BFM - Case studies

BFM- Case studies


1. Probability of occurrence=4
Potential financial impact=4
Impact of internal control=0%
What is the estimated level of operational risk?
A.3
B.2
C.0
D.4
=(4*4*(1-0))square.5=4, So ans is d (look for page295 BFM)
Estimated level of operational risk=Estd probability of
occurrence(4)*Estd potential financial impact(4) *estimated impact of
internal controls
2 If there is an asset of Rs 120 in the doubt ful-I cat and the
realization value of security is rs 90 only , what will be the provision
requirement.
A Rs 48
B Rs 57
C Rs 39
D Rs 75
Ans : 48 since it a doubtful-I cat so provisioning will be 20% of
realization value Rs 90 i.e Rs 18 and 100% of short Fall that is 120-
90= 30. So ans will be 30+1-8= 48
3(a). If there is an asset of Rs 120 only in the doubt ful-II cat and
the realization value of security is Rs 90 if above mentioned asset in
doubtful-ii category what will be the provision requirement.
A 39
B 57
C 66
D 75
Ans : b since it a doubtful-II cat so 30% realization value of Rs
90 i.e Rs 27 and 100% of short Fall that is 120-90= 30 so ans will
be 30+27= 57
3(b). If there is an assets of Rs 120 only in the doubt ful-III cat and
the realization value of security is Rs 90 if above mentioned asset in
doubt-III than what will be the provision requirement.
A 120
B 48
C 57
D 108
Ans : a since it a doubtful-III cat so 100% of realization value Rs 90
i.e Rs 90 and 100% of short Fall that is 120-90= 30 so ans will be
90+30=120
4. A preshipment account above 3 years as on mar 31 2004 has debit
balance of Rs 4 lakh. Principle security value is 1.50 lakh and ECGC
cover is available at 50 %. What provision will be made on the a/c as
on 31.05.2025 .
A Rs 2.15 lac
B 2.0 lac
C 1.92 lac
D 2.25 lac
Ans : a do not know pl.. solved any body I m unable to
5. A/C of ABC has become doubtful with balance of Rs. 6 lac . The
collateral security value is Rs 3 lac and that of principle security is 2
lac. Guarantors worth is Rs 10 lac . A/c is in more than 1 Yr and up
to 3 yr doubtful category . What will be amount of provision as on
mar 2013.
A Rs 1.50 lac
B 2.50 lac
C 1.80 lac
D 3.0 lac
Ans : B since it is in more than two yr in doubtful category it
should be treated as doubtful-II cat and allow 30% of realisation
value that is 3+2=5 , 30% of 5 will be Rs 1.50 lac and 100% of
short fall that is 6-5=1 lac so 1.50+1.0=2.50 lac ans
6. Provisions to be made for a standard asset....teaser housing loan
A)0.25%
B)0.40%
C)1%
D) 2%
Ans: 2%
7. A 5-year 6% semi-annual bond @ market yield of 8%, having a price of
Rs. 92, falls to Rs. 91.80 at a yield of 8.10%, what is Basis Point Value
(BPV)?
1) Rs. 0.20 2) Rs. 0.10 3) Rs. 0.02 4) Rs. 0.05
BPV=92-91.80/8.10%-8%=.2/.10*100=.2/10=.02
8. Received order of USD 50000(CIF) to Australia on 1.1.11 when USD/INR
Bill Buying Rate is 43.50. How much preshipment finance will be released
considering profit margin of 10% and Insurance and freight cost@ 12%.
ans
FOB Value = CIF – Insurance and Freight – Profit (Calculation at Bill Buying
Rate on 1.1.11) i.e
= 50000X43.5 = 2175000 – 216000(12%) – 191400(10% of 1914000) =
1722600
Pre-shipment Finance = FOB value -25%(Margin) = 1722600-
430650=1291950.
9. Spot Rate ((Forward Rates)) is 35.6000/6500 Forward 1M=3500/3000
2M=5500/3000, 3M=8500/8000, Transit Period ----20 days, Exchange
Margin = 0.15%.
Find Bill Buying Rate & 2 M Forward Buying Rate
a)31.6979
b)34.6979
c)27.6979
d)25.6979
ans: Bill Buying Rate (Ready) : Bill Date +20 days
Spot Rate = 35.6000 Less Forward Discount 1M (0.3500) Less Exchange
Margin 0.15% (0.529)
i.e. 35.6000-.3500-.0529(0.15% of 35.2500) = 35.1971
3 Month Forward Buying Rate will be applied. 20 days + 2M
Spot Rate = 35.6000 Less Forward Discount of 3M (.8500) Less Exchange
Margin (.0521)
i.e. 35.6000-.8500-.0521(0.15% of 34.7500) = 34.6979 Ans.
10.Issue of DD on New York for USD 25000. The spot Rate is IUSD =
34.3575/3825 1M forward rate is 34.7825/8250
Exchange margin: 0.15%
a ) 32.4341
b ) 34.4341
c ) 36.4341
d ) 38.4341
Ans: Issue of DD on New York for USD 25000. The spot Rate is IUSD =
34.3575/3825 IM forward rate is 34.7825/8250
Exchange margin: 0.15%
Solution:
TT Selling Rate will Apply
Spot Rate = 34.3825 Add Exchange margin (.15%) i.e. 0.516
TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.
11 Exporter received Advance remittance by way of TT French Franc
100000.
The spot rates are in India IUSD = 35.85/35.92 1M forward =.50/.60
The spot rates in Singapore are 1USD = 6.0220/6.0340 1M forward
=.0040/.0045
Exchange margin = 0.8%
a ) INR 4.9366
b ) INR 5.9366
c ) INR 6.9366
d ) INR 7.9366
Solution
Cross Rate will apply
USD will be bought in the local market at TT Buying rate and sold at Spot
Selling Rates in Singapore for French
Francs:
TT Buying Rates USD/INR = Spot rate – Exchange margin = 35.8500-.0287
= 35.8213
Spot Selling Rate for USD/Francs = 6.0340
Inference:
6.0340 Franc = 1USD
= INR 35.8213
1 franc = 35.8213/6.0340 = INR 5.9366 Ans.
12. On 12th Feb, received Import Bill of USD-10000. The bill has to be
retired to debit the account of the customer. Interbank spot rate
=34.6500/7200. The spot rate for March is 5000/4500. The exchange
margin for TT selling is .15% and Exchange margin for Bill selling is .20%.
Quote rate to be applied.
a ) 31.8415
b ) 34.8415
c ) 35.8415
d ) 39.8415
Solution
Bill Selling Rate will be applied.
Spot Rate + Exchange margin for TT Selling + Exchange margin for Bill
selling = 34.7200+.0520+.0695 = 34.8415
13 On 15th July, Customer presented a sight bill for USD 100000 for
Purchase under LC. How much amount will be credited to the account of the
Exporter. Transit period is 20 days and Exchange margin is 0.15%. The spot
rate is 34.75/85. Forward differentials:
Aug: .60/.57 Sep:1.00/.97 Oct: 1.40/1.37
a ) 28.0988
b ) 34.0988
c ) 40.0988
d ) 44.0988
Solution
Bill Buying rate will be applied.
Spot Rate----34.75 Less discount .60 = 34.15
Less Exchange Margin O.15% i.e. .0512 =34.0988 Ans.
14. Bank received MT of USD 5000 on 15th Sep. The Nostro account was
already credited. What amount will be paid to the customer: Spot Rate
34.25/30. Oct Forward Differential is 22/24. Exchange margin is .80%
a ) 38.2226
b ) 34.2226
c ) 30.2226
d ) 32.2226
Solution
TT buying Rate will be applied
34.25 - .0274 = 34.2226 Ans.
15. Spot Rate ((Forward Rates)) is 35.6000/6500 Forward 1M=3500/3000
2M=5500/3000 3M=8500/8000
Transit Period ----20 days, Exchange Margin = 0.15%.
Find Bill Buying Rate & 2 M Forward Buying Rate
a ) 31.6979
b ) 34.6979
c ) 27.6979
d ) 25.6979
Solution
Bill Buying Rate (Ready) : Bill Date +20 days
Spot Rate = 35.6000 Less Forward Discount 1M (0.3500) Less Exchange
Margin 0.15% (0.529)
i.e. 35.6000-.3500-.0529(0.15% of 35.2500) = 35.1971
3 Month Forward Buying Rate will be applied. 20 days + 2M
Spot Rate = 35.6000 Less Forward Discount of 3M (.8500) Less Exchange
Margin (.0521)
i.e. 35.6000-.8500-.0521(0.15% of 34.7500) = 34.6979 Ans.
16 Issue of DD on New York for USD 25000. The spot Rate is IUSD =
34.3575/3825. 1M forward rate is 34.7825/8250, Exchange margin:
0.15%. Calculate TT Selling rate
a ) 32.4341
b ) 34.4341
c ) 36.4341
d ) 38.4341
Issue of DD on New York for USD 25000. The spot Rate is IUSD =
34.3575/3825, 1M forward rate is 34.7825/8250
Exchange margin: 0.15%
Solution:
TT Selling Rate will Apply
Spot Rate = 34.3825 Add Exchange margin (.15%) i.e. 0.516
TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.
17. Exporter received Advance remittance by way of TT French Franc
100000.
The spot rates are in India IUSD = 35.85/35.92 1M forward =.50/.60
The spot rates in Singapore are 1USD = 6.0220/6.0340 1M forward
=.0040/.0045, Exchange margin = 0.8%
a ) INR 4.9366
b ) INR 5.9366
c ) INR 6.9366
d ) INR 7.9366
Ans: 6.0220*.008=.0481, -0040= 5.97
Cross Rate will apply
USD will be bought in the local market at TT Buying rate and sold at Spot
Selling Rates in Singapore for French Francs:
TT Buying Rates USD/INR = Spot rate – Exchange margin = 35.8500-.0287
= 35.8213
Spot Selling Rate for USD/Francs = 6.0340
Inference:
6.0340 Franc = 1USD
= INR 35.8213
1 franc = 35.8213/6.0340 = INR 5.9366 Ans.
18.A 91 days T Bill, after 41 days is trading at 99, calculate the yield on T
bill..
1) 7.35
2) 7.37
3) 6.89
4) 8.01
ANS: 100-99*365*100/99*50=36500/4950=7.37 ans
19. One of your exporter customers has received an export order for USD
100,000/- (Present conversion rate USD 1= RS 47/-). The contract is for CIF
value. Freight is estimated at 10% and insurance premium will be
approximately 5%. Your branch has prescribed a margin of 10%. What will
be the eligible packing credit loan amount?
1. 32,13,000
2. 37,80,000
3. 42,00,000
4. 35,95,000*
Ans FOB value= 100000*47=4700000-(15% freight)705000=3995000
Pre shipment= FOB- Margin=3995000-399500=3595000ans
20. You are required to negotiate an export bill for USD 150000.00 at 60
days after sight drawn under a LC. Assuming the following rates in the inter
bank market calculate the exchange rate to be quoted bearing in mind that
the required exchange margin is 0.150% , NTP is 20 days and interest is to
be collected at 11% p.a. at the time of negotiation and recoverable from the
customer.
SPOT USD1= Rs.48.2000/48.2500 and premia are
one month-0.0800/0100, 2 month 0.1500/0.1650 and 3 month
0.2300/0.2400
ANS: Since the NTP is 20 days and usance of the bill is 60 days the forward
rate should be that as applicable to 80 days. Since this is a buying
transaction the premium for 2 months is only considered because of the
principle “give less”. The working of the rate is as under:
Inter bank rate + premium= 48.200+ 0.1500 = 48.3500
Exchange margin @ 0.150% is reduced from the above = 48.3500- 0.0545
= 48.2955 and when rounded off it is 48.2950
Amount payable to the customer = 150000* 48.3500 =Rs.7252500
Interest recoverable = {7252500* 80*11}/ 36500= Rs174854.79
20 A bond with Rs 100 par value has a coupon rate of 14 %. The required
rate of return on the bond is 13 % and it matures in 5 years. Find the value
of bond. ?
FORMULA :
COUPON RATE / (1*ROR) N
SO : 14/1.13+ 14/(1.13)2 +14/(1.13)3 +14/(1.13)4 + 114/(1.13)5
:- 12.38 + 10.96 + 9.70 + 8.86 + 61.87 = 103.77
21.COST / UNIT
RAW MATERIAL 50
DIRECT LABOUR 20
OVERHEADS 40
TOTAL COST 110
NO OF UNITS 10,000
NO OF UNITS SOLD ON CREDIT 8000
AVERATE RAW MATERIAL IN STOCK : 1 MONTH
AVERAGE WORK IN PROGRESS : 0.5 MONTH
AVERAGE FINISHED GOODS IN STOCK : 0.5 MONTH
CREDIT BY SUPPLIER : 1 MONTH
CREDIT TO DEBTOR : 2 MONTHS
TAKE 1 YEAR = 12 MONTHS
INVESTMENT IN WORKING CAPITAL FOR FINISHED GOODS IS
NO OF UNIT * COST OF PRODUCTION PRICE * FINISHED GOODS DAY / 365
10000 * 110 * .05/12 = 45833
GROSS PROFIT : 8
NET PROFIT : 5
DEPRECTIATION : 3
SALES : 80
PURCHASE : 60
CAPITAL : 50
CC BANK : 20
TERM LOAN : 10
TERM LOAN ( INSTALL FALL ) 2
CREDITORS : 12
OTHER O/S EXP : 6
FIXED ASSETS : 65
INVESTMENT : 10
DEBTOR : 8
CLOSING STOCK: 7
CASH AND BANK : 5
LOAN AND ADVANCE : 5
INT. ON TERM LOAN : 1.5
1) GROSS PROFIT RATIO
G.P / SALES * 100 : 8/80*100 = 10
2) NET PROFIT RATIO
N.P. / SALES * 100 : 5 / 80 * 100 = 6.25
3) CURRENT RATIO
C.A. / C.L. ( INCL T/L) ( 8 + 7 + 5 + 5 ) / ( 2 + 12 + 6 +20) = 6.25
4) DEBT EQUIRY RATION
DEBT / EQRY : ( 20 + 10 + 2 12 + 6 ) / ( 50)
5) CREDITOR PAYMENT PERIOD
CREDITORS / PURCHASE * 365 : 12/60 *365 = 60.83
6) STOCK HOLDING PERIOD
STOCK / PURCHASE * 365 7 / 80 *365 = 31.93
DSCR : ( PAT + DEPRE+INT ON T/L ) / INT IN T/L AND INSTL OF T/L)
( 5 + 3 1.5 ) / ( 2 + 1.5)
QTN. RS.1000 TREASURE BOND WITH COUPON RATE OF 6 % . TODAY
PRICE AT RS 1010.77 AND SELL IT NEXT YEAR AT THE PRICE OF RS 1020.
SO WHAT IS RATE OR RETURN ON BOND ?
FORMULA : % + DIFFERENCE / INVESTMENT
SO : 60 + 9.23 / 1010.77 = 6.86
33.A bank is holding bond portfolio having BPV of Rs 51000 per Cr. The
book value of the holding is Rs 9780 Cr having present market value of Rs
10543 Cr. Total face value of the holding is Rs 10124 Crs. What would
be the gain/loss on the holding if the portfolio yield increases by 12 basis
points ?
a) Loss of Rs 1265.16
b) loss of Rs 1214.68
c) loss of Rs 612000
d) Insufficient data
Ans : c Yield is inversely proportionate to market price..
So increase in yield..
Will decrease the market price. ..
Means loss in holding the portfolio. ..
BPV is Change in price by 1 basis point ( 0.01%) change in yield..
So by change in the yield by 12 basis points or 12 BPV..
Change in price will be..
= 12 × 51000
= 612000
Loss of rs 6,12,000 per Cr
34. A 20 YR 11% Semi-annual bond @ market yield of 9.80% has 15
Yr remaining for maturity> Mc Cauley’S duration of the bond is 9.2 Yr.
What is the approximate change in price if the market yield goes down by
1% ?
a) Price increases by 8.70%
b) Price increases by 8.77%
c) Price decreases by 8.87%
d) Price decreases by 9.20%
ans : b Modified duration is McCauley's duration discounted by one period
yield to maturity
Modified duration =
McCauley's duration / ( 1 + yield )
= 9.2 / ( 1 + 9.8%)
= 9.2 / ( 1 +0.098)
= 9.2 / ( 1.098)
= 8.37 = modified duration
% change in price = - modified duration × yield change
= - 8.37× (-1%)
= (+)8.37 %
+ means increase in price
So 8.37 % increase in price. .
My magnitude of answer Is different from answer b
35. Say Mr. X purchase 2000 shares of stock ‘A’ at Rs 125 per share
and 1000 shares of stock ‘B’ at Rs 90 per share. The price is expected
to fluctuate 2% daily for stock ‘A’ and 1.25% daily stock ‘ B’ (daily
volatility figure estimated from past data) . He estimates daily potential
loss to be Rs 6350 approximately. The market factor sensitivity of the
portfolio is……..
a) Rs 6350
b) Rs 3000
c) Rs 6.35
d) None of these
ans:d should be ....d
Because market factor sensitivity of portfolio is...
1% of total position. .
Here total position in portfolio is..
125×2000 + 90× 1000
= 250000 + 90000
= 340000
1 % of total position
= 3400 rs
36. A bond portfolio having a bond A (market Value Rs 300 Crs and
MD of 3.5 Yr) and bond B (market value Rs 500 Crs and MD of 05 Yrs)
What is the BPV of the portfolio ?
a) Rs 44375 per crore
b) Rs 4437.50 per crore
c) Rs 44375 per million
d) Rs 4437.50 per million
Explanation. .
BPV of bond A ...
Change in price =
Modified duration × yield change
= 3.5 × 0.01 (basis point change)
=0.035
BPV of bond B
Samilarily
Change in price =
Modified duration × yield change
= 5.0 × 0.01 (basis point change)
= 0.050
BPV of portfolio is equal to. .
Weighted average of BPV
= (0.035×300 + 0.050× 500)/800
= (10.5 + 25)/ 800
= 35.5 / 800
= 0.044375
That is on 100 face value
For per crore we should multiply by 100000
So we get 4437.50 per crore..
Answer b
37. Say Mr. X purchase 2000 shares of stock ‘A’ at Rs 125 per share
and 1000 shares of stock ‘B’ at Rs 90 per share. The price is expected
to fluctuate 2% daily for stock ‘A’ and 1.25% daily stock ‘ B’ (daily
volatility figure estimated from past data) . He estimates daily potential
loss to be Rs 6350 approximately. What is the VaR of 99% confidance
interval(corresponding to 2.33 standard deviation) (Assume that the
stocks have zero correlation)
a) Rs 14795.50
b) Rs 6350
c) Rs 19050
d) None of these
ans: a refer page 251 and 252
How they arrive at option a..
Daily estimated loss is 6350
Daily percentage loss is..
= (daily loss / total position)× 100
Daily loss = 6350
Total position
= 2000 × 125 + 1000 × 90
= 250000 + 90000
= 340000
Daily percentage loss
= (6350/340000)× 100
= 0.018676 × 100
= 1.8676 %
So for getting loss at 99 % confidence level...
Defeasance factor
= Daily percentage loss × standard deviation
= 1.8676 × 2.33
= 4.3516 %
So VaR of portfolio is.
= tatal position × Defeasance factor
= 340000 × 4.3516
= 14795.4999
= 14795.50
That is option a
38. Two stocks A and B have negative correlation of 80% between them
the portfolio consists of 100 units of stock a ( market price Rs 100 ) and
200 units of stock b ( market price Rs 200) if price of stock A moves up
by 10 % what would be gain/loss on the portfolio ?
a) gain Rs 4200
b) loss Rs 2200
c) Loss rs 600
d) non of these
ans : b Explanation. .
Co relation is 80% = 0.80
Which is negative. .
Means. .
two stock price is inversely related. ..
If price of stock a goes up
Then price of stock b goes down. ..
Factor is by 0.80..
Here stock price of a goes up by 10 %..
Current price of stock a is 110 rs...
Also price of stock b is goes down by 10%×0.80 = 8%
Current price of stock b..
Will be 200× (1-.08%)
= 184 rs. .
Gain in stock a
= 110×100 - 100×100
= 11000 - 10000
= 1000
Loss in sock b
= 184×200 - 200×200
= 36800 - 40000
= -3200
In totally. .
= 1000+(-3200)
= -2200
= loss of 2200
39 What would be issue price of a CP carrying an interest rate of 8 %
and maturity of 06 manths expressed as% of notional value ?
a) 100 %
b) 92.59%
c) 96.15%
d) none of these
ans:c
= (100/104)× 100
= 96.15384
= 96.15
Interest rate = 8 % annual
For six months it should be 4 %
CPs are issued at discount prices. .
So if face value is 100..
Then 8 % annual.
4% for semi annual. .
Issue price × (1+ 4%) = 100
Issue price × 1.04 = 100
Issue price = 100/1.04
= 96.15384
= 96.15
41. On a 5 point scale (very high,high,average,modete &
Low),probability of occurrence of an activity has been estimated at
an average level. Potential financial impact is estimated at an high
level, given that the impect of internal control is 40% what is the
estimated level of operational level ?
1) Very high to high
2) High to average
3) Average to moderate
4) Moderate to Low
Ans: c
Estimated level of operational risk =
Estimated probability of occurrence × estimated potential financial impact ×
Estimated impact of internal controls
Firstly we assume 5 level risk in numbers. ..
Scale of risk. .
Very high - 4
High - 3
Average - 2
Moderate - 1
Low - 0
So probability of occurrence
= average = 2
Potential financial impact
= high = 3
Impact of internal control
= 40 %
For calculation. .
Estimated level of operational risk =
Square root of (2 × 3 × ( 1-40%))
= square root of (6 × 0.60)
= square root of 3.6
= more than 1 and less than 2
= more than moderate and less than average
Answer ..c..
Average to moderate
Reference page no 294, 295
BFM McMillan book
42. For estimating level of operational risk, abank estimates probability of
occurrence on historical frequency and maps it on a 5 point scale where
1. implies negligible risk
2. Implies low risk
3. implies medium risk
4. implies high risk
5. implies very high risk
For estimating potential financial impact it relies on past observations and
severly of impact I s also mapped on a scale of 5 as mentioned above
In one of the OR category the bank finds that probability of occuerence
stands mapped at 2 and potential financial impact is mapped at 5
Estimateed impact of internal control is 50% . What is the level of
operational risk for the given OR category?
a) Low risk
b) Medium risk
c) High risk
d) Very high risk
Ans : b
Explanation. ...
.
Estimated level of operational risk =
Estimated probability of occurrence × estimated potential financial
impact × Estimated impact of internal controls
Firstly we assume 5 level risk in numbers. ..
Scale of risk. .
Very high - 5
High - 4
Medium - 3
Low - 2
Negligible - 1
So probability of occurrence
= average = 2
Potential financial impact
= high = 5
Impact of internal control
= 50 %
For calculation. .
Estimated level of operational risk =
Square root of (2 × 5 × ( 1-50%))
= square root of (10 × 0.50)
= square root of 5
= 2.23
= medium risk
Answer ..b
43. A 91day T bill remaining maturity of 73 days is priced at 99%
a) 5%
b) 5.05%
c) 4.95%
d) 5.20%
ans : b y= (100-p)/p *365/d *100 (100-99/99)*365/73*100=5.05
43.A bank,s G sec portfolio has 100 day VaR at 95% confidance level
of 4% based on yield.What is the worst case scenario over 25 days ?
a) increase in yield by 0.4%
b) Decrease in yield by 0.4%
c) Increase in yield by 2%
d) Decrease in yield by 2%
ans: 100 day VaR is 4 %
So one day Var is..
4 = one day VaR × square root of 100
4 = one day VaR × 10
One day VaR = 0.4 %
25 day VaR = 0.4 × suare root of 25
= 0.4 × 5
= 2 %
In worst case scenario yield will always increase. .
Because this will decrease the market price or value. .
Answer is increase in yield by 2 %
44. A bank,s G sec portfolio has 100 day VaR at 95%
confidance level of 4% based on yield.What is the worst case
scenario over 25 days
in case the portfolio size of the bank,s (mentioned above ) G
sec portfolio is rs 10000 croeres with average modified duration of
3, then worst case loss that the bank may suffer overnight is
a) RS 120 crores in terms of market value
b) loss of Rs 40 crores by way of interest income
c) Gain of Rs 40 crores by way of interest income
d) none of these
ans: 3*.4*10000/100=120 cr
45. 100 day VaR of a given security is 5% with 90 % confidence
interval. In a year (250 working days) , How many days VaR may
be observed at more than 5% ?
a) 12.5 days
b) 10 days
c) 25 days
d) None of these
46. VaR for US/INR rate at 95 % confidence interval is 50 BPs
over night. If the day closes at Rs 44.30 spot for USD, What is the
worst possible rate for imports the day after ?
a) Rs 44.80
b) Rs 43.80
c) 45
d) 45.01
ans: questions for worst situation for import if bP will be added in
export BP will be deducted. So ans will be 44.30+.50=44.80 ans will
be a
Because In worst situation for import price for USD will always increase. ...
47. a 10 Yr bond with semi annual coupon rate@ 8% is being
traded in the market at rS 95/- Th YTM of the bond is
a) 8.42%
b) It can,t be determinded based on data given
c) it may be determined and is expected to be above 8%
d)it may be determined and is expected to be below 8%
ans : c
Ytm different from current yield...
Simple rule is that regarding YTM is.
When market price is below face value..
Then YTM will be greater than the interest or coupon rate...
And when market price greater than the face value ...
Then it will be definitely YTM is lower than the interest or coupon rate
48. A bond having a duration of 6 Yr is yielding 8% at present .
if yield increase by .50% . what would be the impact on price of the
bond ?
a) Bond price would go up by 2.7%
b) Bond price would fall by 2.7%
c) Bond price would go up by 2.8%
d) Bond price would fall by 2.8%
ans : d Modified duration is McCauley's duration discounted by one period
yield to maturity
Here we are talking McCauley's duration is 6 years. .as if no McCauley's
duration is given
Modified duration =McCauley's duration / ( 1 + yield )
= 6 / ( 1 + 8%)
= 6/ ( 1 +0.08)
= 6/ ( 1.08)
= 5.556 = modified duration
% change in price =- modified duration × yield change
= - 5.556× (+0.50%)
= (-)2.7778 %
= (-) 2.8
( - )means decrease in price
2.8 % decrease in price. .
49. Currency X having 6% risk free rate for 6 months has a
spot rate of 30Y . where Y is another currency and has 4% risk
free rate for 06 months period. The 6 months forward rate of X in
terms of Y would be
a) 29.70 B
b) 29.71 B
c) 30.30 B
d) 30.29 B
ans : b
According to interest rate parity..
(Fyx/ Syx) = (1+Interest of y)/(1+Interest of x)
F = Forward rate
S = Spot rate
yx means..expression of exchange rate...
Here exchange rate is given in
Terms of..
1 x = 30 y..
Thatswhy x is in the denominator. .yx
Fyx / 30Y = (1+2%)/(1+3%)
Fyx = ( 1.02/1.03) × 30Y
Fyx = 0.99029 × 30Y
Fyx = 29.7087 Y
Fyx = 29.71 Y
50 An individual purchases a call option for 500 shares of A with
strike price at Rs 120 (Present price Rs 100) and remaining maturity of
03 months at a premium of Rs 40 . On maturity shares of A was
priced at Rs 140. Taking interest cost @ 12% p.a . what is the profit
earned by the individual on the transaction ?
a) No loss no profit
b) Rs 600 loss
c) Rs 10600 loss
d) None of these
Ans : c Explanation. .
Call option ..
He will pushase 500 shares of A..at a price of 120
Tatal value of shares is..
60000
Then he will sell the total shares in the market at a price of 140..
500 × 140
= 70000
So profit of 10000 in the transaction. .
But he has to pay the premium for call options. .
Which is 40 × 500
= 20000
And for getting this much fund interest cost is..
= 20000 × 3 % for 3 months (12% p.a for 03 months 12/4=3)
= 600
Total premium + premium cost
= 20000 + 600
= 20600
In totality. ..
= 10000 - 20600
= - 10600
51. A financial institution buys a specified no of futures at NSE on
a stock Rs 90 each when spot price of the stocks Rs 95 . At the
maturity of the contract the FI takes delivery of the shares. During
the period of Rs 3. The acquisition cost to the FI per share is (
ignore any commission charged by exchange)
a) Rs 95
b) Rs 90
c) Rs 97
d) None of these
ans : b
52. A fixed for floating swap on a notional amount of Rs 10 crores
exchanges 9% fixed against 2% over MIBOR. Settlement is up
front based on closing MIBOR of the immediately preceding quarter. If
the MIBOR is 4% on the last day of the quarter, what is amount of
settlement and who pays it ? Given risk free rate is 5%
a) Rs 12,50,000 floating rate payer
b) Rs 12,34,567 fixed rate payer
c) Rs 7,40,740 fixed rate payer
d) Rs 7,50,000 fixed arte payer
ans: Here question is for..
Exchange of interest rate payment. .
Only difference amount of interest will be paid...
By one party to another party. ..
two parties
1... fixed interest rate payer who will pay 9 % fixed interest rate
2 ...floating interest rate payer...
Who will pay 2 + MIBOR interest rate
MIBOR is at the end of last quarter is 4 %
So total floating rate us 6 %..
And difference of interest rate is..
= 9 - 6= 3 %
Means fixed interest rate payer will pay the difference of interest to floating
interest rate party..
Notional value..
10 crore. .
Difference interest rate for the one quarter is..
= 3 / 4= 0.75%
So 0.75 % of 10 crore
= 750000
That is Answer... d
53. A bank borrows US $ for 03 months @ 2.5% and swaps the
same in to INR for 03 months for deployment in CPs @ 5.5%.
The 3 months premium on US $ 0.75%. the margin generated by
the bank in the transaction is
a) 3%
b) 2.25%
c) 5.5%
d) non of these
ans:b
Bank borrow US $ for 3 months @ 2.5%
Same will invest in CP foe 3 months @ 5.5 %..
Then here gaining 3% by interest rate margin...
But when bank repay his borrowing in $..
So bank has pay 0.75 extra because US $ will become costly by 0.75%..
US $ is at premium. .
So it will reduce bank gain by 0.75 %..
3.0% - 0.75 %
= 2.25
54. A bank makes provision in account with out standing balance
of Rs 100 Crs (Risk Weight 150%) of Rs 30 Crs. The amount
that will qualify for Tier ii capital is
a) Rs 1.25 Crs
b) Rs 30 Crs
c) Nil
d) Non of these
ans is c
55. A company enjoys cash credit account with a bank . HE also has a
term looan account with o/s balance of Rs 15 Crs as on 31-03-2010 the
bank has also subscribed to the bonds issued by the borrower company
amounting to Rs 3 Crs. As on 31-03-2010 the CC account with o/s balance
of Rs 1.20 Crs is required to be classified as NPA there is no default in
payment of interest and installment in the term loan and bonds. The amount
that will become NPA on account of this borrow company is
a) Rs 1.20 Crs
b) Rs 16.20 Crs
c) 19.20 Crs
d) none of these
ans: c = 15+3+1.20=19.20
56. A bank has deposits worth ZMW 3,00,000 billion. The interest rate on
this is 12%. SRR to be maintaioned by the bank is 8% effective cost to
deposit is....
1) 12%
2) 15.23%
3) 13.04%
4) 14.66%
Ans: 3 From 300000
8 % should be made for SLR requirements
So available fund for making loans(asset)
= 300000 - 8% of 300000
= 300000 - 24000
= 276000
For this fund 276000
Bank is paying 12 % on 300000
Cost of fund is 36000
So making no loss ..
Bank has to lend money at that interest rate..
Which will cover this cost of funding that is 36000
36000 = 276000 × r /100
36000/276000 = r / 100
0.1304 = r / 100
r = 13.04 %
57. in a loan a/c the balance outstanding is 4.20 lacs and a cover of 75% is
available from CGFTMSE .the a/c has been doubtful since 25.08.2009.and
the value of security held is 1,50,000.the total provision in the a/c as on
31.03.2013 will be
1.2,10,000
2.2,17,500
3.1,26,000
4.2,65,000
Answer should be 2
Explanation ...
Outstanding. .balance. .
Is .....420000
Security available is..
150000
CGFTMSE...on remaining amount
Which is. .
= 420000- 150000
= 270000
Coverage is only 75 %..
So uncovered amount. .
We will take as a Provisioning. .
Which is ..
= 25% of 270000
= 67500
Since loan is in doubtful category for more than 3 years
So we will take 100 % Provisioning for security value. .
Which is.
= 150000
So totality. .
Provisioning is..
= 150000 + 67500
= 217500
58. A customer covers its receivable under exchange fluction risk cover
scheme of ECGC . On due date the currency appreciate by 45%. The
customer will gain on the transaction due to currency fluction.
a) 45%
b) 12%
c) 10%
d) 2%
Ans: bAny loss or gain..
Within the range of 2 % to 35%..
Will go in ecgc account. .
Thatswhy. .
Gain of 45%
Of that...33% will go in ecgc account. .
So profit only. .12%..
For customer
59. A claim of Rs 45 lacs has been settled by ECGC in favour of a bank
againt default of Rs 60 lacs. Subsequently the bank realizes Rs 20 lacs
collaterals available to it.What is the loss suffered by the bank on this loan
?
a) Rs 10 lacs
b) Rs 5 lacs
c) Rs 20 lacs
d) Non of these
ans: A Because of ecgc settled the 45 lakhs on default of 60 lakhs. .
Which means. .ecgc settled the 75 % of default. .
here 20 lakhs is realised security. ...
Which means claim amount will be only..
40 lakhs towards ecgc...
And ecgc will settle obly 75 % amount. .
And 25 % will be bear by bank..
So loss of 25% of 40 lakhs.
Means loss 10 lakhs will bear by bank
60. A claim of Rs 45 lacs has been settled by ECGC in favour of a bank
againt default of Rs 60 lacs. Subsequently the bank realizes Rs 20 lacs
collaterals available to it.What is thenet amount paid to ECGC ?
a) Rs 30 lacs
b) 45 lacs
c) 20 lacs
d) None of these
Because of ecgc settled the 45 lakhs on default of 60 lakhs. .
Which means. .ecgc settled the 75 % of default. .
here 20 lakhs is realised security. ...
Which means claim amount will be only..
40 lakhs towards ecgc...
And ecgc will settle obly 75 % amount. .
And 25 % will be bear by bank..
So 75% of 40 lakhs.
Means 30 lakhs will settled by ecgc
61.
an advance of Rs 235000/- has been declared sub standard on 31/05/2012.
It is covered by securities with realizable value of Rs 168000/-. Total
provision in the account as on 31/03/2013 will amount to:
1) 35250
2) 30200
3) 47000
4) 83800
right ans should be. ..2
Explanation. .
We take provision. .
10 % for secured portion.
20% for unsecured portion
= 10% of 168000 + 20% of of 67000
= 16800 + 13400
= 30200
62. The ovenight VaR of 1yr govt security yield is 0.20% with a current yield
of 7.50%. A prospective seller of the security may expect the yield to be on
next day
1) 7.50%
2)7.70%
3) 7.30%
4) inadequate information to make the calculation.
right ans is B any one explain
In worst case scenario prospective seller of security may expect rise in
the yield so ans is 7.50+0.20=7.70......
Same case vl diffrent fr prospective buyer as he expect the yield to fall
so 7.70-.20=7.30
Qtn 63. Received order of USD 50000(CIF) to Australia on 1.1.11 when
USD/INR Bill Buying Rate is 43.50. How much preshipment finance will be
released considering profit margin of 10% and Insurance and freight cost@
12%. And margin is 25%.
ans
FOB Value = CIF – Insurance and Freight – Profit (Calculation at Bill Buying
Rate on 1.1.11)
= 50000X43.5 = 2175000 – 216000(12%) – 191400(10% of 1914000) =
1722600
Pre-shipment Finance = FOB value -25%(Margin) = 1722600-
430650=1291950.
Qtn 64 Spot Rate ((Forward Rates)) is 35.6000/6500 Forward
1M=3500/3000 2M=5500/3000 3M=8500/8000
Transit Period ----20 days Exchange Margin = 0.15%.
Find Bill Buying Rate & 2 M Forward Buying Rate
a ) 31.6979
b ) 34.6979
c ) 27.6979
d ) 25.6979
Dinesh Jawalkar Solution
Bill Buying Rate (Ready) : Bill Date +20 days
Spot Rate = 35.6000 Less Forward Discount 1M (0.3500) Less Exchange
Margin 0.15% (0.529)
i.e. 35.6000-.3500-.0529(0.15% of 35.2500) = 35.1971
3 Month Forward Buying Rate will be applied. 20 days + 2M
Spot Rate = 35.6000 Less Forward Discount of 3M (.8500) Less Exchange
Margin (.0521)
i.e. 35.6000-.8500-.0521(0.15% of 34.7500) = 34.6979 Ans.
Qtn 65
Issue of DD on New York for USD 25000. The spot Rate is IUSD =
34.3575/3825 IM forward rate is
34.7825/8250
Exchange margin: 0.15%
a ) 32.4341
b ) 34.4341
c ) 36.4341
d ) 38.4341

Dinesh Jawalkar Issue of DD on New York for USD 25000. The spot Rate is
IUSD = 34.3575/3825 IM forward rate is
34.7825/8250
Exchange margin: 0.15%
Solution:
TT Selling Rate will Apply
Spot Rate = 34.3825 Add Exchange margin (.15%) i.e. 0.516
TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.
Qtn:65 Exporter received Advance remittance by way of TT French Franc
100000.
The spot rates are in India IUSD = 35.85/35.92 1M forward =.50/.60
The spot rates in Singapore are 1USD = 6.0220/6.0340 1M forward
=.0040/.0045
Exchange margin = 0.8%
a ) INR 4.9366
b ) INR 5.9366
c ) INR 6.9366
d ) INR 7.9366
Dinesh Jawalkar Solution
Cross Rate will apply
USD will be bought in the local market at TT Buying rate and sold at Spot
Selling Rates in Singapore for French
Francs:
TT Buying Rates USD/INR = Spot rate – Exchange margin = 35.8500-.0287
= 35.8213
Spot Selling Rate for USD/Francs = 6.0340
Inference:
6.0340 Franc = 1USD
= INR 35.8213
1 franc = 35.8213/6.0340 = INR 5.9366 Ans.
Qtn 66 On 12th Feb, received Import Bill of USD-10000. The bill has to
retired to debit the account of the customer. Interbank
spot rate =34.6500/7200. The spot rate for March is 5000/4500. The
exchange margin for TT selling is .15%
and Exchange margin for Bill selling is .020%. Quote rate to be applied.
a ) 31.8415
b ) 34.8415
c ) 35.8415
d ) 39.8415
Dinesh Jawalkar Solution
Bill Selling Rate will be applied.
Spot Rate + Exchange margin for TT Selling + Exchange margin for Bill
selling = 34.7200+.0520+.0695 = 34.8415
qtn:66 On 15th July, Customer presented a sight bill for USD 100000 for
Purchase under LC. How much amount will be
credited to the account of the Exporter. Transit period is 20 days and
Exchange margin is 0.15%. The spot rate is
34.75/85. Forward differentials:
Aug: .60/.57 Sep:1.00/.97 Oct: 1.40/1.37
a ) 28.0988
b ) 34.0988
c ) 40.0988
d ) 44.0988
Solution
Bill Buying rate will be applied.
Spot Rate----34.75 Less discount .60 = 34.15
Less Exchange Margin O.15% i.e. .0512 =34.0988 Ans.
Qtn 67Bank received MT of USD 5000 on 15th Sep. The Nostro account was
already credited. What amount will be paid to
the customer: Spot Rate 34.25/30. Oct Forward Differential is 22/24.
Exchange margin is .80%
a ) 38.2226
b ) 34.2226
c ) 30.2226
d ) 32.2226
Solution
TT buying Rate will be applied
34.25 - .0274 = 34.2226 Ans.
Qtn 67Spot Rate ((Forward Rates)) is 35.6000/6500 Forward
1M=3500/3000 2M=5500/3000 3M=8500/8000
Transit Period ----20 days Exchange Margin = 0.15%.
Find Bill Buying Rate & 2 M Forward Buying Rate
a ) 31.6979
b ) 34.6979
c ) 27.6979
d ) 25.6979
Solution
Bill Buying Rate (Ready) : Bill Date +20 days
Spot Rate = 35.6000 Less Forward Discount 1M (0.3500) Less Exchange
Margin 0.15% (0.529)
i.e. 35.6000-.3500-.0529(0.15% of 35.2500) = 35.1971
3 Month Forward Buying Rate will be applied. 20 days + 2M
Spot Rate = 35.6000 Less Forward Discount of 3M (.8500) Less Exchange
Margin (.0521)
i.e. 35.6000-.8500-.0521(0.15% of 34.7500) = 34.6979 Ans.
Qtn 67Issue of DD on New York for USD 25000. The spot Rate is IUSD =
34.3575/3825 IM forward rate is
34.7825/8250
Exchange margin: 0.15%
a ) 32.4341
b ) 34.4341
c ) 36.4341
d ) 38.4341
Issue of DD on New York for USD 25000. The spot Rate is IUSD =
34.3575/3825 IM forward rate is
34.7825/8250
Exchange margin: 0.15%
Solution:
TT Selling Rate will Apply
Spot Rate = 34.3825 Add Exchange margin (.15%) i.e. 0.516
TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.
Qtn 67 Exporter received Advance remittance by way of TT French Franc
100000.
The spot rates are in India IUSD = 35.85/35.92 1M forward =.50/.60
The spot rates in Singapore are 1USD = 6.0220/6.0340 1M forward
=.0040/.0045
Exchange margin = 0.8%
a ) INR 4.9366...See More

Hitesh Kothari 6.0220*.008=.0481, -0040= 5.97
Cross Rate will apply
USD will be bought in the local market at TT Buying rate and sold at Spot
Selling Rates in Singapore for French
Francs:
TT Buying Rates USD/INR = Spot rate – Exchange margin = 35.8500-.0287
= 35.8213
Spot Selling Rate for USD/Francs = 6.0340
Inference:
6.0340 Franc = 1USD
= INR 35.8213
1 franc = 35.8213/6.0340 = INR 5.9366 Ans.
68. International Advisors, Inc. (IAI) is receiving a payment of 100,000
Euros in three months. The spot rate for the Euro is currently $0.92 per
Euro, but IAI has entered into a threemonth
forward contract with their bank at $0.94 per Euro. How much will IAI
receive in
three months?
a. $92,000
b. $94,000
c. $106,383
d. $108,696
ANS : B
69. One year T-bill rate is 9% and the rate on one year zero
coupon debenture issued by LM ltd is 12.50% , the probabililty of
default is …..
a) 4%
b) 3%
c) 5%
d) non of these
ans: b formula for probability of default is 1-P= 1- ( (1+i)/(1+k))
=1-((1.09/1.125))=1-.969=.03=3% ( Page 284 of bFM).
70. A bond with acupon rate of 7.38% maturing in 2015 and trading
at Rs 106.32 will have yield of…………….
a) 6.94%
b) 14.40%
c)7.84%
d) non of these
ans : a = current yield= coupon rate/ Prevailing mkt value=
.0738/106.32= 6.94%

Security standards and best practices

Security standards and best practices
The Standard of Good Practice for Information Security, published by the Information Security Forum (ISF), is a business-focused, practical and comprehensive guide to identifying and managing information security risks in organizations and their supply chains.
The most recent edition is 2016, an update of the 2014 edition.
The 2011 Standard is the most significant update of the standard for four years. It includes information security 'hot topics' such as consumer devices, critical infrastructure, cybercrime attacks, office equipment, spreadsheets and databases and cloud computing.
The 2011 Standard is aligned with the requirements for an Information Security Management System (ISMS) set out in ISO/IEC 27000-seriesstandards, and provides wider and deeper coverage of ISO/IEC 27002 control topics, as well as cloud computing, information leakage, consumer devices and security governance.
In addition to providing a tool to enable ISO 27001 certification, the 2011 Standard provides full coverage of COBIT v4 topics, and offers substantial alignment with other relevant standards and legislation such as PCI DSS and the Sarbanes Oxley Act, to enable compliance with these standards too.
The Standard is used by Chief Information Security Officers (CISOs), information security managers, business managers, IT managers, internal and external auditors, IT service providers in organizations of all sizes.
The 2011 Standard is available free of charge to members of the ISF. Non-members are able to purchase a copy of the standard directly from the ISF.

IT Governance Standards and Best Practices
ISO/IEC 27000 family of Information Security Management Systems - This document provides an overview of ISO/IEC 27000 family of Information Security Management Systems which consists of inter-related standards and guidelines, already published or under development, and contains a number of significant structural components.
ISO 27001 - This document provides the ISO standards of the requirements for establishing, implementing, maintaining and continually improving an information security management system within the context of the organization.
ISO 27002 - This document introduces the code of practice for information security controls.
British Standard 7799 Part 3 - This set of guidelines is published by BSI Group for the information security risk management.
COBIT - The Control Objectives for Information and related Technology (COBIT) is published by the Standards Board of Information Systems Audit and Control Association (ISACA) providing a control framework for the governance and management of enterprise IT.

India Post Payments Bank (IPPB)

All about India Post Payments Bank (IPPB)

The India Post Payments Bank (IPPB)[ inaugurated on the 1st of September 2018 has been incorporated as a public sector company under the Department of Posts with 100% GOI equity and is governed by the Reserve Bank of India. 650 branches of the bank along with 3250 customer access points are operational across the country from September, 2018. The network presence will be extended to 1.55 lakhs by December 2018.


IPPB is offering demand deposits such as savings and current accounts up to a balance of Rs 1 Lac, digitally enabled payments and remittance services of all kinds between entities and individuals and also provide access to third-party financial services such as insurance, mutual funds, pension, credit products, forex, and more, in partnership with insurance companies, mutual fund houses, pension providers, banks, international money transfer organisations, direct benefit transfer, etc.

10 key highlights that will help you decode all about IPPB:

1. The institute will operate like a banking organisation, but with smaller scale operations. Most banking operations like accepting deposits shall be done, but they cannot give loans or issue credit cards.

2. As per guidelines laid out by the Reserve Bank of India, it can accept deposits of up to Rs 1 lakh per customer, offer payments and remittance services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third-party fund transfers.

3. The bank will offer 4 percent interest rate on savings accounts. It has also tied up with PNB and Bajaj Allianz Life Insurance for products such as loans as well as insurance.

4. These facilities can be accessed through 650 branches and 3,250 access points.

5. Around 1.30 lakh access points will be located in rural areas, which the government hopes to fulfil its financial inclusion goal. The IPPB also has a nod to link around 17-crore postal savings bank (PSB) accounts with its own set-up.

6. Deposits in any account that exceed Rs 1 lakh will be automatically converted into post office savings account

7. Use of technology: The payments bank will be using Aadhaar to open accounts, while a QR card and biometrics will drive authentication, transactions, and payments. Postmen will be armed with biometric devices as well.

8. Ownership of the bank is solely with the government and is functioning under Department of Posts. It will offer products and services through channels such as counter services, micro ATMs, apps, messages and interactive voice response.

9. According to RBI, the objectives of setting up of payments banks will be to further financial inclusion by providing (i) small savings accounts and (ii) payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other user.

10. In a bid to take on competing entities such as Airtel and Paytm Payments Bank, the Cabinet gave a nod to 80 percent hike in spending on IPPB to Rs 1,435 crore. This, it said, will arm it with additional ammo to compete in the market.

Today MSME,cyber fraud & Bcsbi recollected questions 01.09.2018

Today MSME,cyber fraud & Bcsbi recollected questions 01.09.2018
Msme recollected questions
1.09.2018 msme exam recollect question
1WTO established
2. Stage -settings up small scale industry
3.regulated by registration formalities limited liability partnership
4.no.of directors ,paid up capital in public ltd company
5.composite loan 100 cr.
6.51%women entrepreneur enterprises
7.Iso 9000/iso 14001 reimbursement 75000
8.credit guarantee scheme speci category 80%
9.india credit rating agency
10.Bcsbi objective
11.loan application 5lac to 25 lac within 4 weeks
12.federation of indian women entrepreneur head quarter hyderabad
13. Hybrid capital debt +equity
14 venture capital angle fund hybrid capital related 4 option
15.composie loan
16 non fund vase guarantee defered payment guarantee
17performance guarantee
18.red clause lc and back to back lc
19.managerial appraisal character, captivity , capital, collateral
20.technical appraisal
21low break even point means
22.ratio analysis current ratio and debt enquity retio related questions
23 debt equity ratio formula
24.scope of employment in the msme sector-computer software, telecommunications, broadcast
25.msme DO facilities
26.technology upgradation ministry of textile
27business development provider
28features of cluster
29knitware ludhiana
30stage of development initial, growth, maturity., extinction phase
31 sick unites
32internsl and external cause same in sickness
33.handholding stage
34debt restructuring
35wilful defaulter
36write off loss account
37.OTS
38R3HABIILITATION PACKAGE OF A POTENTIAL VIABLE
39 MUDRA bank
40pradan mantri mudra yojna
41.relationship banking
42 customer relations managment comprehensive approach
44service 4 character
45.mdme project specific issue
46 Cambridge network


Ratio analysis
DER,DSCR,CR etc.
Msme schemes
Balance sheet analysis
Msmed act 2006
Investments in mfg and service sector except above questions all other questions are common sense so take relex for exam and best of luck all of us will definitely succeed.

Cyber fraud management ::

Phishing
IP spoofing
Controls
Cyber Smearing Stalking
Cyber Crime
E Governence
E KYC
IT Act
IT AA
Locard Principle
Fraud Triangle
Zeus
Masquerading
Human Traits
Module 4 several questions
ISO IEC

Bcsbi ::

1.COLLA FREE LOAN UPTO WHICH LIMIT IN MSME
2. FEE IN RESPECT OF DISTT LEVEL CASE
3. QUESTIONS RELATED TO CHQ DEPOSIT
4. CHQ COLLECTION
5. NI ACT

External Commercial Borrowings (ECB) framework FAQs

 External Commercial Borrowings (ECB) framework FAQs

1. Where can one get the details of extant ECB framework?

The interested party may refer to Master Direction No.5 dated January 1, 2016, as amended from time to time, on ‘External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers’ (https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10204) for guidance on the extant framework on ECB.

2. Are there other documents which the interested party may refer to know more about the extant ECB framework?

The interested party may also refer to A.P. (DIR Series) Circulars at https://www.rbi.org.in/scripts/Fema.aspx pertaining to External Commercial Borrowings.

3. From when did the extant ECB framework become applicable?

The extant ECB framework announced through A.P. (DIR Series) Circular No. 32 dated November 30, 2015 became applicable from the date of publication of relative regulations in the Gazette of India, i.e., December 2, 2015.

4. What if a company had executed ECB agreement prior to December 2, 2015 and availability period is beyond March 31, 2016/ commencement of drawdown is after March 31, 2016?

Entities raising ECB under previous ECB framework can raise the said loans by March 31, 2016 provided the agreement in respect of the loan is already signed by December 1, 2015. Further, eligible entities can drawdown the ECB proceeds beyond the availability period of March 31, 2016 provided such ECBs are contracted on or before December 1, 2015 and such agreements provide availability period of ECB to be beyond March 31, 2016. In other words, all ECB loan agreements entered into prior to the date of the revised ECB framework coming into effect from December 02, 2015 may continue with the disbursement schedules post March 31, 2016, as already provided in the loan agreements without (requiring) further consent from the Reserve Bank or any AD bank.

5. Is the extant ECB framework different from the framework for issuance of Rupee denominated bonds overseas?

Yes, extant ECB framework is different from the framework for issuance of Rupee denominated bonds overseas. To know more about the framework of issuance of Rupee denominated bonds overseas, interested party may refer to aforementioned Master Direction. Both these frameworks (ECB framework and framework for issuance of Rupee denominated bonds overseas) run separately/concurrently.

6. What are the various types of ECB?

ECBs can be raised as:

1. Loans, eg., bank loans, loans from equity holder, etc.

2. Capital market instruments, e.g.,

floating rate notes / fixed rate bonds / securitised instruments

non-convertible, optionally convertible or partially convertible preference shares

FCCB*

FCEB*

3. Buyers’ credit / suppliers’ credit

4. Financial lease

* A foreign currency convertible bond (FCCB) is a type of corporate bond issued by an Indian company in an overseas market in a currency different from that of the issuer. Investors have the option of redeeming their investment on maturity or converting the bonds into equity any time during the currency of the bond. The repayment of the principal is in the currency in which the money is raised. In case of a foreign currency exchangeable bond (FCEB), investors have the option of converting the bonds into equity of the offered company. The company issuing FCEB shall be part of the promoter group of the offered company and shall hold the equity shares being offered at the time of issuance of FCEB.

7. Do FCNR (B) loans come under the ECB framework?

No, foreign currency loans given domestically by Authorised Dealer Category I banks out of the proceeds of FCNR (B) deposits do not come under the ECB framework.

8. Does a company, incorporated in India, raising Rupee denominated loan from an NRI / PIO by way of Non-Convertible Debentures (NCDs) through a public offer get covered under the ECB framework?

No, NRI/PIO giving loan in Rupees to resident company by way of Non-Convertible Debentures (NCDs) through a public offer is not covered under the ECB framework. It is covered under Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 issued vide Notification No. FEMA 4/2000-RB dated May 3, 2000 as amended from time to time (as per the provisions contained in these Regulations, a company incorporated in India is permitted to raise Rupee denominated loan from an NRI / PIO only by way of issuance of NCDs through a public offer and is subject to other provisions contained in these Regulations).

9. What precautions have to be taken before raising loan from overseas?

Interested party may note that borrowings from overseas have to be in compliance with the applicable ECB guidelines / provisions contained in the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 issued vide Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to time, as applicable / applicable provisions contained in the Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 issued vide Notification No. FEMA 4/2000-RB dated May 3, 2000 as amended from time to time.

10. Whose responsibility is to ensure compliance with ECB guidelines?

The primary responsibility for ensuring that the borrowing is in compliance with the applicable ECB guidelines is that of the borrower concerned. Any contravention of the applicable provisions of ECB guidelines will invite penal action under the FEMA. Same would be the case for devising a structure which bypasses / circumvents ECB guidelines in any manner and / or raising borrowings in any other manner which is not permitted / disguising borrowing under the wrap of other kind of transactions (like raising export advance(s) without actual exports or raising of export advance by circumventing ECB guidelines by creating any structure overseas or otherwise, etc.) and / or contravening provisions of Regulations mentioned in question 9 above.

B. Eligibility for raising ECB

11. Where can one get more details regarding eligibility of an entity to raise ECB?

Interested party may please refer to the aforementioned Master Direction.

12. Is a Limited Liability Partnership (LLP) or Partnership firm or Proprietary concern eligible to raise ECB?

No, entities which are not covered within the provisions contained in Master Direction stated above [like companies doing trading business (whether online or otherwise), companies involve in activities like tourism, beauty parlour / beauty clinics, entertainment business, retail sales, e-commerce companies, etc., on any other activity not covered within these provisions] are not eligible to raise ECB.

13. Whether all companies operating in software sector space eligible to raise ECB?

No, only those companies in software sector space who are into development of software are eligible to raise ECB. Companies who are into designing and engineering consultancy, servicing of third-party software, providing ancillary IT related services, ITeS, etc., are not considered as software development companies for ECB purposes.

14. What does the term infrastructure sector mean for the purpose of ECB?

For the purpose of raising ECB, Infrastructure Sector has the same meaning as given in the Harmonised Master List of Infrastructure sub-sectors approved by Government of India vide Notification F. No. 13/06/2009-INF as amended / updated from time to time. Further, for the purpose of ECB, Exploration, Mining and Refinery sectors are also deemed as in the infrastructure sector. It is also clarified that addition of any sector or sub-sector in the Harmonized Master List by the Government of India automatically entitles such sector/sub-sector to raise ECB as ‘infrastructure’.

15. What are ‘companies supporting infrastructure’?

Companies who help in operations or building of infrastructure as defined in Harmonised Master List of Infrastructure sub-sectors issued by Ministry of Finance as mentioned in the question 14 above will be considered companies supporting infrastructure.

16. Whether educational institutes/ universities/ deemed universities are eligible to raise ECB?

If the educational institute/university/ deemed university is registered as a company under the Companies Act 1956/2013, it can raise ECB as a part of infrastructure sub-sector. ECB guidelines as applicable for infrastructure companies would be applicable for such ECBs.

17. What is the provision for individual limit regarding Housing Finance Companies (HFCs) for ECBs under the auto route?

Individual limit under auto route as applicable to NBFC-IFCs/AFCs, i.e., USD 750 million per financial year under any of the three tracks, will be now available to HFCs also.

18. Whether the restrictions in respect of the eligibility of borrowing entities also applicable to Startups?

No, any entity which is recognised as a Startup by the Central Government as on date of raising ECB, would be eligible to raise ECB, irrespective of its business activities,.

19. Whether companies engaged in the business of Maintenance, Repair and Overhaul and freight forwarding who have been made eligible borrowers should be from airline or shipping sector only or no such restrictions apply?

Companies engaged in the business of Maintenance, Repair and Overhaul and freight forwarding eligible to raise ECBs should be from airline or shipping sector only.

C. Currency of ECB

20. What are the requirements in respect of currencies of ECB?

ECB can be raised in Indian Rupees (INR) and / or any convertible currency. Any entity raising INR denominated ECB is not permitted to convert the liability arising out of this ECB into foreign currency liability in any manner or assuming foreign currency risk is any manner by either entering into a derivative contract or otherwise.

D. Recognised Lenders/ Investors

21. What do you mean by prudentially regulated financial entities?

By prudentially regulated financial entities, we mean that the overseas entity is bound by prudential norms / regulations issued by the sector regulator(s) of the host country. This can be explained by giving the example of non-banking financial companies (NBFCs) in India. These NBFCs, in order to operate in non-banking financial sector space in India are issued Certificate of Registration by RBI (sector regulator). Further, after registration these companies are subject to supervision by RBI. Similar prudential norms / regulations should be applicable to the overseas financial entity by the respective overseas sector regulator in order for such entity qualifying as a recognised lender under prudentially regulated financial entity category.

22. A foreign equity holder holding minimum 25% direct equity holding in the borrowing entity or minimum indirect equity holding of 51% in the borrowing entity is a recognised lender. Can the foreign equity holder dispose-off the holding once ECB is contracted?

No, all ECB guidelines including those related to minimum equity holding, are to be fulfilled during the whole tenure of the ECB and not only at the time of contracting of ECB.

23. Whether ECB liability: equity ratio of 7:1 is applicable for raising ECB from both direct and indirect equity holders under automatic route?

No, it is only applicable to direct equity holders.

24. Whether the equity in ECB liability to equity ratio includes non-convertible preference capital?

No, however, compulsorily and mandatorily convertible debentures (convertible within a specified time) and compulsorily and mandatorily convertible preference shares (convertible within a specified time) can be included for calculation of the equity in ECB liability to equity ratio.

E. Average Maturity Period/ Amount

25. How is average maturity period calculated?

You may refer to https://rbidocs.rbi.org.in/rdocs/Content/PDFs/12EC160712_A6.pdf for illustration purposes.

26. Can door-to-door maturity be used in lieu of average maturity?

No.

27. For an ECB raised under Track I for general corporate purpose, can repayment of principal of ECB start before the completion of 5 years?

Yes, however, the ECB should have minimum average maturity period of 5 years.

28. Should the proposed ECB be added to all outstanding ECBs for the purpose of ECB liability to equity ratio?

Yes, apart from ECB raised for refinancing where the proposed ECB amount may not be taken into account to avoid double counting.

29. Whether ECB liability includes non-convertible / partially convertible preference shares?

Borrowing from a person resident outside India by way of issue of preference shares on or after April 30, 2007, other than those which are fully and mandatorily convertible into equity within a specified time, as well as borrowing from a person resident outside India by way of issue of debentures on or after June 07, 2007, other than those which are fully and mandatorily convertible into equity within a specified time, would be treated as ECB and has to conform to ECB guidelines. Thus, the borrowing raised through such instruments after aforesaid dates would be considered for calculation of ECB liability.

30. Should the proposed ECB be added to all outstanding ECBs for arriving at the individual limit for raising of ECBs?

The individual limit for raising ECB under the automatic route will take into account all outstanding ECBs including the proposed one. However, refinancing of ECB amount will not be considered for arriving at individual limit per financial year.

F. All-in-cost

31. Can an eligible borrower simultaneously raise ECBs under Track I and Track II?

Yes, as long as the ECBs are in compliance with the ECB guidelines for the respective tracks as per RBI guidelines.

32. Does all-in-cost ceiling apply on a continuous basis or can be calculated even on average basis?

All-in-cost should be within the applicable ceiling at all times, for eg., giving interest breaching the ceiling in first year and much lower in second year so as to comply on an average, is not permitted.

G. End-uses

33. Can ECB be raised under Track I and Track III for general corporate purpose (including working capital)? What will be its minimum average maturity period?

ECB can be raised under Track I and Track III for general corporate purpose (including working capital) only from foreign equity holders. The minimum average maturity period will be 5 years, irrespective of amount borrowed.

34. Can ECB be raised under Track II for general corporate purpose (including working capital)? What will be its minimum average maturity period?

Yes, ECB can be raised under Track II for general corporate purpose (including working capital). The minimum average maturity period will be 10 years.

35. Can ECB be used for real estate activities?

No. All activities under real estate are not permitted as eligible end use for raising ECB.

36. Is import of technical know-how which is not part of a capital good an eligible end use for the purpose of ECB?

No.

37. Is the reimbursement of expenditure incurred in the past a permissible end-use under the ECB framework?

No. The reimbursement of expenditure incurred in the past is not a permissible end-use under the ECB framework.

38. Can proceeds of ECB, raised under previous framework be used for end uses permitted under the revised framework?

No. ECB raised under the previous framework can be used for end uses permitted under the old framework only.

39. Can ECB be availed for repayment of domestic INR loan?

Yes, however, for Tracks I and III, it is only permitted if ECB is raised from foreign equity holder.

40. Can ECB be availed for making equity investment domestically or buying goodwill?

No. Equity investment either directly or indirectly (through purchase of goodwill) is not permitted.

41. Can ECB be availed for making contribution in LLP?

No, it is not permitted under any track.

42. Can an eligible borrower raise fresh ECB under Track II for repayment of existing Rupee denominated ECB?

Refinancing of Rupee denominated ECB with Foreign Currency denominated ECB under Track II is not permitted.

43. Whether ECB proceeds can be used by eligible resident borrowers for investment in their overseas JV/WOS as per the extant overseas investment regulations?

ECB proceeds can be utilized for overseas investment as permitted under the overseas investment guidelines.

H. Refinancing of ECB

44. Can an ECB raised under the erstwhile USD 10 billion scheme be refinanced under the revised ECB framework?

No, the repayment of ECB raised under USD 10 billion scheme is to be undertaken through forex revenues.

45. Can ECB raised under the earlier ECB framework be refinanced/ partially refinanced through an ECB raised under extant ECB framework?

Yes, provided that company continues to be eligible to raise ECB under the extant ECB framework, all-in-cost is lower of the all-in-cost of existing ECB or as applicable to the respective track under the extant framework and residual maturity is not reduced.

46. Can refinancing/ partial refinancing be undertaken under auto route even for ECBs raised under approval route, subject to compliance with guidelines?

Yes.

47. Can ECB under revised ECB framework be raised with average maturity period of 5 years (under Track I) to refinance ECB raised under previous ECB framework?

Yes, however, the all-in-cost should be lower of the all-in-cost of existing ECB or 6 month LIBOR+450 bps per annum. Further, the entity should be eligible to raise ECB under Track I and residual maturity should not reduce.

48. Is 100 per cent mandatory hedging applicable to infrastructure space entities for ECBs being refinanced, which were raised under the earlier ECB framework?

No. Such ECBs will be exempt from the mandatory hedging clause, however, they are encouraged to undertake hedging for the open currency risk exposure.

49. Does the condition of refinancing of ECBs at lower all-in-cost also apply to Track III ECBs?

Yes, if the original ECB raised under Track III is to be refinanced with another ECB under Track III. However, when refinancing of existing foreign currency denominated ECB (Track I/ II) is done by raising Rupee denominated ECB (Track III), the condition regarding lower all-in-cost of the fresh ECB will not apply.

I. Security/ Guarantee

50. Is corporate guarantee from overseas permitted for ECB?

Yes, but only in cases where the overseas guarantor fulfills the criteria of recognised lender under extant ECB guidelines. Fees payable, if any, for this guarantee will form part of All-in-cost of the ECB.

51. Can overseas bank give guarantee for ECB?

An overseas bank (not overseas branches / subsidiaries of Indian bank) is permitted to give guarantee from overseas for ECB, provided it is recognised as ECB lender as per extant ECB guidelines. It may be noted that guarantee fee will form part of all-in-cost of the ECB.

J. Hedging under ECB Framework

52. What is the meaning of 100 per cent hedging of ECB wherever it is so mandated by the RBI?

Wherever 100 percent hedging has been mandated by the RBI, ECB borrowers shall keep their ECB exposure hedged 100 per cent at all times, which would be verified by the Authorised Dealer Category-I bank concerned and reported to RBI through ECB 2 returns. Besides, the ECB borrower shall also have a board approved risk management policy for the ECBs.

53. What are the operational aspects of hedging of ECB wherever it is mandated by the RBI?

Wherever hedging has been mandated by the RBI, the following should be ensured:

i. Coverage: The ECB borrower will be required to fully cover principal as well as coupon through financial hedges. The financial hedge for all exposures on account of ECB should start from the time of each such exposure (i.e. the day liability is created in the books of the borrower).

ii. Tenor and rollover: A minimum tenor of one year of financial hedge would be required with periodic rollover duly ensuring that the exposure on account of ECB is not unhedged / underhedged at any point during the currency of ECB.

iii. Natural Hedge: Natural hedge, in lieu of financial hedge, will be considered only to the extent of offsetting projected cash flows / revenues in matching currency, net of all other projected outflows. For this purpose, an ECB may be considered naturally hedged if the offsetting exposure has the maturity/cash flow within the same accounting year. Any other arrangements/ structures, where revenues are indexed to foreign currency will not be considered as natural hedge.

54. What are the permitted derivative products for hedging of ECB?

Hedging for ECB purposes means hedging currency risk through products as permitted under Master Direction on Risk Management and Inter-bank dealings. Use of any cost reduction structure for hedging of ECB, which does not fully cover the foreign exchange risk currency risk associated with ECB any time during the currency of the borrowing, is not permitted.

55. What are the other requirements in respect of hedging of ECB?

An entity which is raising foreign currency denominated ECB is also required to follow the guidelines for hedging issued, if any, by the respective sector / prudential regulator in respect of foreign currency exposure.

K. Miscellaneous

56. What precautions have to be taken at the time of filing of Form 83 in respect of an ECB?

Any draw-down in respect of an ECB as well as payment of any fees / charges for raising an ECB should happen only after obtaining the Loan Registration Number (LRN) from RBI by filing duly certified Form 83 to the Director, Balance of Payments Statistics Division, Department of Statistics and Information Management (DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai – 400 051 (Contact numbers 022-26572513 and 022-26573612). It should be ensured that all terms and conditions of the ECB are reported correctly in Form 83 and none of the columns are left blank (such columns which are not applicable for the borrowing or against which ‘nil’ information has to be given, should be suitably covered). Changes in ECB parameters, whether under the automatic route with the approval of Authorised Dealer Category –I banks or under the approval route with prior approval of the RBI, should also be reported to the DSIM through revised Form 83 at the earliest, in any case not later than 7 days from the changes effected. While submitting revised Form 83, the changes should be specifically mentioned in the communication. Any failure to comply with reporting guidelines in respect of Form 83 for an ECB may invite penal action under FEMA.

57. How are actual transactions of an ECB reported to RBI?

The borrowers are required to report actual ECB transactions, correctly and fully, through duly certified ECB 2 Return through the Authorised Dealer Category-I bank to DSIM as per the periodicity specified by the RBI. None of the columns in ECB 2 Return should be left blank (such columns which are not applicable for the borrowing or against which ‘nil’ information has to be given, should be suitably covered). The ECB 2 Return should reach DSIM within seven working days from the close of month to which it relates. Changes, if any, in ECB parameters should also be incorporated in ECB 2 Return suitably. Any failure to comply with reporting guidelines in respect of ECB 2 Return, including failure to adhere to periodicity of reporting, may invite penal action under FEMA.

58. In light of the revised ECB framework, does the borrower need to file revised Form 83?

No, in case no changes are made in terms and conditions of ECB, there is no need to file revised Form 83.

59. Can fixed deposits created out of ECB proceeds, pending utilization, be renewed after completion of maximum permitted period?

No

60. What are the major requirements for Indian banks to participate in ECB space?

Indian banks are not permitted to raise ECB. They can act as ECB lenders (through their overseas branches / subsidiaries) only under Track I of the ECB framework duly ensuring that the applicable prudential norms are complied with. Overseas branches/subsidiaries of Indian banks are permitted only to refinance ECBs of highly rated (AAA) corporates (or equivalent AAA(SO) rating) as well as Navratna and Maharatna PSUs, provided the outstanding maturity of the original borrowing is not reduced and all-in-cost of fresh ECB is lower than the existing ECB. Partial refinancing is also permitted subject to same conditions. Further, any case involving repayment/refinancing of any foreign currency loan by way of rupee loans from Indian banks, prudential guidelines stipulated in paragraph 4(b) of Circular No. BP.BC.85/21.04.048/2014-15 dated April 06, 2015 issued by the Department of Banking Regulation (DBR) of RBI will be applicable which interalia state that such refinance shall be treated as ‘restructuring’ (and classified/provided for as per extant prudential norms on income recognition, asset classification and provisioning), if the above is extended to a borrower who is under financial difficulty and involve concessions that the bank would otherwise not consider. It should also be noted that if the ECB borrower concerned has availed credit facilities from the Indian banking system including overseas branches/subsidiaries, any extension of tenure / change in average maturity period of ECB / change in all-in-cost of ECB/ conversion of unpaid ECBs into equity (whether matured or not) shall be subject to applicable prudential guidelines issued by the DBR of RBI, including guidelines on restructuring, as applicable. Further, such conversion of ECB into equity shall also be subject to consent of other lenders, if any, to the same borrower or at least information regarding conversions shall be exchanged with other lenders of the borrower.

61. What are the primary roles of the designated Authorized Dealer Category-I bank?

The designated Authorized Dealer Category-I bank, which is the bank branch designated by the ECB borrower, would be primarily responsible for meeting the reporting requirements including obtaining of LRN, exercising the delegated powers under these guidelines and monitoring of ECB transactions.

L. Trade Credits

62. Does discontinuance of LoU/ LoC mean that Trade Credit has been discontinued as a means of trade finance?

No, Trade Credits, including Buyers’ Credit, can be availed as a form of clean credit apart from availing Bank Guarantee for Trade Credits, subject to extant Trade Credit guidelines and compliance with provisions contained in Department of Banking Regulation Master Circular No.DBR No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015 on “Guarantees and Co-acceptances”, as amended from time to time. Letters of Credit/ Bank Guarantee arrangements continue as a form of trade finance, as hitherto.

63. Do LoUs/ LoCs, which have been issued prior to issuance of A.P. (DIR Series) Circular No.20 dated March 13, 2018, but whose tenor is not over need to be cancelled?

No, LoUs/ LoCs issued and accepted prior to the issuance of the said circular may continue till their original validity. However, no roll-over is permitted.

64. Whether SBLC can be issued by AD Category branches on behalf of their customers for availing short term trade finance from overseas lenders in Foreign currency?

AD banks can issue SBLC on behalf of their customers for availing short term trade credit from overseas lenders in foreign currency subject to such SBLCs complying with the provisions contained in Department of Banking Regulation Master Circular No. DBR. No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015 on “Guarantees and Co-acceptances”, as amended from time to time.

ASSETS & LIABILITIES

According to Accounting terms

ASSETS

Assets are the economic resources of business or we can say assets are the property owned by the business to get benefit on future.

In other words, assets are valuable resources owned by a business which were acquired at a measurable money cost for usefulness.

The various types of assets are:

1- Fixed assets: those assets which are acquired for the purpose of increasing profit earning capacity of the business and are purchased not for sale purpose, they will remain in the business till the business winds up. Example, land and building, plant and machinery etc

2- Current assets: those which can be converted into cash within a short period say one year. These are short term assets for the purpose of converting them into cash. Example, cash in hand, debtors, stock, bank balance etc.

3- Liquid assets: similar to current assets, but they are those assets which can be easily and in a very short period of time can be converted into​ cash, so all current assets except stock and prepaid expenses are considered liquid assets.

4- Tangible assets: assets which having some physical existence or we say which can be touched and seen like land and building, machinery, stock etc

5- Intangible assets: those assets which can't be seen or touched and there revenue generation is assumed to be uncertain. Moreover they can't be purchased or sold in open market examples are goodwill, patents, trademarks etc.

6- Fictitious assets: those assets which do not have any real value and do not have any physical form but are called assets on the basis of legal and technical grounds, as they do not have any real value so they are written off in the future, for example preliminary expenses, discount on issue of shares and debentures etc.

7- Wasting assets: those assets when with the passage of time value of assets decreases, example patents, leasehold property.

LIABILITIES

Liabilities are the claims against those resources or liabilities are the amount which a business owes to outsiders or claim of outside towards business. We should remember one thing that we take all the claims against business except the claims of proprietors. Because claim of proprietors against business is called internal liability or capital.

Example of liabilities are, creditors, bills payable, bank overdraft etc.

We should note that total assets are always equals to total liabilities.

Types of liabilities are:

1- Fixed liabilities: which are payable after a long period or normally one year. Example long term loans, debentures etc.

2- Current liabilities: those which are payable within one year example, bills payable, creditors etc

3- Contingent liabilities: those liabilities which are not a liability for today but it may be liability in future depending on the future events, they are uncertain liabilities so that is why they are called doubtful liabilities also. Example, value of bill discounted, cases pending in court etc.

Total assets=total liabilities

Or

Total assets= internal liabilities+external liabilities

Or

Total assets= Capital+ liabilities

Or

Liabilities= Assets-capital.

CAIIB HRM elective PDF

CAIIB HRM elective PDF

Download link here

https://drive.google.com/file/d/1y_CEUzvTbZkaXpvE5nskPhBjSktlK8B2/view?usp=sharing

All the best

Importer-exporter code number (IEC BFM CAIIB

BFM

🔴Importer-exporter code number (IEC) 🔴

To obtain from DGFT and to quote in all declarations. Manner of receipt of export proceeds : 

🔴The amount of proceeds can be received through AD banks 

➡a) By draft or personal cheque 

➡b) F/c notes or TC from buyer on his visit 

➡c) To the debit of FCNR/NRE a/c of the buyer 

➡d) Any other accepted banking channel 

🔴Realization and repatriation of export proceeds : 

➡a) 9 months from the date of shipment except 

➡b) 15 months from the date of shipment, if export to warehouse outside India 

➡Advance payment against export : The shipment of goods to be made within one year and rate of interest does not exceed LIBOR + 100 BPS

Different types of banking

Para Banking:

Para banking activities are defined as those banking activities which a bank performs apart from its daily activities like withdrawal or deposit of money.

Under para banking activities banks can undertake activities either departmentally or by setting up subsidiaries.

Narrow Banking:

This is a type of banking in which banks invest money mostly in government bonds and securities.

This is done to avoid risk in the market.

Banks dedicated to such type of banking are also known as Narrow Banks.

Offshore Banking

When a bank accepts currencies of countries abroad, such an activity is known as Offshore banking

Sometimes people require more than their local banks can offer. In such cases, they opt for Offshore banking.

It provides financial and legal benefits like privacy and minimal taxation.

Green Banking

Green banking promotes deployment of clean energy technologies.

It stresses on environmentally friendly practices and aims at reducing the carbon footprint from banking activities.

These activities seek to reduce costs of energy for ratepayers, private sector investments and other economic activities.

Retail Banking

Retail banking is a type of banking in which direct dealing with the retail customers is done. This type of banking is also popularly known as consumer banking or personal banking

Retail banking is the visible face of banking to the general public.

Wholesale Banking

Wholesale banking can be referred to as the services provided by banks to organisations like Mortgage Brokers, corporate clients, medium scale companies, real estate developers and investors, international trade finance businesses, institutional customers (such as pension funds & government agencies) and services offered to other banks or financial institutions.

Universal Banking

The recommendation of the concept of Universal Banking was done by the R H Khan committee.

This is a type of banking in which banks are allowed to undertake all types of financial activities regarding banking or development in accordance with the statutory and other requirements of RBI, Government and related legal Acts.

Universal Banking includes activities like accepting deposits, issuing credit cards, investing in securities, merchant banking, foreign exchange operations, etc.

Islamic Banking

Islamic banking is a kind of banking activity which strictly follows the principles of the Islamic law (Sharia) and its application practically through the development in Islamic economics

A better and more apt term for Islamic banking is Sharia Compliant Finance.

Unit Banking

USA is where such type of banking was first introduced.

In such a type of banking, all the operations are performed from a single branch.

A customer having an account in a specified branch has to undergo all banking activities through that branch.

Examples are Regional Rural Banks and Local Area Banks.

Mixed Banking

Mixed banking is a type of banking in which deposits and investment activities take place simultaneously.

It can also be described as the dual functioning of investment banking and commercial banking.

Chain Banking:

Chain banking is a type of banking which is a group of minimum 3 banks held together by a group of people to carry out effective banking activities.

Instead of having a holding company the bank functions independently.

The revenue is maximised since there is no overlap of activities.

Relationship Banking

In such a type of banking, the the major needs of the customers are understood by the bank and accordingly banking services are provided to the individual.

Banks get to know if the customer is credit worthy since they have to gather information about its customers.

Correspondent Banking

In more than 200 countries, this type of banking is prevalent and is considered the most profitable way of doing business.

In such a type of banking, the bank does not have a physical presence or any limitations in the permission of operations.

It acts as a banking agent for a home bank.

New Financial statements and Terms PDF useful for CAIIB ,CCP, JAIIB

New Financial  statements and Terms PDF

Download link here

https://drive.google.com/file/d/1M2pNNG4VfC6PeQqxHey89Dw2tA-2Sxqj/view?usp=sharing

According to Accounting terms

ASSETS

Assets are the economic resources of business or we can say assets are the property owned by the business to get benefit on future.

In other words, assets are valuable resources owned by a business which were acquired at a measurable money cost for usefulness.

The various types of assets are:

1- Fixed assets: those assets which are acquired for the purpose of increasing profit earning capacity of the business and are purchased not for sale purpose, they will remain in the business till the business winds up. Example, land and building, plant and machinery etc

2- Current assets: those which can be converted into cash within a short period say one year. These are short term assets for the purpose of converting them into cash. Example, cash in hand, debtors, stock, bank balance etc.

3- Liquid assets: similar to current assets, but they are those assets which can be easily and in a very short period of time can be converted into​ cash, so all current assets except stock and prepaid expenses are considered liquid assets.

4- Tangible assets: assets which having some physical existence or we say which can be touched and seen like land and building, machinery, stock etc

5- Intangible assets: those assets which can't be seen or touched and there revenue generation is assumed to be uncertain. Moreover they can't be purchased or sold in open market examples are goodwill, patents, trademarks etc.

6- Fictitious assets: those assets which do not have any real value and do not have any physical form but are called assets on the basis of legal and technical grounds, as they do not have any real value so they are written off in the future, for example preliminary expenses, discount on issue of shares and debentures etc.

7- Wasting assets: those assets when with the passage of time value of assets decreases, example patents, leasehold property.

LIABILITIES

Liabilities are the claims against those resources or liabilities are the amount which a business owes to outsiders or claim of outside towards business. We should remember one thing that we take all the claims against business except the claims of proprietors. Because claim of proprietors against business is called internal liability or capital.

Example of liabilities are, creditors, bills payable, bank overdraft etc.

We should note that total assets are always equals to total liabilities.

Types of liabilities are:

1- Fixed liabilities: which are payable after a long period or normally one year. Example long term loans, debentures etc.

2- Current liabilities: those which are payable within one year example, bills payable, creditors etc

3- Contingent liabilities: those liabilities which are not a liability for today but it may be liability in future depending on the future events, they are uncertain liabilities so that is why they are called doubtful liabilities also. Example, value of bill discounted, cases pending in court etc.

Total assets=total liabilities

Or

Total assets= internal liabilities+external liabilities

Or

Total assets= Capital+ liabilities

Or

Liabilities= Assets-capital.

CMA DATA FORMS

CMA DATA FORMS

What reports are covered ?

It covers following statements:

1. Details of existing and proposed fund limit: In this report, details about your current financial condition, borrowed fund and proposed fund are covered.If the business is new, proposed data is required to be given.

2. Operating statement: You are required to show past 2 years and future 3 years ( Proposed) operating statements. There may be some changes as per loan needed and business nature.The profit and loss account should be presented here.

3. Analysis of balance sheet: Details about your balance sheets of past years are required to show. It is also required to show proposed balance sheet data to show a picture of your future business plan. Details about current assets, fixed assets, current and long-term liabilities are presented in this statement.

4. Comparative statements of current assets and liabilities: This statement describes the viability of your working capital cycle.

5. Calculation of MPBF: Calculation of maximum permissible bank finance. This statement shows the capacity of the borrower to borrow money. It depends on two methods which are dependent on working capital.

6. Fund flow statements: This statement shows the fund flow statements for current and future years. It shows the fund utilisation and sources of funds.The statement is important because it highlights the utilization of fund. To make sure the bank that you are using the fund for the purpose you have borrowed.

7. Ratio analysis: This is also one of the long and important statements of CMA data.It covers key ratios. Some ratios are the current ratio, MPBF, Net worth ratio, quick ratios, turnover ratios, debt-equity ratios, DSCR etc.

 No same report for all businesses:

There are different business types and according to their business nature and size, CMA report is prepared. It is not similar for all businesses. Similarly, CMA report is prepared as per nature of the borrowed funds. The data is different for the working capital loan or for CC or for CMA data for the bank guarantee.

 What is the benefit of submitting CMA report?

By submitting CMA data report with right ratios and proper presentation of usage of funds, your chances of getting the loan has been increased. Provided you follow other procedures and requirements of banks.

 CMA ( Credit Monitoring arrangement) data preparation does not mean only filling data but it requires deep knowledge of finance