CAIIB ABM MODULE D 60 MCQs

CAIIB ABM MODULE D 60 MCQs

01. Statutory corporations are controlled by which act for credit management.

a) Indian contract act

b) Company act

c) Act that created them

d) Indian partnership act

e) Indian trust act and public act

Ans: c

02. Which one of the following is not a non fund base credit?

a) Letter of credit

b) Bill discounting

c) Co-acceptance of bills

d) Forward contract

e) Derivatives

Ans: b

03. Mr. Shyam has a house in a rural village, very near to Agra. His house is very old and

required some repairing work. So, Mr. Shyam visited Agra main branch for a loan, how much

amount of loan he can avail from bank under housing finance.

a) 1 lakh

b) 2 Lakh

c) 5 Lakh

d) 10 Lakh

e) 20 Lakh

Ans: a

04. Small enterprises advance and export credit does not financed by both public sector and

PSU (export does not comes under priority sector advance) what percentage of small

enterprises advance and export credit is supposed to be given ___ and ___ respectively.

a) 40 and 32 %

b) 18 and 10%

c) 10 and 12%

d) No target and 12%

e) 10% and no target

Ans: c

05. RBI to free the landing rates of scheduled commercial banks for credit limit over ___.

a) 01 Lakh

b) 02 Lakh

c) 05 lakh

d) 10 Lakh

e) 20 Lakh

Ans: b

06. BPLR system of lending rates replaced by base rate system it was effected from ____.

a) 01 Jun 2010

b) 01 Jul 2011

c) 01 Jan 2010

d) 01 Jul 2010

e) 01 Jul 2003

Ans: d

07. No penal interest should be charged with effect from 10 Oct 2000 to borrower�s loan

under priority sector up to Rs _____.

a) 10000

b) 20000

c) 25000

d) 50000

Ans: c

08. No collateral security is required loan under MSME both manufacturing and production and

providing or rendering of services up to Rs ___.

a) 1 lakh

b) 2 lakh

c) 5 lakh

d) 10 lakh

e) 20 lakh

Ans: C

09. Which accounting standard makes it mandatory for some enterprises to prepare cash Flow

Statement for the accounting period?

a) AS-1

b) AS-3

c) AS-9

d) AS-17

Ans: b

10. Industries & business enterprises whose turnover for the accounting period exceeds Rs.

50 crore has to submit segment-wise reporting as per _____.

a) AS-3

b) AS-7

c) AS-17

d) AS-21

e) AS-22

ANS: C

11. MR. Rohit want to invest some money in XYZ co., he want to purchase some stocks of this

co. How Mr. Rohit can assess to financial statement of the XYZ co.

a) By balance sheet

b) By EPS

c) By financial statement

d) all

Ans: d (EPS- earning per Share)

12. Basic concept used in preparing of financial statements is given below pick up the odd

one.

a) Entity concept

b) Money market concept

c) Going concern concept

d) Dual aspect concept

e) Accrual concept

ANS: b

13. As per company act the maximum period of financial period is 15 months, MR Charles is

GM of ABC co. due to some contingency he is unable to prepare his Financial statement so he

want to extend his financial to another 03 months i.e. 18 months maximum period of financial

statement so MR Charles has to approach to whom for such extension.

a) Income Tex office

b) Reserve bank of India

c) Accountant general of region

d) Registrar of company

Ans: d

14. The companies Act classifies liabilities which shown on the left side of the horizontal form

pick up the odd one.

a) Share capital

b) Reserve & surplus

c) Miscellaneous expenditure

d) Secured & unsecured loans

e) Current liability & provisions

Ans: c

15. Revenue reserve represents accumulated retained earnings from the profits of normal

business operations. These are held in various forms that are given below pick up odd one

___.

a) General reserve

b) Investment allowance reserve

c) Advance payment received

d) Capital redemption reserve

e) Dividend equalization reserve

Ans: c

16. 17. Current liabilities and provisions as per classification under the co. act consist of the

following except one given below.

a) Advance payments received

b) Accrued expenses

c) Pre-paid expenses

d) Unclaimed dividend & dividends

e) Provisions for taxes

f) Gratuity and pensions

Ans: c

17. Which committee has prescribed inventory norms for various industries?

a) Narasimham committee

b) Raghawan committee

c) Tandon committee

d) Chakraborty committee

Ans: c

18. ____ % of small enterprises advances should go to micro enterprises in case of foreign

banks.

a) 20

b) 40

c) 60

d) 80

Ans: c

19. In order to avoid the problem in delay in realization of bills, bank may take advantage of

improved computer/communication network ___.

a) GUI

b) SFMS

c) ETF

d) SWIFT

ANS: b

20. Bank guarantee should normally have a maturity of more than ___.

a) 5 years

b) 10 years

c) 15 years

d) 20 years

e) 25 years

Ans: b

21. The conduct of LC business is governed by����..

a) RBI

b) IRDA

c) UCPDC 600

d) AMFA

e) GOI

Ans: c

22. What should bank do if the owner of the collateral security is someone other than the

borrower?

a) Reject the loan

b) Transfer security to the name of borrower

c) He should become first guarantor of the loan and create charge over the security

d) Security should be hypothecated to the banker

Ans: c

23. What bank should do to avoid asset-liability maturity mismatch that may arise out

extending long tenor to infrastructure projects.

a) Return on investment

b) break- even analysis

c) Liquidity support from IDFC

d) Take-out financing arrangement

e) Sensitivity analysis

Ans: d

24. Frequency of review should vary depending on the magnitude of risk for the average risk

account.

a) 01 month

b) 03 months

c) 06 Months

d) 12 Months

Ans: c

25. In case of company, the charge should be registered with ROC within ___ days from the

date of execution of documents.

a) 15 days

b) 30 days

c) 45 days

d) 2 m

Ans: b

26. What is Priority sector target of Direct & Indirect Agriculture for Domestic banks?

a) 13.5% of ANBC or Off Balance Sheet Items whichever is higher. 4.5% for Indirect Agri.

b) 10% of anbc or 6% for indirect agri

c) 12% of anbc or 4.5% for indirect agri

d) No target

Ans: a (it is 18% in total 13.5 % is direct Ans 4.5% is indirect agric)

27. What are targets and sub-targets of DRI advances?

a) 1% of total outstanding advances of previous year

b) Out of which 40% should go to SC/St

c) 2/3rd must route though Rural and Semi Urban branches

d) All of these

ANS: d

28. What are prudential norms for individuals and Groups as per RBI guidelines? Pick up odd

one.

a) Individuals Groups General 15% of Capital Funds

b) 40% of Capital Funds of borrower group

c) Infrastructure 20% of Capital Funds single borrower

d) 50% of Capital Fund to gp infrastructure project

e) Oil Companies 25% of Capital Funds

f) All correct

ANS: f

29. Monetary and Credit policy is issued by RBI how many times in a year?

a) Monetary Policy is issued annually

b) With quarterly review

c) Credit Policy twice a year

d) All of these

Ans: d

30. RBI has restricted bank to finance against/to _______________.

a) Bank�s own shares

b) Relatives of Directors and Senior Officers

c) Sensitive commodities under selective control measures

d) FDRs of other banks, CDs, Companies for buy back of shares and Industries consuming

Ozone Depleting Substance (ODS)

e) All of these

Ans: e

31. Explain Delivery of credit for WC limits of 10 crore and above.

a) CC component -20% & WCTL component-80%

b) WCTL component-80% & CC Components-20%

c) WCTL components-50% & CC Components-50%

d) CC Components-15% & WCTL components-85%

ANS: a- The proportion is not fixed but is flexible according to requirement of borrower.

32. What are provisioning norms for Standard Assets? Pick up odd one.

a) Direct SME and Direct Agriculture 0.25%

b) Others 0.40%

c) Commercial Real Estate 1%

d) Teaser Housing Loans 2%

e) None of these

Ans: e (It is Classification Rate of provision)

33. In how many years, Foreign banks with 20 branches and above in India need to achieve

PS target of 40%?

a) 2 years

b) 3 years

c) 4 years

d) 5 years

e) 7 years

Ans: d -starting from 1.4.2013 up to 1.4.2018.

34. What is ANBC?

a) Bank Credit in India + Bills Rediscounted with RBI/other approved institutions + Investment

in Non-SLR bonds under HTM category + other investments eligible to be treated as PS

b) Bank Credit in India + Investment in Non-SLR bonds under HTM category + other

investments eligible to be treated as PS

c) Bank Credit in India + Bills Rediscounted with RBI/other approved institutions + Investment

in Non-SLR bonds under HTM category

d) Bank Credit in India + Bills Rediscounted with RBI/other approved institutions + other

investments eligible to be treated as PS.

Ans: b

(Now amended) as per http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7460&Mode=0

35. Base Rate is determined in each bank by ___.

a) ALCO

b) BPLR

c) ALM

d) DSCR

e) SFMS

Ans: a (Asset Liability Management Committee)

36. The target given for advances to weaker sections in percentage of ANBC is ___.

a) 10% for domestic banks

b) 12% for foreign banks

c) No target for domestic banks

d) 10% for foreign banks

Ans: a

37. Mark the incorrect statement.

a) No target is given to domestic banks for small enterprise advances

b) No target is given for agriculture advances in for foreign banks

c) Export credit does not form a part of priority sector for domestic banks

d) Export credit does not form a part of priority sector for foreign banks

Ans: d

38. Gain on revaluation of asset is a ____.

a) General reserve

b) Investment allowance reserve

c) Capital reserve

d) Revenue reserve

Ans: c

39. Banks can file a civil suit for recovery of their dues in civil courts. This option is used for

dues ____.

a) Up to 5 lacs

b) Up to 10 lacs

c) Above 10 lacs only

d) Above 20 lacs only

Ans: c

40. What are provisioning norms for NPAs? Classification of assets Provision on Secured

Provision on Unsecured

a) Sub-Standard 15% 25%

b) Doubtful (D1) 25% 100%

c) Doubtful (D2) 40% 100%

d) Doubtful (D3) 100% 100%

e) Loss Assets 100% 100%

f) All correct

Ans: f

41. You are a loan in charge of ABC one of your a/c of personal loan in the name of Mr.

subhash is not paying his dues in time lots of reminder have been send by you for recovery ,

you have approached him for rehabilitation, he has agreed for that. What will be next step?

a) Rescheduling/restructuring

b) Legal action

c) Exit from the account

d) Compromise

e) Write off

Ans: d

42. Lok adalat (peoples� court) at present resoling issue of NPAs, the enhanced limit from

Aug 2004 is ___.

a) 5 lakh

b) 10 lakh

c) 20 lakh

d) 25 lakh

e) 25 lakh above

Ans: 20

43. Banks and FIs for expediting the recovery cases to DRTs (Debt Recovery Tribunals) for

NPAs value in excess of ___.

a) 05 lakh

b) 10 lakh

c) 20 lakh

d) 25 lakh

e) 25 lakh above

Ans: b

44. SARFAESI Act 2002 has been extended to cover co-operative banks by notitification dated

___.

a) 21 June 2002

b) 21 Jul 2002

c) 21 Jul 2010

d) 28 Jan 2003

e) 01 Jan 2003

Ans: d

45. CDR is a ____ mechanism.

a) Statutory

b) Non-statutory

c) Core

d) None of these

Ans: b (Corporate Debt Restructuring)

46. Define Small Business on the basis of annual Turnover?

Ans. Whose Annual turnover is less than 50 crore.

47. How will you define Retail Customers?

Ans. Borrowers with exposure of more than 5.00 crore

48. What is Priority sector target of Direct & Indirect Agriculture for Domestic banks?

Ans. 13.5% of ANBC or Off Balance Sheet Items whichever is higher. 4.5% for Indirect Agri.

49. What are targets and sub-targets of DRI advances?

Ans. 1% of total outstanding advances of previous year. Out of which 40% should go to SC/St

and 2/3rd must route though Rural and Semi Urban branches.

50. Priority Sector Target For Housing Loan

Ans. Housing Loan ----Rs. 25 lac for Metro stations having population 10.00 lac and above. Rs.

15 Lac for other cities.

For Repair-----------up to 2.00 (Rural and SU) and Rs. 5.00 lac (Urban and Metro)

51. Define Small and Marginal farmer.

Ans. Farmers having land up to 1 hector are Marginal Farmers and others having land up to 2

Hector are Small Farmers.

52. Define Micro, Small and medium for manufacturing and service units.

Ans. Investment in Plant and Machinery for Manufacturing Units

Investment in Equipment For Service Units

Micro Up To Rs. 25 lac Up To Rs. 10 lac

Small Up To Rs. 5.00 crore Up to Rs. 2.00 crore

Medium Up To Rs. 10.00 crore Up To Rs. 5.00 crore

53. What are provisioning norms for NPAs?

Classification of assets Provision on Secured Provision on Unsecured

Sub-Standard 15% 25%

Doubtful (D1) 25% 100%

Doubtful (D2) 40% 100%

Doubtful (D3) 100% 100%

Loss Assets 100% 100%

54. What are Prudential norms for individuals and Groups as per RBI guidelines?

Ans. Individuals Groups

General 15% of Capital Funds 40% of Capital Funds

Infrastructure 20% of Capital Funds 50% of Capital Funds

Oil Companies 25% of Capital Funds

55. How much amount of loan can be sanctioned to Agriculture and SME without Collateral?

Ans. Agriculture --------------1.00 lac

SME----------------------10.00 lac

56. Monetary and Credit policy is issued by RBI how many times in a year?

Ans. Monetary Policy is issued annually with quarterly review and credit Policy twice a year.

57. RBI has restricted bank to finance against/to _______________?

Ans.

1. Bank�s own shares

2. Relatives of Directors and Senior Officers.

3. Sensitive commodities under selective contro measures.

4. FDRs of other banks, CDs, Companies for buy back of shares and Industries consuming

Ozone Depleting Substance (ODS)

58. Explain Delivery of credit for WC limits of 10 crore and above.

Ans. CC component --------20%

WCTL component-----80%

The proportion is not fixed but is flexible according to requirement of borrower.

59. What are provisioning norms for Standard Assets?

Ans. Classification Rate of provision

Direct SME and Direct Agriculture 0.25%

Others 0.40%

Commercial Real Estate 1%

Teaser Housing Loans 2%

60. What are PS targets for Micro and Small Enterprises?

Ans. All MSE loans will be treated as PS. But sub-targets within overall MSE loans are as

under:

40% 20% 40%

Manufacturing units

having Investment in Plant and Machinery

Up to Rs. 5.00 lac

Above 5.00 up Rs. 25.00 lac

Above 25.00 lac

Service Units having Investment in Equipment

Up to Rs. 2.00 lac

Above Rs. 10.00 lac

Above Rs. 10.00 lac

61. What are PS targets for Foreign Banks having less than 20 branches in India?

Ans. Total Priority Sector 32% of ANBC or Off Balance Sheet Items (Higher)

Agriculture No specific target but forms part of Total PS

MSE units No specific target but forms part of Total PS

Export No specific target but forms part of Total PS

Weaker sector No specific target but forms part of Total PS

62. In how many years, Foreign banks with 20 branches and above in India need to achieve

PS target of 40%?

Ans. 5 years starting from 1.4.2013 up to 1.4.2018.

63. What are PS targets of weaker sector for Domestic banks and Foreign banks having 20

and above branches in India?

Ans. 10% of ANBC or Off Balance Sheet Items whichever is higher.

64. What is ANBC?

Ans. Bank Credit in India + Bills Rediscounted with RBI/other approved institutions +

Investment in non-SLR bonds under HTM category + other investments eligible to be treated

as PS.

65. Base Rate is determined in each bank by ____.

Ans. Asset Liability Management Committee (ALCO)Top of Form

Bcsbi recollected questions

1) Garnishee Order received for Rs 10,000/- The minimum balance as per bank rule is Rs 3,000/- What is the course of action?

2) Right of appropriation is as per which act?

3) A teacher for the purpose of teaching enquiring bank regarding her rish categorization, as in what risk her account is classified?

4) Mr. X is having gold loan with our bank. He stand as a guarantor for Mr. Y. Now Mr. Y defaulted the loan and the account is NPA. Whether bank can hold the pledge ornaments?

5) How many CIC a bank should have membership as per guidelines ?

6) Which among the following is not CIC?

7) Which among the following is not Officially valid Documents (Answer was Ration Card)

8) Major complain received in Ombudsman for the credit card? (Wrong Billing)

9) What facility we cannot extend to Minor account ? (Overdraft facility )

10) What precaution bank take while accepting the power of attorney, Chooser the wrong answer (Power of attorney unstamped)

11) Maximum term of FCNR (B) deposit?

12) Full form of CORE in CBS?

13) Which among the following is implied needs? (Ans: Extra Attention to the service need)

14) Customer approaching for getting a pass sheet print in terms of passbook? Whether bank will issue apart from passbook?

15) The bank came to know that Mr. A, customer of your branch died on 01.09.2018. Mr. B is approaching the bank on 05.09.2018, to deposit money to that account. What will be the course of action?

16) Customer Delight Illustration by an example choosing from the options

17) Recently what and all deficiency are added to the purview of Ombudsman? (Bancassurance to ineligible/in appropriate customer & Non displaying of redressed/Ombudsman details at branch)

18) Who will appoint CEO in BCSBI?

19) Number of women representatives in various redressal forums under Consumer Protection Act?

20) How branch guide for a customer who is having a complaint? (Ans: TAT, Ombudsman details, etc)

21) The stop payment is issued, however bank honor the cheque, what will be the implication on the bank in terms of this deficiency?

22) Order cheque requires (Endorsement, Delivery or both ?)

23) Which among is not principles of banking? (Insolvency, trust, transparency etc )

24) A reduced customer complaint and increased business is a sign of (Good progress in business )

25) Example of social media marketing? (Advt in press/Internet etx)

26) Implication of a bank which is not a member of BCSBI ? (Less Image in public )

27) Mr. X an employee of the bank collects from neighbors everyday money not deposited to their account? What will be the implication ( Bank’s Image will go low, The staff will be punished, No implication on bank as the collection done not in branch time etc)

28) In terms of promotional materials internet, the bank’s ethics (Like not misleading, giving transparency, information etc)

29) Which among the given option is not a rating parameter for BCSBI for bank’s rating?

30) As per the BR act, who is having the power to conduct inspection of SCBs (NABARD)

31) Which among the following is not required to disclose as per the BCSBI codes to the person who do Forex transfer? (Answer was interest rate of beneficiary country for the term deposits)

32) A non - customer approached you for the remittance of Rs 60,000/- vide NEFT to his father in different town for the medical purpose. What will be the course of action as per BCSBI codes?

33) Mr. X issued a cheque in favor of Mr. Y in different city. He has presented to clearing to Bank. Mr. X now demanding for the original cheque to confirm the particulars entered. (Bank can give the image of cheque only)

34) The bank has send the returned cheque vide ordinary post to the payee. The same is lost in transit. How the case can be dealt to ?

35) Which among the given option is not retail banking?

36) Calculation of eligible loan by giving project cost, Reg Charge, Stamp Duty & Cost of Project @ given LTV of 90%

37) Who can authorize the alterations in the Cheque when it is presented over the counter for the payment?

38) The remittance above what amount o be strictly routed through A/c

39) The demand draft above what value to be credited or passed through account payee options?

40) What is the limit to which no processing charges for MSE loan? (Ans: 5 Lacs)

41) As per MSME CODE till what amount bank will give collateral free loan?

42) The loan given for ITI Education. The loan value is Rs 1.50 Lacs. It is a one year course Maximum moratorium can be ?

43) Demerits of credit card ( Overspending)

44) An unsolicited card is issued to a person. The bank charged Rs 100/- as fees. What is the course of action bank need to take?(Charge and Twice Value of the charges reversed)

45) Code of conduct of DSA : Which among is wrong?

46) Mr. X who is to be approached by our recovery agent old the agent to come to his company near the tea shop in the ground floor of his office, What the agent should do (Ans: No other way go only J )

47) Within how many days the customer can approach the appellate authority if they are not satisfied with the award given by Ombudsman?

48) Which among the following is not an advantage of demat services?

49) Which among the given option is not feature of endorsement?

50) The cheque given for the collection is returned unpaid, the notice is not given in 24 Hours to the party. The customer came to know after 2 months. How to compensate /deal with this situation?

51) Who controlling body for the the tele marketing ?

52) What is the pre requisite required while hiring a tele marketer for the bank?

53) The time limit for transfer of account from one branch to another branch same bank?

54) Which committee on customer service recommended that the passbook should be issued to FD holders like we issue for SB account ?

55) All the details in cheque is filled with ink, the signature is done with pencil. What will be the course of action?

56) As per the CPPAPS Committee, the evaluations are based on whose sense ? (Regulator, RBI, IBA or Customer. Answer is Customer )

57) Time frame for the settlement of death claim

58) Which among the following is not a BSBDA Account Features?

59) Time frame for the recovery agent to visit customers place ( 07:00 to 19:00)

60) As per the Copra Act, the redressal forum is (Quasi Judicial Machinery)

61) Which among to following is not right of customer as per COPRA act ( Giving criminal complaint on the service deficiency)

62) Which among the following conforms that the receiver is an active listener? (Ask question to understand the content)

63) In the following which is not the components of active listening?

64) Which is the following is not the duty of CEO of BCSBI?

65) Total number of members in Governing council of BCSBI?

66) The Change of charges if notified in 30 days, the customer is having option with in how many days to close/switch his account?

67) How many times an individual will get free credit report from CIBIL in a year ? (No free reports)

68) Time frame to give notice to the probable customers whose account to be converted to dormant/inoperative account ?

69) Notice of how many months is to be given when a branch is getting shut down where there is no branch of any bank.

70) When the usance bill is payable?

71) Nursing / restructuring of debts happen after how many days of NPA?

72) Which of the choices are not a post disbursement requirements bank do to MSE borrowers ? (Comparison with other units I guess is the answer)

73) Which is the primary distribution outlets for the banking services (Answer: Branches)

74) The ATM failed transaction beyond the stipulated waiting period of 7 days will have to be reimbursed to the customer by Onus settlement of (Card Issuing Bank, The bank whose ATM customer uses, None of these etc. )

75) Mr. X a recently current account opened customer issued with a cheque book initially. He is asked for 25 cheque books as he said some payments he need to give to group of people . What will be the course of action (Monitor the account for the issued cheque, how and what amount issued etc)

76) The time frame to rectify every breach in the code by BCSBI and reporting of the same (Ans: with in 7 days reporting and remedial action in 15 days )

77) Failure to submit the duly completed annual statement of annual compliance attracts fine not exceeding (Ans: Rs 1000/- per day )

78) Which of the following is the uses of CTS cheque clearing ( Ans: was all of these)

Regards

Ravikumar

Credit Rating Agencies in India

Credit Rating Agencies in India

A credit rating agency is a company which rates the debtors on the basis of their ability to pay back the debt in timely manner.

There are three big credit rating agencievvs in the world which are
 1.Standard & Poor's (S&P) – Headquarter – New York, US
 2.Moody's – Headquarter - New York, US,
 3.Fitch Ratings- New York, US


There are mainly 5 credit rating agencies in India which are

CARE (Credit Analysis and Research):Founded: 1993,Mumbai  It is the second-largest credit rating agency in india


CRISIL (Credit Rating Information Servicesof India Limited):Founded: 1987,mumbai. It is the largest credit rating limited company.with a market share of
greater than 60%.
*CRISIL’s majority
shareholder is
Standard & Poor’s.

ICRA ( Investment information andcredit rating agency)Founded: 1991 at Gurgaon
It is public limited company .Majority share holder is Moodys

SMERA( SME Rating Agency of India Ltd):Founded: 2005 ,mumbai
*SMERA is a full   service credit rating sector
 agency in India, exclusively set up MSME

ONICRA Gurgaon. It is a Pvt sector agency  set up by onida finance

TERMS RELATING TO MONEY MARKET FINANCIAL PRODUCTS

TERMS RELATING TO MONEY MARKET FINANCIAL PRODUCTS
Derivatives: A derivative is a financial contract that derives its value fromanother financial product/commodity (say spot rate) called underlying (thatmay
be a stock, stock index, a foreign currency, a commodity). Forward contract in forex, a simple formof a derivative.
Option : It is contract that provides a right but does not impose any obligation to buy or sell a financial instrument, say a share or security. It can be
exercised by the owner. Options offer the buyers, profits from favourablemovement of prices say of shares or foreign exchanqe.
Variants of option: There are two variants of options i.e. European (where the holder can exercise his right on the expiry date) and American (where
the holder can exercise the right, anytime between purchase date and the expiry date).
Call option : Owner (buyer), has the right to purchase and the seller has the obligation to sell, a specified no. of instruments (say shares ) at a specified
date during the time prior to expiry date.
Put Option : Owner or the buyer has the right to sell and the seller has the obligation to buy during a particular period
Futures: The futures are the contracts between sellers and buyers under which the sellers (termed 'short') have to deliver, a pre-fixed quantity, at a
pre-fixed time in future, at a pre-fixed price, to the buyers (known as long'). Themain features of a futures contract are that these are traded in
organised exchanges, regulated by institutions such as SEBI, they need onlymargin payment on a daily basis. Futures contract aremade primarily
for hedging, speculation, price determination and allocation of resources.
Forwards: The forward on the other hand is a contract that is traded off-the-stock exchange, is self regulatory and has certain flexibility unlike future
which are traded at stock exchange only, do not have flexibility of quantity and quality of commodity to be delivered and these are regulated by
SEBI, RBI or other agencies.

ASSET - LIABILITY MANAGEMENT IN BANKS

ASSET - LIABILITY MANAGEMENT IN BANKS :

It has been implemented wef April 01, 1999.

What is ALM : ALM is the management of structure of balance sheet (liabilities and assets) in such a way that the net earning
from interest is maximised within the overall risk-preference (present and future) of the institutions.
Maturity buckets are different time intervals (10 for the time being, namely next day, 2-7 days, 8-14 days, 15- 28, 29-90, 91-
180, 181-365 days, 1-3 years, 3-5 and above 5 years), in which value of an asset or liability is placed desending upon its
residual maturity
Mismatch position : When in a particular maturity bucket, the amount of maturing liabilities or assets does not match, such position is
called a mismatch position, which creates liquidity surplus or liquidity crunch position and depending upon the interest rate movement,
such situation may turnout to be risky for the bank.
Ceiling on mismatch position : Mismatches for cash flows for next day to 15-28 days' buckets to be kept to minimum (not to
exceed 5% for next day, 10% for 2-7 days, 15% for 8-14 days and 20% for 15-28 days, each of cash outflows for those
bRuoclekeotfsA).LCO : Asset-Liability Committee is the top most committee to oversee implementation of ALM system, to be headed by CMD
or ED. ALCO would consider product pricing for both deposits and advances, the desired maturity profile of the incremental assets and
liabilities in addition to monitoring the risk levels of the bank. It will have to articulate current interest rates view of the bank and base
its decisions for future business strategy on this view.

Call Money Money lent for one day
Notice Money Money lent for a period of 2-14 days
TermMoney Money lend for 15 days ormore in Inter-bankmarket
Held till maturity Govt. securities which are notmeant for sale and shall be kept till maturity by the banks.
Held for trading Govt. securities acquired by the banks with the intention to trade by taking advantage of the short-term
price/ interest ratemovements.
Available for sale Govt. securities which do not fall within the above two categories i.e. HTM or HFT.
Yield to maturity Expected rate of return on a security during the period, it is held by an investor which may
include capital gains and losses also.
Coupon Rate Specified interest rate on a fixedmaturity security, fixed at the time of issue.
Gilt Edged security Government security.
Dated securities Govt. security instruments which have tenure over one year.
Prudential limits For
money
call Borrowing : On a fortnightly basis, maximum 100% of capital fund of latest audited balance
sheet. It can go up to 125% on any particular day.
Lending: On a fortnightly basis, maximum 25% of capital fund of latest audited balance sheet.
It can go up to 50% on any particular day.
Inter-bank liability ceilings Max 200%of its net-worth as on 31st March of the previous year. Banks with CRAR is at least 25%more
than theminimum CRAR (9%) i.e 11.25%up to 300%of the net worth for IBL.

Sovereign Gold Bond

Sovereign Gold Bond : SGB is issued by RBI on behalf of Government of India, denominated in multiples of grams of gold with a
basic unit of 1 gram. Price of Bond will be fixed in Indian Rupees on the basis of previous week's (Monday-Friday) simple average of closing
price of gold of 999 purity published by the Indian Bulllion and Jewellers Association Ltd (IBJA) . The Bonds are restricted for sale to resident
Indian entities, including individuals, HUFs, Trusts, Universities, Charitable Institutions. Minimum permissible investment is 1 gram of
gold. The maximum LIMIT subscribed be - 4kg for Individuals/HUF. 20 kg for trust and similar entities notified by government from time to
time for fiscal year(April – March) provided that Annual ceiling will include bonds subscribed under different tranches during initial
issuance by Government and those purchased from the secondary market; and b) The ceiling on investment will not include the
holdings as collateral by banks and other Financial Institutions. In case of joint holding, the investment limit of will be applied to
the first applicant only. The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the
interest payment dates. The issue price of the Gold Bonds will be Rs 50 per gram less than the nominal value to those investors
applying online and the funds supporting the application is paid through digital mode. The rate will be communicated to the
branches on weekly basis once RBI communicates the same to the Bank. The Subscription of the Gold Bond under this Scheme
shall be open from Monday to Wednesday of every week (both days inclusive)


ref : RBI circullers