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, when the currency is unstable and devalued by hyperinflation.Branding: It is a promise, a pledge of quality. It is the essence of a product, including why it is great, and how it is better than all competition products. It is an image.  It is a combination of words and letters, symbols, and colors.Conglomerate: A conglomerate is the term used to describe a large company that consists of seemingly unrelated business sections. This term may also be referred to as a multi-industry company.Circulation: The total number of copies distributed by a newspaper or magazine.Classifieds: An advertisement in a newspaper that is placed along with advertisements for similar events under a classified heading, e.g. 'Entertainment' or 'Cinema'.Concept: A design in which all aspects of the product are linked to a central idea, function or theory, etc.Copy: Written or typed matter intended to be reproduced in print.Copyright: The  exclusive  right,  granted  by  law  for  a  certain  term  of  years,  to  make  and  dispose  of  copies  of, and otherwise to control, a literary, musical, dramatic, or artistic work.Critical Path: Plots the events that need to occur to complete a project on a timeline.CRM: Customer Relationship Marketing. Building loyalty through your relationship with a customer.Database: A  large  volume  of  information  stored  in  a  computer  and  organised  in  categories  to  facilitate retrieval.Direct Mail: Mailing brochures, letters, questionnaires etc. directly to the target market.Direct Marketing: Marketing to the customer without the use of an intermediary.Types of Direct marketing:There are many types of direct marketing, only some important types are listed below and these are the most form of direct marketing.i)Direct Mail Marketing: Advertising material sent directly to home and business addresses. This is the most common form of direct marketing.ii)Telemarketing: It is the second most common form of direct marketing, in which marketers contact consumers by phone.ii)Email Marketing: This type of marketing targets customers through their email accountsDisplay Ad: An advertisement which is usually designed by the advertiser and displayed in a box.Direct Response: In advertising. Advertising  designed  to  trigger  a  behavioural  response  in  target  audiences,  e.g. placing mail back coupons in the ad, asking people to bring in or mention an ad, setting up a phone number and asking individuals to call for further information etc.Digital Marketing: Digital Marketing is the practice of promoting products and services using all forms of digital advertising. It includes Television, Radio, Internet, mobile and any other form of digital media. Distress Rates: Cheaper rates for advertising at short notice, i.e.  When newspapers have spaces to fill shortly before their deadlines.Distribution: To place promotional material, e.g. fliers or posters, throughout areas where they will be picked up.Drip Marketing: Method of sending promotional items to clients is called Drip marketing.Dumping: If a company exports a product at a price (export  price) lower than the price it normally charges on its own home market (normal value), it is said to be 'dumping' the product. Dumping can harm the domestic  industry  by  reducing its  sales volume  and  market  shares,  as  well  as  its sales  prices. This in  turn  can  result  in  decline  in  profitability,  job  losses  and,  in  the  worst  case,  in  the  domestic industry going  out  of  business.  Often,  dumping  is  mistaken  and  simplified  to  mean  cheap  or  low priced  imports.  However, it is a misunderstanding of the term. On the other hand, dumping, in its legal sense, means export of goods by a country to another country at a price lower than its normal value.   Thus, dumping implies low priced imports only in the relative sense (relative to the normal value), and not in absolute sense.Freepost: Used to encourage a response by mail. The sender does not pay to return an item by post e.g. a questionnaire.Guerilla Marketing: Unconventional marketing intended to get maximum results from minimal resources is nothing but Guerilla Marketing.

JIT: Just-in-time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated carrying costs. In order to achieve JIT the process must have signals of what is going on elsewhere within the process.Incentive: Something  of  financial  or  symbolic  value  added  to  an  offer  to  encourage  some  overt  behavioural response.Indirect Marketing: Indirect Marketing is the distribution of a particular product through a channel that includes one or more resellers.Difference b/w Direct and Indirect Marketing:

·         Direct marketing is basically advertising your own products or services.·         In the same way you might advertise for someone else is called Indirect marketing, is an increasingly popular way of doing

businessInternet Marketing: Internet marketing is the marketing of products or services over the Internet.Internet Marketing is also known as i-marketing, web-marketing, online-marketing, Search Engine Marketing (SEM) or e-MarketingKey Selling Points: The components of a program or event that will appeal to the greatest number of people.Loyalty Programs: A component of relationship marketing. Programs designed to increase the strength of a consumer's preference for a particular entity. The most common form of loyalty program in the arts is subscription or membership programs.Marketing: The  process  of  planning  and  executing  the  conception,  pricing,  promotion,  and  distribution  of ideas,  goods,  services,  and  people  to  create  exchanges  that  will  satisfy  individual  and organizational goals.Marketing Mix: The  blend  of  product,  place,  promotion,  and  pricing  strategies  designed  to  produce  satisfying exchanges with a target market.Market Research: The  process  of  planning,  collecting,  and  analyzing  data  relevant  to  marketing  decision-making. Using a combination of primary and secondary research tools to better understand a situation.Marketing Strategy: The first stage is setting  marketing objectives (where the organisation wants to be at the end of the strategic  planning  period)  and  goals  (the  objectives  with  specific  numerical  benchmarks  and deadlines attached to allow  management  to  measure achievement). The  second stage  is specifying the core  marketing  strategy,  i.e. specific target markets,  competitive  positioning and  key  elements of the marketing mix. The third is the implementation of tactics to achieve the core strategy.Mergers and Acquisitions: The phrase  mergers and acquisitions (abbreviated  M&A) refers to the aspect of corporate strategy, corporate  finance  and  management  dealing  with  the  buying,  selling  and  combining  of  different companies  that  can  aid,  finance,  or  help  a  growing  company  in  a  given  industry  grow  rapidly without  having  to  create  another  business  entity.  A  merger  is  a  tool  used  by  companies  for  the purpose  of  expanding  their  operations  often  aiming at an  increase of their long  term  profitability. An acquisition, also known as a takeover, is the buying of one company (the ‘target’) by another.Media Hooks: Aspects of an event or program that are most likely to appeal to a journalist or the media generally.Media Monitoring: Systematic monitoring of the media in order to ascertain what has been said.  Specialised agencies provide this service.Offer: A  proposal  by  a  marketer  to  make  available  to  a  target  customer  a  desirable  set  of  positive consequences if the customer undertakes the required action.Pitch: A proposal - either verbal or written - to enlist the engagement or support of a third party.Psychographics: Life-style measures which   combine psychological and demographic measurements based on consumers' activities, aspirations, values, interests or opinions.Publicity: Definitions vary but in Sauce the term is used to describe obtaining media coverage.Personal Selling: Persuasive communication between a representative of the company and one or more prospective customers, designed to influence the person's or group's purchase decision.Qualitative Research: Research  that  seeks  out  people's  attitudes  and  preferences,  usually  conducted  through unstructured interviews or focus groups.Quantitative Research: Research  that  measures  (quantifies)  responses  to  a  structured  questionnaire,  conducted  either through  telephone,  face-to-face  structured  interviews,  on  the  Internet  or  through  self  completion surveys.Quickcuts: The brand name of technology which enables design companies or advertising agencies to transmit advertisements directly to the publication over a telephone line.Reach: The total number of people your organisation or campaign reaches.Relationship marketing: Marketing  with  a  focus  on  building  long-term  relationships  where  the  target  customer  is encouraged to continue his or her involvement with the marketer.Strategic Marketing Planning: The  process  of  managerial  and  operational  activities  required  to  create  and  sustain  effective  and efficient  marketing  strategies,  including  identifying  and  evaluating  opportunities,  analyzing markets  and  selecting  target  markets,  developing  a  positioning  strategy,  preparing  and  executing the market plan, and controlling and evaluating results.Situational Analysis:  An analysis of the internal and external environment of a company or event.SWOT Analysis: Identifying the strengths and weaknesses, which are internal to the organisation or project and the opportunities and threats, which come from outside the organisation.Social Media Marketing: Social media marketing is marketing using online communities, social networks, blog marketing and moreTalent: The  person  or  people  you  put  forward  to  the  media  as  possible  subjects  for  an  interview,  a  game show, a picture or footage, etc.Target Audience: The  section  of  the population  that  is  identified  as  likely  to  be  most  interested  in  buying  or  being associated with a product.Target media: The media you decide to target for coverage because they reach your target audience.Targeting: The act of directing promotions to the target audience.TARPS: Target  audience  rating points --  that  is,  the  number  of people  or  percentage  of  people  reached  in your target audienceUnique Selling Proposition (USP): The one thing that  makes  a  product different  than any  other.  It's  the  one  reason  marketers  think consumers will buy the product even though it may seem no different from many others just like it.Viral Marketing: Marketing by the word of the mouth, having a high pass-rate from person to person is called Viral marketing.  Creating a 'buzz' in the industry is an example of viral marketing

BANKING TERMS

The basic banking terms are frequently asked in all the Bank Interviews. These terms are useful not only for your interview but also for your general knowledge. Knowledge and Understanding of Important Banking terms play a very crucial role in the final selection. Also these banking terms are useful for Banking Aspirants, Economics & Commerce students, MBA aspirants and students preparing for other similar level Exams.Knowing basic banking terms not only gives you an edge over other candidates but also shows your interest level for the job.  Account Agreement: The contract governing your open-end credit account, it provides information on changes that may occur to the account.Account History: The payment history of an account over a specific period of time, including the number of times the account was past due or over limit.Account Holder: Any and all persons designated and authorized to transact business on behalf of an account. Each account holder's signature needs to be on file with the bank. The signature authorizes that person to conduct business on behalf of the account.

Acquiring Bank: In a merger, the bank that absorbs the bank acquired.Accrued interest: Interest due from issue date or from the last coupon payment date to the settlement date. Accrued interest on bonds must be added to their purchase price.Adjustable-Rate Mortgages (ARMS): Also known as variable-rate mortgages. The initial interest rate is usually below that of conventional fixed-rate loans. The interest rate may change over the life of the loan as market conditions change.  There is typically a maximum (or ceiling) and a minimum (or floor) defined in the loan agreement. If interest rates rise, so does the loan payment. If interest rates fall, the loan payment may as well.Arbitrage: Buying a financial instrument in one market in order to sell the same instrument at a higher price in another market.Adverse Action: Under the Equal Credit Opportunity Act, a creditor's refusal to grant credit on the terms requested, termination of an existing account, or an unfavorable change in an existing account.Adverse Action Notice: The notice required by the Equal Credit Opportunity Act advising a credit applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the account holder.AER: Annual earnings rate on an investment.Affidavit: A sworn statement in writing before a proper official, such as a notary public.Alteration: Any change involving an erasure or rewriting in the date, amount, or payee of a check or other negotiable instrument.Amortization: The process of reducing debt through regular installment payments of principal and interest that will result in the payoff of a loan at its maturity.Anytime Banking: With introduction of ATMs, Tele-Banking and internet banking, customers can conduct their business anytime of the day and night. The 'Banking Hours' is not a constraint for transacting banking business.Anywhere Banking : Refers to banking not only by ATMs, Tele-Banking and internet banking, but also to core banking solutions brought in by banks where customer can deposit his money, cheques and also withdraw money from any branch connected with the system. All major banks in India have brought in core banking in their operations to make banking truly anywhere banking.Annual Percentage Rate (APR): The cost of credit on a yearly basis, expressed as a percentage.Annual Percentage Yield (APY): A percentage rate reflecting the total amount of interest paid on a deposit account based on the interest rate and the frequency of compounding for a 365-day year.Annuity : A life insurance product which pays income over the course of a set period. Deferred annuities allow assets to grow before the income is received and immediate annuities (usually taken from a year after purchase) allow payments to start from about a year after purchase.APR:  The annual percentage rate of interest, usually on a loan or mortgage, usually displayed in brackets and representing the true cost of the loan or mortgage as it shows any additional payments beyond the interest rate.Application: Under the Equal Credit Opportunity Act (ECOA), an oral or written request for an extension of credit that is made in accordance with the procedures established by a creditor for the type of credit requested.Appraisal: The act of evaluating and setting the value of a specific piece of personal or real property.Ask Price: The lowest price at which a dealer is willing to sell a given security.Asset-Backed Securities (ABS): A type of security that is backed by a pool of bank loans, leases, and other assets. Most ABS are backed by auto loans and credit cards – these issues are very similar to mortgage-backed securities.At-the-money: The exercise price of a derivative that is closest to the market price of the underlying instrument.ATM:  ATMs are Automatic Teller Machines, which do the job of a teller in a bank through Computer Network. ATMs are located on the branch premises or off branch premises. ATMs are useful to dispense cash, receive cash, accept cheques, give balances in the accounts and also give mini-statements to the customers.Authorization: The issuance of approval, by a credit card issuer, merchant, or other affiliate, to complete a credit card transaction.Automated Clearing House (ACH): A computerized facility used by member depository institutions to electronically combine, sort, and distribute inter-bank credits and debits. ACHs process electronic transfers of government securities and provided customer services, such as direct deposit of customers' salaries and government benefit payments (i.e., social security, welfare, and veterans' entitlements), and preauthorized transfers.Automated Teller Machine (ATM): A machine, activated by a magnetically encoded card or other medium that can process a variety of banking transactions. These include accepting deposits and loan payments, providing withdrawals, and transferring funds between accounts.Automatic Bill Payment: A checkless system for paying recurring bills with one authorization statement to a financial institution. For example, the customer would only have to provide one authorization form/letter/document to pay the cable bill each month. The necessary debits and credits are made through an Automated Clearing House (ACH).Availability Date: Bank's policy as to when funds deposited into an account will be available for withdrawal.Availability Policy: Bank's policy as to when funds deposited into an account will be available for withdrawal.

Available Balance: The balance of an account less any hold, uncollected funds, and restrictions against the account.Available Credit: The difference between the credit limit assigned to a cardholder account and the present balance of the account.

Banking: Accepting for the purpose of lending or investment of deposits of money from Public, Repayable on demand or otherwise and withdraw able by cheques, drafts, order, etc.Bank Ombudsman: Bank Ombudsman is the authority to look into complaints against Banks in the main areas of collection of cheque / bills, issue of demand drafts, non-adherence to prescribed hours of working, failure to honour guarantee / letter of credit commitments, operations in deposit accounts and also in the areas of loans and advances where banks flout directions / instructions of RBI. This Scheme was announced in 1995 and is functioning with new guidelines from 2007. This scheme covers all scheduled banks, the RRBs and co-operative banks.Bancassurance:  Bancassurance refers to the distribution of insurance products and the insurance policies of insurance companies which may be life policies or non-life policies like home insurance - car insurance, medi-policies and others, by banks as corporate agents through their branches located in different parts of the country by charging a fee.Banker's Lien: Bankers lien is a special right of lien exercised by the bankers, who can retain goods bailed to them as a security for general balance of account. Bankers can have this right in the absence of a contract to the contrary.Basel-II: The Committee on Banking Regulations and Supervisory Practices, popularity known as Basel Committee, submitted its revised version of norms in June, 2004. Under the revised accord the capital requirement is to be calculated for credit, market and operational risks. The minimum requirement continues to be 8% of capital fund (Tier I & II Capital) Tier II shall continue to be not more than 100% of Tier I Capital.Brick & Mortar Banking: Brick and Mortar Banking refers to traditional system of banking done only in a fixed branch premises made of brick and mortar. Now there are banking channels like ATM, Internet Banking, tele banking etc.Business of Banking : Accepting deposits, borrowing money, lending money, investing, dealing in bills, dealing in Foreign Exchange, Hiring Lockers, Opening Safe Custody Accounts, Issuing Letters of Credit, Travelers’ Cheques, doing Mutual Fund business, Insurance Business, acting as Trustee or doing any other business which Central Government may notify in the official Gazette.Bouncing of a cheque: Where an account does not have sufficient balance to honour the cheque issued by the customer, the cheque is returned by the bank with the reason "funds insufficient" or "Exceeds arrangement”. This is known as 'Bouncing of a cheque’.Basis Point: One hundredth of 1%. A measure normally used in the statement of interest rate e.g., a change from 5.75% to 5.81% is a change of 6 basis points. Bear Markets: Unfavorable markets associated with falling prices and investor pessimism.Bid-ask Spread: The difference between a dealers’s bid and ask price.Bid Price: The highest price offered by a dealer to purchase a given security.Blue Chips: Blue chips are unsurpassed in quality and have a long and stable record of earnings and dividends. They are issued by large and well-established firms that have impeccable financial credentials.Bond: Publicly traded long-term debt securities, issued by corporations and governments, whereby the issuer agrees to pay a fixed amount of interest over a specified period of time and to repay a fixed amount of principal at maturity.Book Value: The amount of stockholders’ equity in a firm equals the amount of the firm’s assets minus the firm’s liabilities and preferred stock. Broker: Individuals licensed by stock exchanges to enable investors to buy and sell securities.Brokerage Fee: The commission charged by a broker.Bull Markets: Favorable markets associated with rising prices and investor optimism.

Call Option: The right to buy the underlying securities at a specified exercise price on or before a specified expiration date.Callable Bonds: Bonds that give the issuer the right to redeem the bonds before their stated maturity.Capital Gain: The amount by which the proceeds from the sale of a capital asset exceed its original purchase price.Capital Markets: The market in which long-term securities such as stocks and bonds are bought and sold.Certificate of Deposits (CDs): Savings instrument in which funds must remain on deposit for a specified period and premature withdrawals incur interest penalties.Certificate of Deposit:. Certificate of Deposits are negotiable receipts in bearer form which can be freely traded among investors. This is also a money market instrument,issued for a period ranging from 7 days to f one year .The minimum deposit amount is Rs. 1 lakh and they are transferable by endorsement and delivery.Cheque: Cheque is a bill of exchange drawn on a specified banker ordering the banker to pay a certain sum of money to the drawer of cheque or another person. Money is generally withdrawn by clients by cheques. Cheque is always payable on demand.Cheque Truncation: Cheque truncation truncates or stops the flow of cheques through the banking system. Generally truncation takes place at the collecting branch, which sends the electronic image of the cheques to the paying branch through the clearing house and stores the paper cheques with it.Closed-end (Mutual) Fund: A fund with a fixed number of shares issued, and all trading is done between investors in the open market. The share prices are determined by market prices instead of their net asset value.Collateral: A specific asset pledged against possible default on a bond. Mortgage bonds are backed by claims on property. Collateral trusts bonds are backed by claims on other securities. Equipment obligation bonds are backed by claims on equipment.Commercial Paper: Short-term and unsecured promissory notes issued by corporations with very high credit standings.Common Stock: Equity investment representing ownership in a corporation; each share represents a fractional ownership interest in the firm.Compound Interest: Interest paid not only on the initial deposit but also on any interest accumulated from one period to the next.Contract Note:  A note which must accompany every security transaction which contains information such as the dealer’s name (whether he is acting as principal or agent) and the date of contract.Controlling Shareholder: Any person who is, or group of persons who together are, entitled to exercise or control the exercise of a certain amount of shares in a company at a level (which differs by jurisdiction) that triggers a mandatory general offer, or more of the voting power at general meetings of the issuer, or who is or are in a position to control the composition of a majority of the board of directors of the issuer.

Convertible Bond: A bond with an option, allowing the bondholder to exchange the bond for a specified number of shares of common stock in the firm. A conversion price is the specified value of the shares for which the bond may be exchanged. The conversion premium is the excess of the bond’s value over the conversion price.Corporate Bond: Long-term debt issued by private corporations.Coupon: The feature on a bond that defines the amount of annual interest income.Coupon Frequency: The number of coupon payments per year.Coupon Rate: The annual rate of interest on the bond’s face value that a bond’s issuer promises to pay the bondholder. It is the bond’s interest payment per dollar of par value.Covered Warrants:  Derivative call warrants on shares which have been separately deposited by the issuer so that they are available for delivery upon exercise.Credit Rating: An assessment of the likelihood of an individual or business being able to meet its financial obligations. Credit ratings are provided by credit agencies or rating agencies to verify the financial strength of the issuer for investors.Collecting Banker: Also called receiving banker, who collects on instruments like a cheque, draft or bill of exchange, lodged with himself for the credit of his customer's account.Consumer Protection Act: It is implemented from 1987 to enforce consumer rights through a simple legal procedure. Banks also are covered under the Act. A consumer can file complaint for deficiency of service with Consumer District Forum for amounts upto Rs.20 Lacs in District Court, and for amounts above Rs.20 Lacs to Rs.1 Crore in State Commission and for amounts above Rs.1 Crore in National Commission. Co-operative Bank : An association of persons who collectively own and operate a bank for the benefit of consumers / customers, like Saraswat Co-operative Bank or Abhyudaya Co-operative Bank and other such banks.Co-operative Society : When an association of persons collectively own and operate a unit for the benefit of those using its services like Apna Bazar Co-operative Society or Sahakar Bhandar or a Co-operative Housing Society.Core Banking Solutions (CBS): Core Banking Solutions is a buzz word in Indian banking at present, where branches of the bank are connected to a central host and the customers of connected branches can do banking at any breach with core banking facility.Creditworthiness: It is the capacity of a borrower to repay the loan / advance in time along with interest as per agreed terms.Crossing of Cheques: Crossing refers to drawing two parallel lines across the face of the cheque. A crossed cheque cannot be paid in cash across the counter, and is to be paid through a bank either by transfer, collection or clearing. A general crossing means that cheque can be paid through any bank and a special crossing, where the name of a bank is indicated on the cheque, can be paid only through the named bank.Customer: A person who maintains any type of account with a bank is a bank customer. Consumer Protection Act has a wider definition for consumer as the one who purchases any service for a fee like purchasing a demand draft or a pay order. The term customer is defined differently by Laws, softwares and countries.Current Account: Current account with a bank can be opened generally for business purpose. There are no restrictions on withdrawals in this type of account. No interest is paid in this type of account.Currency Board: A monetary system in which the monetary base is fully backed by foreign reserves. Any changes in the size of the monetary base have to be fully matched by corresponding changes in the foreign reserves.Current Yield: A return measure that indicates the amount of current income a bond provides relative to its market price. It is shown as: Coupon Rate divided by Price multiplied by 100%.Custody of Securities: Registration of securities in the name of the person to whom a bank is accountable, or in the name of the bank’s nominee; plus deposition of securities in a designated account with the bank’s bankers or with any other institution providing custodial services.

Debit Card: A plastic card issued by banks to customers to withdraw money electronically from their accounts. When you purchase things on the basis of Debit Card the amount due is debited immediately to the account. Many banks issue Debit-Cum-ATM Cards.Debtor: A person who takes some money on loan from another person.Demand Deposits: Deposits which are withdrawn on demand by customers. E.g.  savings bank and current account deposits.Demat Account: Demat Account concept has revolutionized the capital market of India. When a depository company takes paper shares from an investor and converts them in electronic form through the concerned company, it is called Dematerialization of Shares. These converted Share Certificates in Electronic form are kept in a Demat Account by the Depository Company, like a bank keeps money in a deposit account. Investor can withdraw the shares or purchase more shares through this demat Account.Derivative Call (Put) Warrants: Warrants issued by a third party which grant the holder the right to buy (sell) the shares of a listed company at a specified price.Derivative Instrument: Financial instrument whose value depends on the value of another asset.Discount Bond:  A bond selling below par, as interest in-lieu to the bondholders.Dishonour of Cheque: Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-payment. Default Risk: The possibility that a bond issuer will default ie, fail to repay principal and interest in a timely manner.Diversification: The inclusion of a number of different investment vehicles in a portfolio in order to increase returns or be exposed to less risk.Duration: A measure of bond price volatility, it captures both price and reinvestment risks to indicate how a bond will react to different interest rate environments.

Earnings: The total profits of a company after taxation and interest.Earnings per Share (EPS): The amount of annual earnings available to common stockholders as stated on a per share basis.Earnings Yield: The ratio of earnings to price (E/P). The reciprocal is price earnings ratio (P/E).E-Banking : E-Banking or electronic banking is a form of banking where funds are transferred through exchange of electronic signals between banks and financial institution and customers ATMs, Credit Cards, Debit Cards, International Cards, Internet Banking and new fund transfer devices like SWIFT, RTGS belong to this category.EFT - (Electronic Fund Transfer): EFT is a device to facilitate automatic transmission and processing of messages as well as funds from one bank branch to another bank branch and even from one branch of a bank to a branch of another bank. EFT allows transfer of funds electronically with debit and credit to relative accounts.

Either or Survivor: Refers to operation of the account opened in two names with a bank. It means that any one of the account holders have powers to withdraw money from the account, issue cheques, give stop payment instructions etc. In the event of death of one of the account holder, the surviving account holder gets all the powers of operation.Electronic Commerce (E-Commerce): E-Commerce is the paperless commerce where the exchange of business takes place by Electronic means.Endorsement: When a Negotiable Instrument contains, on the back of the instrument an endorsement, signed by the holder or payee of an order instrument, transferring the title to the other person, it is called endorsement.Bouncing of a cheque: Where the name of the endorsee or transferee is not mentioned on the instrument.Endorsement in Full: Where the name of the endorsee or transferee appears on the instrument while making endorsement.Equity: Ownership of the company in the form of shares of common stock.Equity Call Warrants: Warrants issued by a company which give the holder the right to acquire new shares in that company at a specified price and for a specified period of time.Ex-dividend (XD): A security which no longer carries the right to the most recently declared dividend or the period of time between the announcement of the dividend and the payment (usually two days before the record date). For transactions during the ex-dividend period, the seller will receive the dividend, not the buyer. Ex-dividend status is usually indicated in newspapers with an (x) next to the stock’s or unit trust’s name.Execution of Documents: Execution of documents is done by putting signature of the person, or affixing his thumb impression or putting signature with stamp or affixing common seal of the company on the documents with or without signatures of directors as per articles of association of the company.

Face Value/ Nominal Value: The value of a financial instrument as stated on the instrument. Interest is calculated on face/nominal value.Fixed-income Securities: Investment vehicles that offer a fixed periodic return.Fixed Rate Bonds:  Bonds bearing fixed interest payments until maturity date.Floating Rate Bonds: Bonds bearing interest payments that are tied to current interest rates.Factoring: Business of buying trade debts at a discount and making a profit when debt is realized and also taking over collection of trade debts at agreed prices.Foreign Banks: Banks incorporated outside India but operating in India and regulated by the Reserve Bank of India (RBI),. e..g., Barclays Bank, HSBC, Citibank, Standard Chartered Bank, etc.Forfeiting: In International Trade when an exporter finds it difficult to realize money from the importer, he sells the right to receive money at a discount to a forfaiter, who undertakes inherent political and commercial risks to finance the exporter, of course with assumption of a profit in the venture.Forgery: when a material alteration is made on a document or a Negotiable Instrument like a cheque, to change the mandate of the drawer, with intention to defraud.Fundamental Analysis: Research to predict stock value that focuses on such determinants as earnings and dividends prospects, expectations for future interest rates and risk evaluation of the firm.Future Value: The amount to which a current deposit will grow over a period of time when it is placed in an account paying compound interest.Future Value of an Annuity: The amount to which a stream of equal cash flows that occur in equal intervals will grow over a period of time when it is placed in an account paying compound interest.Futures Contract: A commitment to deliver a certain amount of some specified item at some specified date in the future.

Garnishee Order: When a Court directs a bank to attach the funds to the credit of customer's account under provisions of Section 60 of the Code of Civil Procedure, 1908.General Lien: A right of the creditors to retain possession of all goods given in security to him by the debtor for any outstanding debt.Guarantee: A contract between guarantor and beneficiary to ensure performance of a promise or discharge the liability of a third person. If promise is broken or not performed, the guarantor pays contracted amount to the beneficiary.

Hedge: A combination of two or more securities into a single investment position for the purpose of reducing or eliminating risk.Holder: Holder means any person entitled in his own name to the possession of the cheque, bill of exchange or promissory note and who is entitled to receive or recover the amount due on it from the parties. For example, if I give a cheque to my friend to withdraw money from my bank,he becomes holder of that cheque. Even if he loses the cheque, he continues to be holder. Finder cannot become the holder.Holder in due course : A person who receives a Negotiable Instrument for value, before it was due and in good faith, without notice of any defect in it, he is called holder in due course as per Negotiable Instrument Act. In the earlier example if my friend lends some money to me on the basis of the cheque, which I have given to him for encashment, he becomes holder-in-due course.Hypothecation: Charge against property for an amount of debt where neither ownership nor possession is passed to the creditor. In pledge, possession of property is passed on to the lender but in hypothecation, the property remains with the borrower in trust for the lender.

Identification: When a person provides a document to a bank or is being identified by a person, who is known to the bank, it is called identification. Banks ask for identification before paying an order cheque or a demand draft across the counter.Indemnifier: When a person indemnifies or guarantees to make good any loss caused to the lender from his actions or others' actions.Indemnity: Indemnity is a bond where the indemnifier undertakes to reimburse the beneficiary from any loss arising due to his actions or third party actions.Income: The amount of money an individual receives in a particular time period.Index Fund:  A mutual fund that holds shares in proportion to their representation in a market index, such as the S&P 500.

Initial Public Offering (IPO): An event where a company sells its shares to the public for the first time. The company can be referred to as an IPO for a period of time after the event.Inside Information: Non-public knowledge about a company possessed by its officers, major owners, or other individuals with privileged access to information.Insider Trading: The illegal use of non-public information about a company to make profitable securities transactionsInsolvent: Insolvent is a person who is unable to pay his debts as they mature, as his liabilities are more than the assets . Civil Courts declare such persons insolvent. Banks do not open accounts of insolvent persons as they cannot enter into contract as per law.Interest Warrant: When cheque is given by a company or an organization in payment of interest on deposit , it is called interest warrant. Interest warrant has all the characteristics of a cheque.International Banking: involves more than two nations or countries. If an Indian Bank has branches in different countries like State Bank of India, it is said to do International Banking.Introduction: Banks are careful in opening any account for a customer as the prospective customer has to be introduced by an existing account holder or a staff member or by any other person known to the bank for opening of account. If bank does not take introduction, it will amount to negligence and will not get protection under law.Intrinsic Value: The difference of the exercise price over the market price of the underlying asset.Investment: A vehicle for funds expected to increase its value and/or generate positive returns.Investment Adviser: A person who carries on a business which provides investment advice with respect to securities and is registered with the relevant regulator as an investment adviser.IPO price: The price of share set before being traded on the stock exchange. Once the company has gone Initial Public Offering, the stock price is determined by supply and demand.

JHF Account : Joint Hindu Family Account is account of a firm whose business is carried out by Karta of the Joint family, acting for all the family members.. The family members have common ancestor and generally maintain a common residence and are subject to common social, economic and religious regulations.Joint Account: When two or more individuals jointly open an account with a bank.Junk Bond: High-risk securities that have received low ratings (i.e. Standard & Poor’s BBB rating or below; or Moody’s BBB rating or below) and as such, produce high yields, so long as they do not go into default.

Karta: Manager of a Hindu Undivided Family (HUF) who handles the family business. He is usually the eldest male member of the undivided family.Kiosk Banking: Doing banking from a cubicle from which food, newspapers, tickets etc. are also sold.KYC Norms: Know your customer norms are imposed by R.B.I. on banks and other financial institutions to ensure that they know their customers and to ensure that customers deal only in legitimate banking operations and not in money laundering or frauds.

Law of Limitation: Limitation Act of 1963 fixes the limitation period of debts and obligations including banks loans and advances. If the period fixed for particular debt or loan expires, one cannot file a suit for is recovery, but the fact of the debt or loan is not denied. It is said that law of limitation bars the remedy but does not extinguish the right.Lease Financing: Financing for the business of renting houses or lands for a specified period of time and also hiring out of an asset for the duration of its economic life. Leasing of a car or heavy machinery for a specific period at specific price is an example.Letter of Credit: A document issued by importers bank to its branch or agent abroad authorizing the payment of a specified sum to a person named in Letter of Credit (usually exporter from abroad). Letters of Credit are covered by rules framed under Uniform Customs and Practices of Documentary Credits framed by International Chamber of Commerce in Paris.Limited Companies Accounts: Accounts of companies incorporated under the Companies Act, 1956 . A company may be private or public. Liability of the shareholders of a company is generally limited to the face value of shares held by them.Leverage Ratio: Financial ratios that measure the amount of debt being used to support operations and the ability of the firm to service its debt.Libor: The London Interbank Offered Rate (or LIBOR) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market). The LIBOR rate is published daily by the British Banker’s Association and will be slightly higher than the London Interbank Bid Rate (LIBID), the rate at which banks are prepared to accept deposits.Limit Order: An order to buy (sell) securities which specifies the highest (lowest) price at which the order is to be transacted.Limited Company: The passive investors in a partnership, who supply most of the capital and have liability limited to the amount of their capital contributions.Liquidity: The ability to convert an investment into cash quickly and with little or no loss in value.Listing: Quotation of the Initial Public Offering company’s shares on the stock exchange for public trading.Listing Date: The date on which Initial Public Offering stocks are first traded on the stock exchange by the public

Margin Call: A notice to a client that it must provide money to satisfy a minimum margin requirement set by an Exchange or by a bank / broking firm.Market Capitalization: The product of the number of the company’s outstanding ordinary shares and the market price of each share.Market Maker: A dealer who maintains an inventory in one or more stocks and undertakes to make continuous two-sided quotes.Market Order: An order to buy or an order to sell securities which is to be executed at the prevailing market price.Money Market: Market in which short-term securities are bought and sold.Marginal Standing Facility Rate: MSF scheme has become effective from 09th May, 2011 launched by the RBI. Under this scheme, Banks will be able to borrow upto 1% of their respective Net Demand and Time Liabilities.  The rate of interest on the amount accessed from this facility will be 100 basis points (i.e. 1%) above the repo rate. This scheme is likely to reduce volatility in the overnight rates and improve monetary transmission.

Mandate: Written authority issued by a customer to another person to act on his behalf, to sign cheques or to operate a bank account.Material Alteration: Alteration in an instrument so as to alter the character of an instrument for example when date, amount, name of the payee are altered or making a cheque payable to bearer from an order one or opening the crossing on a cheque.Merchant Banking : When a bank provides to a customer various types of financial services like accepting bills arising out of trade, arranging and providing underwriting, new issues, providing advice, information or assistance on starting new business, acquisitions, mergers and foreign exchange.Micro Finance: Micro Finance aims at alleviation of poverty and empowerment of weaker sections in India. In micro finance, very small amounts are given as credit to poor in rural, semi-urban and urban areas to enable them to raise their income levels and improve living standards.Minor Accounts: A minor is a person who has not attained legal age of 18 years. As per Contract Act a minor cannot enter into a contract but as per Negotiable Instrument Act, a minor can draw, negotiate, endorse, receive payment on a Negotiable Instrument so as to bind all the persons, except himself. In order to boost their deposits many banks open minor accounts with some restrictions.Mobile Banking : With the help of M-Banking or mobile banking customer can check his bank balance, order a demand draft, stop payment of a cheque, request for a cheque book and have information about latest interest rates.Money Laundering: When a customer uses banking channels to cover up his suspicious and unlawful financial activities, it is called money laundering. Money Market: Money market is not an organized market like Bombay Stock Exchange but is an informal network of banks, financial institutions who deal in money market instruments of short term like CP, CD and Treasury bills of Government.Moratorium: R.B.I. imposes moratorium on operations of a bank; if the affairs of the bank are not conducted as per banking norms. After moratorium R.B.I. and Government explore the options of safeguarding the interests of depositors by way of change in management, amalgamation or take over or by other means.Mortgage: Transfer of an interest in specific immovable property for the purpose of offering a security for taking a loan or advance from another. It may be existing or future debt or performance of an agreement which may create monetary obligation for the transferor (mortgagor).Mutual Fund: A company that invests in and professionally manages a diversified portfolio of securities and sells shares of the portfolio to investors.

NABARD: National Bank for Agriculture & Rural Development was setup in 1982 under the Act of 1981. NABARD finances and regulates rural financing and also is responsible for development agriculture and rural industries.Negotiation: In the context of banking, negotiation means an act of transferring or assigning a money instrument from one person to another person in the course of business.Net Asset Value: The underlying value of a share of stock in a particular mutual fund; also used with preferred stock.Non-Fund Based Limits: Non-Fund Based Limits are those type of limits where banker does not part with the funds but may have to part with funds in case of default by the borrowers, like guarantees, letter of credit and acceptance facility.Non-Resident: A person who is not a resident of India is a non-resident. Non-Resident Accounts: Accounts of non-resident Indian citizens opened and maintained as per R.B.I. Rules.Notary Public: A Lawyer who is authorized by Government to certify copies of documents .NPA Account: If interest and instalments and other bank dues are not paid in any loan account within a specified time limit, it is being treated as non-performing assets of a bank.

Off Balance Sheet Items: Those items which affect the financial position of a business concern, but do not appear in the Balance Sheet E,g guarantees, letters of credit . The mention "off Balance Sheet items" is often found in Auditors Reports or Directors Reports.Offer for Sale: An offer to the public by, or on behalf of, the holders of securities already in issue.Offer for Subscription: The offer of new securities to the public by the issuer or by someone on behalf of the issuer.Online Banking: Banking through internet site of the bank which is made interactive.Open-end (Mutual) Fund: There is no limit to the number of shares the fund can issue. The fund issues new shares of stock and fills the purchase order with those new shares. Investors buy their shares from, and sell them back to, the mutual fund itself. The share prices are determined by their net asset value.Open Offer: An offer to current holders of securities to subscribe for securities whether or not in proportion to their existing holdings.Option: A security that gives the holder the right to buy or sell a certain amount of an underlying financial asset at a specified price for a specified period of time.Oversubscribed: When an Initial Public Offering has more applications than actual shares available. Investors will often apply for more shares than required in anticipation of only receiving a fraction of the requested number. Investors and underwriters will often look to see if an IPO is oversubscribed as an indication of the public’s perception of the business potential of the IPO company.

Pass Book: A record of all debit and credit entries in a customer's account. Generally all banks issue pass books to Savings Bank/Current Account Holders.Par Bond: A bond selling at par (i.e. at its face value).Par Value: The face value of a security.Perpetual Bonds: Bonds which have no maturity date.Placing: Obtaining subscriptions for, or the sale of, primary market, where the new securities of issuing companies are initially sold.Personal Identification Number (PIN): Personal Identification Number is a number which an ATM card holder has to key in before he is authorized to do any banking transaction in a ATM .Plastic Money: Credit Cards, Debit Cards, ATM Cards and International Cards are considered plastic money as like money they can enable us to get goods and services.Pledge: A bailment of goods as security for payment of a debt or performance of a promise, e.g pledge of stock by a borrower to a banker for a credit limit. Pledge can be made in movable goods only.

Post-Dated Cheque:  A Cheque which bears the date which is subsequent to the date when it is drawn. For example, a cheque drawn on 8th of February, 2007 bears the date of 12th February, 2007.Power of Attorney: It is a document executed by one person - Donor or Principal, in favour of another person, Donee or Agent - to act on behalf of the former, strictly as per authority given in the document.Portfolio: A collection of investment vehicles assembled to meet one or more investment goals.Preference Shares: A corporate security that pays a fixed dividend each period. It is senior to ordinary shares but junior to bonds in its claims on corporate income and assets in case of bankruptcy.Premium (Warrants): The difference of the market price of a warrant over its intrinsic value.Premium Bond: Bond selling above par.Present Value: The amount to which a future deposit will discount back to present when it is depreciated in an account paying compound interest.Present Value of an Annuity: The amount to which a stream of equal cash flows that occur in equal intervals will discount back to present when it is depreciated in an account paying compound interest.Price/Earnings Ratio (P/E): The measure to determine how the market is pricing the company’s common stock. The price/earnings (P/E) ratio relates the company’s earnings per share (EPS) to the market price of its stock.Privatization: The sale of government-owned equity in nationalized industry or other commercial enterprises to private investors.Prospectus: A detailed report published by the Initial Public Offering company, which includes all terms and conditions, application procedures, IPO prices etc, for the IPOPut Option: The right to sell the underlying securities at a specified exercise price on of before a specified expiration date.Premature Withdrawals: Term deposits like Fixed Deposits, Call Deposits, Short Deposits and Recurring Deposits have to mature on a particular day. When these deposits are sought to be withdrawn before maturity , it is premature withdrawal.Prime Lending Rate (PLR): The rate at which banks lend to their best (prime) customers.Priority Sector Advances : consist of loans and advances to Agriculture, Small Scale Industry, Small Road and Water Transport Operators, Retail Trade, Small Business with limits on investment in equipments, professional and self employed persons, state sponsored organisations for lending to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help groups and consumption loans.Promissory Note: Promissory Note is a promise / undertaking given by one person in writing to another person, to pay to that person , a certain sum of money on demand or on a future day.Provisioning:  Provisioning is made for the likely loss in the profit and loss account while finalizing accounts of banks. All banks are supposed to make assets classification and make appropriate provisions for likely losses in their balance sheets.Public Sector Bank: A bank fully or partly owned by the Government.

Rate of Return: A percentage showing the amount of investment gain or loss against the initial investment.Real Interest Rate: The net interest rate over the inflation rate. The growth rate of purchasing power derived from an investment.Redemption Value: The value of a bond when redeemed.Reinvestment Value: The rate at which an investor assumes interest payments made on a bond which can be reinvested over the life of that security.Relative Strength Index (RSI): A stock’s price that changes over a period of time relative to that of a market index such as the Standard & Poor’s 500, usually measured on a scale from 1 to 100, 1 being the worst and 100 being the best.Repurchase Agreement: An arrangement in which a security is sold and later bought back at an agreed price and time.Resistance Level: A price at which sellers consistently outnumber buyers, preventing further price rises.Return: Amount of investment gain or loss.Rescheduling of Payment:  Rearranging the repayment of a debt over a longer period than originally agreed upon due to financial difficulties of the borrower.Restrictive Endorsement: Where endorser desires that instrument is to be paid to particular person only, he restricts further negotiation or transfer by such words as "Pay to Ashok only". Now Ashok cannot negotiate the instrument further.Right of Appropriation: As per Section 59 of the Indian Contract Act, 1972 while making the payment, a debtor has the right to direct his creditor to appropriate such amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer.Right of Set-Off : When a banker combines two accounts in the name of the same customer and adjusts the debit balance in one account with the credit balance in other account, it is called right of set-off. For example, debit balance of Rs.50,000/- in overdraft account can be set off against credit balance of Rs.75,000/- in the Savings Bank Account of the same customer, leaving a balance of Rs.25,000/- credit in the savings account.Rights Issue: An offer by way of rights to current holders of securities that allows them to subscribe for securities in proportion to their existing holdings.Risk-Averse, Risk-Neutral, Risk-Taking:Risk-averse describes an investor who requires greater return in exchange for greater risk.Risk-neutral describes an investor who does not require greater return in exchange for greater risk.Risk-taking describes an investor who will accept a lower return in exchange for greater risk.

Safe Custody: When articles of value like jewellery, boxes, shares, debentures, Government bonds, Wills or other documents or articles are given to a bank for safe keeping in its safe vault, it is called safe custody.. Bank charges a fee from its clients for such safe custody.Savings Bank Account: All banks in India are having the facility of opening savings bank account with a nominal balance. This account is used for personal purposes and not for business purpose and there are certain restrictions on withdrawals from this type of account. Account holder gets nominal interest in this account.Senior Bond: A bond that has priority over other bonds in claiming assets and dividends.Settlement: Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivered, securities sold, and receive from the broker the proceeds of a sale.Short Hedge: A transaction that protects the value of an asset held by taking a short position in a futures contract.

Short Position: Investors sell securities in the hope that they will decrease in value and can be bought at a later date for profit.Short Selling: The sale of borrowed securities, their eventual repurchase by the short seller at a lower price and their return to the lender.Speculation: The process of buying investment vehicles in which the future value and level of expected earnings are highly uncertain.Stock Splits: Wholesale changes in the number of shares. For example, a two for one split doubles the number of shares but does not change the share capital.Subordinated Bond:  An issue that ranks after secured debt, debenture, and other bonds, and after some general creditors in its claim on assets and earnings. Owners of this kind of bond stand last in line among creditors, but before equity holders, when an issuer fails financially.Substantial Shareholder: A person acquires an interest in relevant share capital equal to, or exceeding, 10% of the share capital.Support Level: A price at which buyers consistently outnumber sellers, preventing further price falls.

Teller : Teller is a staff member of a bank who accepts deposits, cashes cheques and performs other banking services for the public.Technical Analysis: A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict future (usually short-term) market trends. Contrasted with fundamental analysis which involves the study of financial accounts and other information about the company. (It is an attempt to predict movements in security prices from their trading volume history.)Time Horizon: The duration of time an investment is intended for.Trading Rules: Stipulation of parameters for opening and intra-day quotations, permissible spreads according to the prices of securities available for trading and board lot sizes for each security.Trust Deed: A formal document that creates a trust. It states the purpose and terms of the name of the trustees and beneficiaries.

Underwriting : is an agreement by the underwriter to buy on a fixed date and at a fixed rate, the unsubscribed portion of shares or debentures or other issues. Underwriter gets commission for this agreement.Underlying Security:  The security subject to being purchased or sold upon exercise of the option contract.Universal Banking : When Banks and Financial Institutions are allowed to undertake all types of activities related to banking like acceptance of deposits, granting of advances, investment, issue of credit cards, project finance, venture capital finance, foreign exchange business, insurance etc. it is called Universal Banking.

Valuation: Process by which an investor determines the worth of a security using risk and return concept.Virtual Banking: Virtual banking is also called internet banking, through which financial and banking services are accessed via internet's World Wide Web. It is called virtual banking because an internet bank has no boundaries of brick and mortar and it exists only on the internet.

Warrant: An option for a longer period of time giving the buyer the right to buy a number of shares of common stock in company at a specified price for a specified period of time.Wholesale Banking: Wholesale banking is different from Retail Banking as its focus is on providing for financial needs of industry and institutional clients.Window Dressing: Financial adjustments made solely for the purpose of accounting presentation, normally at the time of auditing of company accounts.

Yield (Internal rate of Return): The compound annual rate of return earned by an investmentYield to Maturity: The rate of return yield by a bond held to maturity when both compound interest payments and the investor’s capital gain or loss on the security are taken into account.

Zero Coupon Bond: A bond with no coupon that is sold at a deep discount from par value.

RBI Lending Rate Cut By 50 Basis Pts To Boost Growth

In its annual monetary policy statement for 2012-13, the Reserve Bank of India (RBI) on 17th April 2012 has cut interest rate by 0.50 per cent after a gap of 3 years, making the credit cheaper.

The Changed Key Rates are:-

KEY RATES CURRENT STATUS PREVIOUS STATUSBank Rate 9.00% 9.50%Cash Reserve Ratio (CRR) 4.75% (NO CHANGE) 4.75%Statutory Liquidity Ratio (SLR) 24% (NO CHANGE) 24%Repo Rate 8.00% 8.50%

Reverse Repo Rate 7.00% 7.50%

Marginal Standing Facility (MSF) 9.00% 9.50%