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.

MSME special

ABCD OF MSME :::: Excellent Content plz read everybody..

1.Keynote address delivered by Shri S. S. Mundra, Deputy Governor, Reserve Bank of India at the 2nd CII
National Conference on MSME Funding held in New Delhi on August 23, 2016 ).
Thank you for inviting me to deliver the keynote address at this second edition of the Conference on
MSME Funding. I compliment the CII for having chosen a very relevant theme for the Conference
‘Propelling MSME Growth through Enhanced Financial Access and Support’. The theme lays emphasis on
two crucial pillars that are pertinent for the sector i.e. enhancing financial access and ensuring adequate
support to enable MSMEs to attain faster growth.

RBI Notification

Incorporation of Name of the Purchaser on the Face of the Demand Draft

RBI vide its circular RBI/2018-19/14, DBR.AML.BC.No.210/14.01.001/2018-19 dated 12.07.2018 has made it compulsory to banks to incorporate the name of the purchaser on the face of the Demand Draft while purchasing it at a bank (including RRBs, Co-operative banks).

In terms of the above notification, Section 66 of the Master Direction on KYC dated February 25, 2016, as amended on April 20, 2018, has been amended and following paragraph has been added:

Further, the name of the purchaser shall be incorporated on the face of the demand draft, pay order, banker’s cheques, etc., by the issuing bank. These instructions shall take effect for such instruments issued on or after September 15, 2018.

It is learned that the above step was taken by RBI in order to address the concerns arising out of the anonymity provided by payments through demand drafts and its possible misuse for money laundering.

Imp banking terms

IMPORTANT BANKING TERMS

Repo Rate
Repo rate is the rate at which our banks borrow rupees from RBI. Whenever the banks have any shortage of funds they can borrow it from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases, borrowing from RBI becomes more expensive.

Reverse Repo Rate
This is exact opposite of Repo rate. Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. RBI uses this tool when it feels there is too much money floating in the banking system. Banks are always happy to lend money to RBI since their money is in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to these attractive interest rates.

CRR Rate
Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.

SLR Rate
SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. Approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order to control the expansion of bank credit.

Most important for bankers

Most important topic forever useful::

Individual Elements of Balance Sheet
and Their Analysis:::

Liabilities
 Current Liabilities
 Term Liabilities
 Debentures
 Public Deposits
 Capital
 Reserves (including
Revaluation reserve)

Assets
 Current Assets
 ICDs/Loans
 Fixed Assets
 Capital Work-in-
Progress
 Investments
 Other Non-Current
Assets
 Fictitious & Intangible
Assets

Current Liabilities
 Current liabilities are the liabilities, including bank
borrowings, which are payable within next 12 months.
Thus, the following items are treated as current
liabilities:
 Sundry creditors for raw material supplies and other
expenses
 Advance payment received
 Dividend payable
 Instalments of term loans/deposits/DPGs/debentures
due within one year
 Any other liability which will fall due in next 12 months

Term Liabilities
 Term liabilities include loans taken from
banks or Financial Institutions for long-term
usage, which are repayable over a longer
time period. While instalment payable in next
12 months is classified as current liabilities,
the remaining instalment amount that is due
for payment after a year is classified as term
liabilities.

Debentures
 The features of debentures are:
 They are essentially in the nature of loans - much like
long-term loans granted by banks / financial
Institutions
 Companies raise them from general public and
institutions, to be repaid within a specific time frame
 Companies pay interest at a specified rate to
debenture holders from whom they raise debentures,
till they repay the principal sum
 They come in the form of certificates issued by a
company under its common seal, which is also an
acknowledgement of the company's indebtedness to
the debenture holder

Public Deposits'
 Care to be Exercised by Lending Banker
Should take care, particularly, in cases where
the company has defaulted in repaying such
public deposits
 May treat all such public deposits which have
become due for repayment, and the portion of
small investments (regardless of the age of
such deposits), as current liability

Capital
 Capital of a business enterprise is an item of
liability by virtue of:
 The entity concept used in the preparation of
financial statements, which treats capital as a
liability.
 The principles of accountancy, according to
which the enterprise owes this sum to the
owner(s) and therefore carries a liability to
pay back the capital fund with or without any
profit earned on it

Reserves
 A Reserve
 Consists of the portion of the earnings and
receipts.
 Does not serve as a provision against a
known liability or any diminution in the value
of fixed assets (i.e. accumulated depreciation)
etc., in contradistinction to Reserves which is
part of net worth of the company

Surplus
 A Surplus
 Represents credit balance in the profit and
loss account, after the dividend and reserves
etc. are provided for, appropriated or
transferred.

Assets - Current Assets
 Current assets are those assets, which: Are expected
to be converted into cash e.g. raw material, stock-in-
process, finished goods etc. in next 12 months, and
Pertain to the company's main activity
 However, in respect of receivables, the treatment is
different. Receivables are treated:
 As current assets only for a period of 6 months
 As non-current assets, if they are more than 6
months old

Fixed Assets
Fixed assets are the assets:A credit analyst
should:
 Held for use in production or providing goods,
services etc. over a long period of time
 Not meant for sale in the normal course of
business
 That are producers of merchandise and not
merchandise themselves

Assets - Investments
 Investments made by a company, appearing in the
balance sheet of a company:
 Is a very important item, appearing in the assets side,
from the point of view of a credit analyst
 Normally indicates deployment of funds in securities
or assets, which may not be directly related to the
main activities of the companyMay refer to the
surplus funds of enterprises, which they decided to
invest in short-term securities for earning profit/short-
term gainsMay also refer to, funds invested in the
shares/securities of another enterprise in which the
investor company is interested on a long-term basis.
E.g.: Investment made in subsidiaries.

Assets - Other Non-Current Assets
 Other non-current assets include:
 Advances to suppliers of capital goods (plant,
machinery etc.)
 Deferred receivables (maturity after 1 year)
 Receivables more than 6 months old
 Non-consumable stores and spares
 Dues from directors et

Assets - Fictitious & Intangible
Assets
 Fictitious Assets
 Companies incur certain expenses, which are
not charged to the profit & loss account either
fully or in part during the same year in which
they are incurred. These expenses figure on
the asset side of a balance sheet, as though
they are real assets. Such assets are known
as fictitious assets.

Assets - Fictitious & Intangible
Assets
 Intangible Assets
 Assets that may not represent any real or
tangible asset are called as intangible
assets.Intangible assets represent monetary
values of different rights enjoyed by the
business enterprise, and are therefore
considered as assets. This category of items
include goodwill, patents, copyrights,
trademark rights etc. that appear on the asset
side of a balance sheet.

Indicators for suspicious transactions::::

Indicators for suspicious transactions::::( Most important exam  and General( Daily) Banking  point of view) ( Every one read this article at least once)

Suspicion of proceeds of crime

Match of customer details with known criminals or persons with suspicious
background
Match with UN list – IS IT BEING DONE IN SCBs/DCCBs/RRBs??
Customer has been the subject of a law enforcement inquiry
Customer who conducts transactions in a pattern consistent with criminal
proceeds
Lottery scam or recruitment scam
Multi-level marketing
Transaction from high risk or sensitive area
Unusual or complex transaction
Transaction is unnecessarily complex
Unusual single or aggregate transfers
Transaction is inconsistent with customer profile
Routing of transfer through multiple locations or accounts or unexplained
transfers between accounts
“U-Turn” Transactions
Structuring - transactions split to evade reporting
Unexplained activity in dormant accounts
Suspicious use of ATM card
Doubtful source of payment for credit card purchases

No economic rationale or bonafide purpose::

Volume or frequency of transactions has no economic rationale
Use of agents or associates to disguise the beneficial owner
Common Unique IDs used by multiple customers
Common address/telephone used by multiple unrelated customers
Multiple cash transactions in a single day
Transactions with countries known for secret banking practices
Transactions inconsistent with customer’s profile
Maintaining multiple accounts without explanation
Unexplained cash deposits in bank account
Frequent cash transactions just under the reporting threshold
Multiple cash transactions in multiple accounts
Cash deposits followed by issue of instruments
Suspicious cash withdrawals from bank account
High value cheque deposits followed by immediate cash withdrawals

Non Financial Indicators::

Usage of Lockers

Behavioral Indicators:::

Customer is hurried, nervous or evasive
Customer has no or little knowledge about transaction
Customer is accompanied by unrelated individuals.
31
Reluctance to meet in person, representing through power of attorney
Customer aborts transaction after being informed that identification
information will be required
Reluctance to provide original ID
Customer makes inquiries or tries to convince staff to avoid reporting
Providing different identifications or details (such as phone or address) on
different occasions in an attempt to avoid linking of transaction.

Knowledge Indicators::

Customer tries to convince staff not to complete the formalities
Customer thoroughly aware of legal position on suspicious transaction
reporting.
Customer seems very conversant with money laundering or terrorist activity
financing issues.
Customer is quick to volunteer that funds are clean or not being laundered.
Identity indicators
Customer doubtful or vague information given.
Customer gives false identification or identification that appears to be
counterfeited, altered or inaccurate.
Instead of his own some other identification is submitted by Customer.
All Identity documents presented are not verifiable i.e. Foreign documents
etc.
All identification documents appear to be recently acquired.
Identity matches with known ‘hot/watch lists’

Transactions indicators::

Frequent cash transactions in large amounts which is not normally done by
the customer.
Small denominations frequently changed for large ones.
Dirty/smelly notes deposited.
Customer consistently makes cash transactions that are just under the
reporting threshold amount in an apparent attempt to avoid the reporting
threshold .
Frequent purchase of travellers cheques, DDs, etc. with cash when this
appears to be outside of normal activity for the client.
32

Accounts Indicators::

A long distance customer opening an account/s.
Account/s opened with names closer to established industrial houses/
groups.
Intra bank transfer of funds - accumulated into one account for foreign
remittance.
Opening of several accounts simultaneously, some of which remain dormant
for long periods.
A third party appears to be using the account of customer.
Customer frequently using different locations other than the place of account
opening to deposit funds.
Activity in account
Account activity inconsistent with nature of business.
Transaction involves NGOs or charitable organization for which there appears
to be no logical economic purpose or where there appears to be no link
between the stated activity of the NGO or charitable organization and the
other parties in the transaction.
Transaction is unnecessarily complex.

COMMITTEES ON ADVANCES & PRIORITY SECTOR

COMMITTEES ON ADVANCES & PRIORITY SECTOR

a. Committee on Wilful Default 2002 S S Kohli

b. Committee on Corporate Debt restructuring 2005 S Gopinath ( Dec. 2005 )

c. Micro, Small & Medium Enterprises 2010 T K A Nair

d. Rehabilitation of Sick SMEs 2008 Dr. K. C. Chakrabarty

e. Flow of Credit to Agriculture 2004 V S Vyas

f. Service Area Approach (rural & urban area) 1988 PD Ojha

g. Financial Inclusion 2006 C Rangarajan

h. Procedure and Processes of Agricultural Loan 2007 C P Swarnkar

i. Rural Credit and Microfinance 2005 H R Khan

j. Flow of Credit to SSI Sector 2004 A S Ganguly

k. Micro finance 2003 Vepa Kamesam

l. Agricultural Credit Delivery (no Dues Certificate) 1998 R V Gupta

m. Lead Bank Scheme 2009 Usha Thorat

n. Micro Finance Institutions 2011 Y H Malegam

o. Institutional Credit to SSIs 1998 S L Kapoor

p. Institutional Credit to SSIs 1974 PR Nayak

q. Committee on to assist Distressed Farmers : S S Johl

r. SHG Credit Linkage Kalia Committee

MUDRA MSME

MUDRA BANK

Introduction: Mudra Bank stands for Micro Units Development Refinance Agency (MUDRA). MUDRA

Bank was announced by the Finance Minister Arun Jaitley in his FY 15-16 Budget speech. Micro Units

Development and Refinance Agency Bank (or MUDRA Bank) is a public sector financial institution.

Mudra Bank is being set up through a statutory enactment and will be responsible for developing and

refinancing through a Pradhan Mantri MUDRA Yojana. Although 20% of the country's population is

dependent on 5.7 crore micro and small entrepreneurs, they do not have access to institutional credit.

Since small entreprenuers are businssess are often cut off from banking system because of limited

branch presence, Mudra Bank will partner with local coordinators and provide finance to "Last Mile

Financiers" of small/micro businesses. The aim is to provide financial assistance to the "unfunded"

small entrepreneurs who provide employment to a large number of people. The Government will

ensure that measures to be taken up by MUDRA are targeted towards mainstreaming young, educated

or skilled workers and entrepreneurs including women entrepreneurs. The MUDRA banks will be set up

under the Pradhan Mantri MUDRA Yojana scheme. It will provide its services to small entrepreneurs

outside the service area of regular banks, by using last mile agents. About 5.77 crore (57.7 million)

small business have identified as target clients using the NSSO survey of 2013. Only 4% of these

businesses get finance from regular banks. The bank will also ensure that its clients do not fall into

indebtness and will lend responsibly. The bank will cater to 5.77 crore small business units that are

spread all across India who currently find it difficult to access credit from the regular banking system.

Objectives: The principal objectives of the MUDRA Bank are:

1. Regulate the lender and the borrower of microfinance and bring stability to the microfinance system

through regulation and inclusive participation.

2. Extend finance and credit support to Microfinance Institutions (MFI) and agencies that lend money

to small businesses, retailers, self-help groups and individuals.

3. Register all MFIs and introduce a system of performance rating and accreditation for the first time.

This will help last-mile borrowers of finance to evaluate and approach the MFI that meets their

requirement best and whose past record is most satisfactory. This will also introduce an element of

competitiveness among the MFIs. The ultimate beneficiary will be the borrower.

4. Provide structured guidelines for the borrowers to follow to avoid failure of business or take

corrective steps in time. MUDRA will help in laying down guidelines or acceptable procedures to be

followed by the lenders to recover money in cases of default.

5. Develop the standardised covenants that will form the backbone of the last-mile business in future.

6. Offer a Credit Guarantee scheme for providing guarantees to loans being offered to micro

businesses.

7. Introduce appropriate technologies to assist in the process of efficient lending, borrowing and

monitoring of distributed capital.

8. Build a suitable framework under the Pradhan Mantri MUDRA Yojana for developing an efficient lastmile

credit delivery system to small and micro businesses.

9. Laying down responsible financing practices to ward off indebtedness and ensure proper client

protection principles and methods of recovery.

Major Product Offerings: MUDRA Bank has classified the borrowers into three segments: the

starters, the mid-stage finance seekers and the next level growth seekers. The Bank will nurture small

businesses through different stages of growth and development of businesses termed as Shishu,

Kishor and Tarun.

Shishu: This will be the first step when the business is just starting up. The loan cover in this stage

will be upto Rs 50,000.

Kishor: In this stage, the entreprenuer will be eligible for a loan ranging from Rs 50,000 to Rs 5 lakh.

Tarun: This last and final category will provide loans for upto Rs 10 lakh.

Types of Credit Facilities

Types of Credit Facilities

1) Fund based lending

2) Non fund based lending

Fund based lending, where the lending bank commits the physical outflow of funds.

The various forms in which fund based lending may be made by banks.

The facilities like Overdrafts,Cash Credit A/c, Bills Finance, Demand Loans, Term Loans etc, wherein immediate flow of

funds available to borrowers, are called funds based facility. The non fund based facilities like issuance of letter of guarantee, letter of credit wherein banks get fee income and there is no immediate outfow of funds from bank.

Overdrafts: Overdraft means allowing the customer to draw cheques over and above credit balance in his account. Overdraft is normally allowed to Current Account

Customers and in exceptional case SB A/c holders are also allowed to overdraw their account. The high rate of interest is charged but only on daily debit balance. An

overdraft is repayable on demand. There are two types of overdraft prevalent in Banks i.e. (i) Temporary overdraft or clean overdraft (ii) Secured overdraft. Temporary

overdrafts are allowed purely on personal credit of the party and it is for party to meet some urgent commitments on rare occasions. Allowing a customer to draw against

his cheques sent in clearing also falls under this category. Secured overdraft is allowed up to a certain limit against some tangible security like bank deposits, LIC policies,

National Saving Certificates, shares and other similar assets. Secured overdraft is most popular with traders as lesser operating cost, simple application and document

formalities are involved in this facility.

Cash Credit Account (CC A/C): Cash credit account is a running account just like a current account where debit balance in the account up to a sanctioned limit or drawing

TYPE OF CUSTOMERS

TYPE OF CUSTOMERS

In this Chapter, for the convenience of study, types of Borrowers have been classified as under:

1. Individual

2. Partnership firm.

3. Hindu Undivided Family

4. Companies

5. Statutory Corporations

6. Trusts and Co-op Societies

7. Limited liability Patnership

One of the essential elements of a contract is “capacity of the parties to Contract”.

The Bank while dealing with an individual should ensure that he is competent to enter into contract. An individual is not competent to contract and money lent to him cannot be recovered in the following circumstances:

a) If an individual is a minor:

A person is minor in the eyes of the law if has not attained the age of 18 years under Indian Majority Act and the age of 21 years, if he/she is a ward, under the Guardians and Wards Act. The money lent to a minor cannot be recovered, if the minor fails to repay. Exception to this is a contract with a minor for supply of necessaries to the minor. If a Bank lends money to a minor to meet expenses for purchasing necessaries of life, then bank can recover the money from the estate of the minor.

b) If an individual is not of sound mind:

According to the Contract Act, if a person is not of sound mind, then he is incompetent to enter into a contract. The Act says that a person at the time when he makes the contract, he is not capable of understanding it and of forming a rational judgment as to its effect upon his interests, will be considered that he is ‘not of sound mind’. Hence, a contract would be invalid if it is proved that the time of entering into contract, the person was not in sound state of mind and could not understand what he was doing and could not understand the implications of entering into the contract.

c) Disqualified persons:

If a person is disqualified by the law in respect of his capacity to contract, then the contract entered into by such a person cannot be enforced. For example, a person might have been declared as insolvent under the Insolvency law. As long as the person continues to be undischarged insolvent, he cannot enter into contract.

2. PARTNERSHIP FIRM

‘Partnership Firm’ is another entity with which a Banker deals with in the course of his business. Partnership firm is governed by Indian Partnership Act 1932. A partnership is the relation between persons who have agreed to share the profits of a business, carried on by all or any of them acting for all. The relationship between partners is governed by partnership deed which can be written or unwritten.

Legal Position of a partnership:

A partnership is not distinct from its partners. The liability is joint and several. It means that they responsible for the act of the partnership firm in their capacity as partner as well as individual. The Indian Partnership Act 1932, provides for registration of the partnership and it is necessary that a Banker dealing with partnership firm, should verify as to whether the firm is registered or not. This would help him to know all the names of the partners and their relationship.

CGTMSE full details

CGTMSE:

INTRODUCTION

            The Board of Trustees of Credit Guarantee Fund Trust for Small Industries, having decided to frame a Scheme for the purpose of providing guarantees to a substantial extent in respect of credit facilities to borrowers in Micro and Small Enterprises, hereby make the following Scheme:

1.         Title and date of commencement

                           (i)           The Scheme shall be known as the Credit Guarantee Fund Scheme for Small Industries (CGFSI)

                           (ii)          It shall come into force from August 1, 2000.

                          (iii)         It shall cover eligible credit facility extended by the lending institutions to eligible borrowers effective June 1, 2000.

Subsequent to the enactment of MSMED Act-2006 the Trust was renamed as Credit Guarantee Fund Trust for Micro and Small Enterprises and scheme as Credit Guarantee Scheme for Micro and Small Enterprises.

2.         Definitions

            For the purposes of this Scheme -

               (i)            "Amount in Default" means the principal and interest amount outstanding in the account(s) of the borrower in respect of term loan and amount of outstanding working capital facilities (including interest),  as on the date of the account becoming NPA, or the date of lodgment of claim application whichever is lower or such of the date as may be specified by CGTMSE for preferring any claim against the guarantee cover subject to a maximum of amount Guaranteed. 

               (ii)            "Collateral security" means the security provided in addition to the primary security, in connection with the credit facility extended by a lending institution to a borrower.

              (iii)          "Credit facility" means any financial assistance by way of term loan and / or fund based and non-fund based working capital (e.g. Bank Guarantee, Letter of credit etc) facilities extended by the lending institution to the eligible borrower. For the purpose of calculation of guarantee fee, the "credit facility extended" shall mean the amount of financial assistance committed by the lending institution to the borrower, whether disbursed or not.  For the purpose of the calculation of service fee, the credit facility extended shall mean the credit facilities (both fund and non-fund based) covered under CGS and for which guarantee fee has been paid, as at March 31, of the relevant year.

              (iv)          "Eligible borrower" means new or existing Micro and Small Enterprises to which credit facility has been provided by the lending institution without any collateral security and/or third party guarantees.

              (v)           'Guarantee Cover' means maximum cover available per eligible borrower of the  amount in default in respect of the credit facility extended by the lending institution.

               (vi)       "Lending institution(s)" means a commercial bank for the time being included in the second Schedule to the Reserve Bank of India Act, 1934 and Regional Rural Banks as may be specified by the Trust from time to time, or any other institution (s) as may be directed by the Govt. of India from time to time. The Trust may, on review of performance, remove any of the lending institution from the list of eligible institution.

              (vii)       "Material date" means the date on which the guarantee fee on the amount covered in respect of eligible borrower becomes payable by the eligible institution to the Trust.

            (viii)       "Non Performing Assets" means an asset classified as a non-performing based on the instructions and guidelines issued by the Reserve Bank of India from time to time.

              (ix)        "Primary security"  in respect of a credit facility shall mean the assets created out of the credit facility so extended and/or existing unencumbered assetswhich are directly associated with the project or business for which the credit facility has been extended.

                (x)       "Prime Lending Rate" for a lending institution means the rate so declared by that lending institution for the relevant time period / duration for which the credit facility has been extended.

                (xi)     "Scheme" means the Credit Guarantee Fund Scheme for Micro and Small Enterprises

               (xii)     "SIDBI" means the Small Industries Development Bank of India, established under Small Industries Development Bank of India Act, 1989 (39 of 1989).

               (xiii)    'Micro and Small Enterprises' As per the MSMED Act, 2006 an "enterprise" means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services; and "Micro and Small Enterprises" are defined in 7.1.a.i) and ii) & in 7.1.b.i) and ii) of the said Act .

                (xiv)     "Tenure of guarantee cover" means the maximum period of guarantee cover from Guarantee start date which shall run through the agreed tenure of the term credit and for a period of 5 years or block of a 5 years where working capital facilities alone are extended or loan termination date, which ever is earlier or such period as may be specified by the Trust.

               (xv)      "Trust" means the Credit Guarantee Fund Trust for Micro and Small Enterprises set up by Government of India and SIDBI with the purpose of guaranteeing credit facility (ies), extended by the lending institution(s) to the eligible borrowers. 

SCOPE AND EXTENT OF THE SCHEME

3.         Guarantees by the Trust

               (i.)            Subject to the other provisions of the Scheme, the Trust undertakes, in relation to credit facilities extended to an eligible borrower from time to time by an eligible institution which has entered into the necessary agreement for this purpose with the Trust, to provide a guarantee on account of the said credit facilities.

             (ii.)            The Trust reserves the discretion to accept or reject any proposal referred by the lending institution which otherwise satisfies the norms of the Scheme.

Development Commissioner (DC-MSME) Schemes :::

Development Commissioner (DC-MSME) Schemes :::

Related scheme: 1. Credit Guarantee 
Description Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries 
Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust 
for Micro and Small Enterprises (CGTMSE) to implement Credit Guarantee Fund Scheme for 
Micro and Small Enterprises. The corpus of CGTMSE is being contributed by GoI and SIDBI. 
Nature of assistance Collateral free loans up to a limit ofRs.50 lakh - for individual MSEs 
Who can apply Both existing and new enterprises are eligible to be covered under the scheme. 
How to apply Candidates meeting the eligibility criteria may approach banks/financial 
institutions, which are eligible under the scheme, or scheduled commercial banks and select 
Regional Rural Banks. 
Related scheme: 2. Credit Linked Capital Subsidy (CLCS) forTechnology Upgradation 
Description Technology upgradation would ordinarily mean induction of state-of-the-art or near 
state-of-the-art technology. In the varying mosaic of technology obtaining in more than 7,500 
products in Indian small scale sector, technology upgradation would mean a significant step up 
from the present technology level to a substantially higher one involving improved productivity, 

and/or improvement in quality of products and/or improved environmental conditions including 
work environment for the unit. It includes installation of improved packaging techniques as well 
as anti-pollution measures and energy conservation machinery. Further, units in need of 
introducing facilities for in-house testing and on-line quality control would qualify for assistance, 
as the same are a case oftechnology up-gradation. 

Micro, Small & Medium Enterprises (MSME) Sector Very Important

 Micro, Small & Medium Enterprises (MSME) Sector

Short Title and Commencement

Directions are called the “Reserve Bank of India [Lending to Micro, Small & Medium Enterprises (MSME)

Sector] Directions, 2016” and shall come into effect on the day they are placed on the official website

of RBI.

Applicability

These Directions are applicable to all Scheduled Commercial Bank but excluding RRBs.

 Definitions/ Clarifications

(a) The “MSMED Act, 2006” means ‘Micro, Small and Medium Enterprises Development (MSMED)

Act, 2006’ as notified by the Government of India on June 16, 2006 and the amendments

thereafter, if any, by the Government of India.

(b) ‘Micro, Small and Medium Enterprises’ mean the enterprises as defined in the MSMED Act,

2006 and the amendments, if any, from time to time.

(c) ‘Manufacturing’ and ‘Service’ Enterprises mean the enterprises as defined in the MSMED

Act, 2006 or as notified by the Government of India, Ministry of MSME under the MSMED Act,

2006 from time to time.

(d) ‘Priority Sector’ means the sectors as defined in Master Direction - Reserve Bank of India

(Priority Sector Lending –Targets and Classification) Directions, 2016 dated July 7, 2016 or as

modified from time to time.

(e) ‘Adjusted Net Bank Credit (ANBC)’ would mean Adjusted Net Bank Credit (ANBC) as defined

in Master Direction - Reserve Bank of India (Priority Sector Lending –Targets and Classification)

Directions, 2016 dated July 7, 2016 or as modified from time to time.

BCSBI Lending

BCSBI ::

Lending::

Each bank has its own Loan policy, approved by its Board, based on the guidelines
issued by the Reserve Bank of India. Banks are expected to base their lending
decisions on a careful and prudent assessment of the financial position and repaying
capacity of the applicant, besides other important criteria.
What information is a bank required to give when one approaches them for a
loan?
Banks, along with the loan application form are required to provide full
information about the interest rates applicable, whether floating or fixed as
also fees and charges payable for processing, penal rate of interest for delayed

BCSBI

Banking Codes and Standards Board of India (BCSBI)::

In November 2003, Reserve Bank of India (RBI) constituted the Committee on Procedures and Performance Audit of Public Services under the Chairmanship of Shri S.S.Tarapore (former Deputy Governor) to address the issues relating to availability of adequate banking services to the common person. The mandate to the Committee included identification of factors that inhibited the attainment of best customer services and suggesting steps to improve the quality of banking services to individual customers. The Committee felt that in an effort to continuously upgrade the package of services that banks offered to their customers, there was a need for benchmarking of such services. After an in-depth study at the grass-roots level, the Committee concluded that there was an institutional gap for measuring the performance of banks against a bench mark reflecting the best practices (Code and Standards). Therefore, the Committee recommended setting up of the Banking Codes and Standards Board of I ndia (BCSBI). BCSBI was set up to ensure that the common person as a consumer of financial services from the banking Industry is in no way at a disadvantageous position and really gets what he/she has been promised.

The Scheme of Banking Ombudsman, which has been functioning for quite some time, does not look into systemic issues with a view to enforcing a prescribed quality of service. Ideally, such a function should be performed by a Self-Regulatory Organisation (SRO) but in view of the existing framework of the banking sector in India, it was felt that an independent, autonomous Board will be best suited for the function. Therefore, Dr. Y.V. Reddy, Governor, Reserve Bank of India, in his Monetary Policy Statement (April 2005) announced setting up of the Banking Codes and Standards Board of India in order to ensure that a comprehensive code of conduct for fair treatment of customers was evolved and adhered to.

MSME DRTs

MSME::

What are Debt Recovery Tribunals (DRTs)?

Debt Recovery Tribunals were established to facilitate the debt recovery involving banks and other financial institutions with their customers. DRTs were set up after the passing of Recovery of Debts due to Banks and Financial Institutions Act (RDBBFI), 1993. Appeals against orders passed by DRTs lie before Debts Recovery Appellate Tribunal (DRAT). DRTs can take cases from banks for disputed loans above Rs 10 Lakhs. At present, there are 33 DRTs and 5 DRATs functioning at various parts of the country. In 2014, the government has created six new DRTs to speed up loan related dispute settlement.

Compared to the ordinary court procedures, DRTs were able to handle large number of cases with low delay during the initial phases. Though the DRTs have made impact on recovery front, several issues related to their performance in the background of rising volume of NPAs have appeared in later period. Inadequate infrastructure coupled with insufficient number of DRTs has made them incompetent to handle the rising volume of disputes.

Recent issues related with DRTs

The leading issue related with debt recovery through DRTs is the slow process of resolution (settling debts and finding end to defaults). Like several other debt recovery mechanisms, the DRTs are slow to work out on pending disputes. Nearly 93000 cases are pending in front of all the DRTs in the country at the end of 2016. The World Bank estimated that it took 4.3 years on average in India to resolve insolvency under the old laws, more than twice as long as in China. Similarly, the average recoveries were just 25.7 cents on the dollar in India. This is one of the worst among the similar economies.

The number of DRTs are small given the increasing number of cases. –

Delay in settling the cases is long.

The DRTs were not able to handle cases related to large borrowers.

Timely appointment of officials for DRT has not been made.

Recent efforts to rejuvenate DRTs: the RDBBFI amendment 2016

To correct the situation, government has made several efforts. Major one is the amendment to the RDBBFI Act 1993 in 2016. Similarly, the new Insolvency and Bankruptcy Code give powers to DRTs to consider cases of Bankruptcy from individuals and unlimited liability partnerships. Following are the main changes made to the RDBBFI Act in 2016 though the amendments are yet to be enforced.

The amendment gives timelines for various steps in the adjudication process before the debt recovery tribunals. Time limit for filing of written statements, passing of orders, appeals, etc. have been reduced. The Act Empowers the Central Government to provide for uniform procedural rules for the proceedings in the Debts Recovery Tribunals and Appellate Tribunals.

The amendment increases the retirement age of Presiding Officers of Debt Recovery Tribunals from 62 years to 65 years and that of the Chairpersons of Appellate Tribunals from 65 years to 67 years. It also makes Presiding Officers and Chairpersons eligible for reappointment to their positions.

The amendment allows banks to file cases in DRTs having jurisdiction over the area of bank branch where the debt is pending, instead in the DRT which have jurisdiction over the defendant’s area of residence or business.

Similarly, to reduce delays, the he cost on a borrower to delay recovery timelines through protracted appeals and proceedings has been increased.

Borrowers will have to deposit at least 25% of the outstanding amounts with the debt recovery appellate tribunal (DRAT) under the DRT Act to avail an appeal. Previously, this provision was required only under the SARFAESI Act.

MSME ABBREVIATIONS

ABBREVIATIONS::

ACWW: Associated Country Women of the World
AIC: Agro Industries Corporation
ANC: Ancillary Undertakings
APTDC: A. P. Technology Development Centre (CII)
ASBA :Alliance of Small Business Associations in the USA
ASI: Annual Survey of Industries
ASSOCHAM Association of Chambers of Commerce and Industry
AWEK Association of Women Entrepreneurs of Karnataka
BDS Business Development Services
CAR Common Annual Return
CDCC Central Documentation and Clearance Centre
CDR Corporate Debt Restructuring
CGTMSE: Credit Guarantee Fund Trust for Micro and Small Enterprises
CGTSI Credit Guarantee Trust for Small Industries
CII Confederation of Indian Industry
CITD Centre for International Trade in Agriculture and Agro-based Industries, New
Delhi
COSIA Chamber of Small Industry Associations
CRM Customer Relationship Management
CWEI Consortium of Women Entrepreneurs in India
CWEI Consortium of Women Entrepreneurs of India
DIC District Industries Centre
DICGC Deposit Insurance & Credit Guarantee Corporation
DRT Debt Recovery Tribunal
DWCRA Development of Women and Children in Rural Areas
EDIT Entrepreneurship Development Institute of India
EOU Export Oriented Units
EU European Union
EXIM BankExport Import Bank of India
FAPCCI Federation of Andhra Pradesh Chambers of Commerce and Industry
FAPSIA Federation of Andhra Pradesh Small Industries Association
FASII Federation of Associations of Small Industries of India
FDI Foreign Direct Investment
FICCI Federation of Indian Chambers of Commerce and Industry
FISME Federation of Indian Micro & Small and Medium Enterprises
FISME Federation of Indian Small & Medium Enterprises
FIWE Federation of Indian Women Entrepreneurs
FOSMI Federation of Small & Medium Industries
GATT General Agreement on Trade and Tariff
Gol Government of India
HUDCO Housing & Urban Development Corporation
HUF Hindu Undivided Family
ICSI Indian Council of Small Industry
ICWE India Council of Women Entrepreneurs, New Delhi
IDLSS Integrated Development of Leather Sector Scheme
IIA Indian Industries Association
IIC Industrial Infrastructure Corporation
IIE Indian Institute of Entrepreneurship, Guwahati
IRAC Income Recognition and Asset Classification
ISEC Interest Subsidy Eligibility Certification
JHF Joint Hindu Family
KVIC Khadi & Village Industries Commission
LLP Limited Liability Partnership
MFA Multi-Fibre Arrangement
MSE-CDP Micro & Small Enterprises Cluster Development Programme
MSMED Micro Small and Medium Enterprises Development
NABARD National Bank for Agriculture and Rural Development
NAYE National Alliance of Young Entrepreneurs
NGO Non-Governmental Organization
NIC National Industrial Classification
NIESBUD National Institute for Entrepreneurship and Small Business Development,Noida
NIMSME National Institute for Micro, Small and Medium Enterprises
NISBET National Institute of Small Business Extension Training
NMCP National Manufacturing Competitiveness Programme
NPA Non-Performing Asset
NPV Net Present Value
NRY Nehru Rojgar Yojna
NSIC National Small Industries Corporation
OECD Organisation for Economic Co-operation and Development
OGL Open General License
OTS One Time Settlement
PACS Primary Agricultural Cooperative Credit Society
PCB Pollution Control Board
PMEGP Prime Minister's Employment Generation Programme
PPP Public Private Participation
PRF Portfolio Risk Fund
PRODIP Product Development, Design Intervention and Packaging
QRs Quantitative Restrictions
RBI Reserve Bank of India
RGUMY Rajiv Gandhi Udyami Mitra Yojana
SEZ Special Economic Zone
SFC State Financial Corporation
SFURTI Scheme of Fund for Regeneration of Traditional Industries
SHG Self Help Group
SIDBI Small Industries Development Bank of India
SIDC State Industrial Development Corporation

SIDO Small Industries Development Organisation
SIIC State Industries Investment Corporation
SMERA Small & Medium Enterprises Rating Agency of India Ltd.
SMEs Small and Medium Enterprises
SNDP State Net Domestic Product
SPV Special Purpose Vehicle
SSIDC State Small Industries Development Corporation
SSSBE Small Scale Service and Business (industry-related) Enterprises
TANSTIA Tamil Nadu Small and Tiny Industries Association
TCO Technical Consultancy Organisation
TREAD Trade Related Entrepreneurship Assistance and Development
TRIPs Trade-Related Intellectual Property Rights
TRYSEM Training for Rural Youth for Self Employment
TUFS Technical Upgradation Fund Scheme
WE Town and Village Enterprises
UNIDO United Nations Industrial Development Organization
VAT Value Added Tax
WASME World Association for Small and Medium Enterprises
WASME World Association of Small and Medium Enterprises
WAWE World Association of Women Entrepreneurs
WE Women Enterprises
WTO World Trade Organisation

IT SECURITY

SOFTWARE ATTACKS by
Virus
A virus is a type of malicious software (malware) comprised of small pieces of code attached to legitimate programs. When that program runs, the virus runs.
Viruses are malicious programs that spread throughout computer files without user knowledge. Most widespread virus infections spread through email message attachments that activate when opened. The vicious cycle of a virus perpetuates as infected emails are forwarded to multiple users. Viruses also spread through shared media, such as Universal Serial Bus (USB) drives.

Initially created as pranks, viruses are responsible for widespread and significant computer system and file destruction. Installing anti-virus software helps prevent, block or remove previously installed viruses
 Worm
A worm is a type of malicious software (malware) that replicates while moving across computers, leaving copies of itself in the memory of each computer in its path.
A worm locates a computer’s vulnerability and spreads within its connected network like an infection, while continually seeking new vulnerabilities. Like viruses, worms often originate from e-mail attachments that appear to be from trusted senders. Worms then spread to a user’s contacts via his e-mail account and address book.
Some worms spread and then do nothing while tthers cause harm. In such cases, the worm’s code is known as payload.


 Malicious Software (Malware)
Malicious software, commonly known as malware, is any software that brings harm to a computer system. Malware can be in the form of worms, viruses, trojans, spyware, adware and rootkits, etc., which steal protected data, delete documents or add software not approved by a user.

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.

IT SECURITY Software testing

Software testing can be conducted as soon as executable software (even if partially complete) exists. The overall approach to software development often determines when and how testing is conducted. For example, in a phased process, most testing occurs after system requirements have been defined and then implemented in testable programs. In contrast, under an agile approach, requirements, programming, and testing are often done concurrently.


The box approach
Software testing methods are traditionally divided into white- and black-box testing. These two approaches are used to describe the point of view that the tester takes when designing test cases.

White-box testing

White-box testing (also known as clear box testing, glass box testing, transparent box testing and structural testing, by seeing the source code) tests internal structures or workings of a program, as opposed to the functionality exposed to the end-user. In white-box testing, an internal perspective of the system, as well as programming skills, are used to design test cases. The tester chooses inputs to exercise paths through the code and determine the appropriate outputs. This is analogous to testing nodes in a circuit, e.g. in-circuit testing (ICT).