Working capital

WORKING CAPITAL



Working capital, also known as net working capital, is the difference between a company’s current assets, like cash, accounts receivable (customers’ unpaid bills) and inventories of raw materials and finished goods, and current liabilities, like accounts payable.

Working Capital = Current Assets - Current Liabilities



The objective of running any industry is earning profits. An industry will require funds to

acquire “fixed assets” like land, building, plant, machinery, equipments, vehicles, tools etc.,

and also to run the business i.e. its day to day operations.

Funds required for day to-day working will be to finance production and sales. For

production, funds are needed for purchase of raw materials/stores/fuel, for employment of

labour, for power charges etc., for storing finished goods till they are sold out and for

financing the sales by way of sundry debtors/ receivables.

Capital or funds required for an industry can therefore be bifurcated as fixed capital and

working capital. Working capital in this context is the excess of current assets over current

liabilities. Current assets are those assets that in the ordinary course of business will be

converted into cash within a brief period (during the operating cycle of the industry and

normally not exceeding one year) without undergoing diminution in value and without

disrupting the operation. Current liabilities are those liabilities intended at their inception, to

be paid in the ordinary course of business within a reasonably short time (normally within a

year) out of the current assets or the income of the business. The above definition of

working capital, however, takes into account only the funds available to the industry from

long term sources like capital and long term borrowings, after meeting the expenses

towards fixed and other non-current assets. It does not represent the total funds required

by the industry for working capital to sustain its level of operations.

The excess of current assets over current liabilities is treated as net working capital or

liquid surplus and represents that portion of the working capital which has been provided

from the long term source. This can be explained by the following diagram.







Working Capital Assessment :

Concept of Working Capital: Working capital denotes the amount of funds needed for

meeting day-to-day operations of a concern.

This is related to short-term assets and short-term sources of financing. Hence it deals

with both, assets and liabilities

There are two concepts or senses used for working capital.

1. Gross Working Capital: The concept of gross working capital refers to the total

value of current assets. In other words, gross working capital is the total amount

available for financing of current assets. However, it does not reveal the true financial

position of an enterprise. How? A borrowing will increase current assets and, thus, will

increase gross working capital but, at the same time, it will increase current liabilities

also.

As a result, the net working capital will remain the same. This concept is usually

supported by the business community as it raises their assets (current) and is in their

advantage to borrow the funds from external sources such as banks and the financial

institutions.

In this sense, the working capital is a financial concept. As per this concept:

Gross Working Capital = Total Current Assets

2. Net working Capital: The net working capital is an accounting concept which

represents the excess of current assets over current liabilities. Current assets consist of

items such as cash, bank balance, stock, debtors, bills receivables, etc. and current

liabilities include items such as bills payables, creditors, etc. Excess of current assets

over current liabilities, thus, indicates the liquid position of an enterprise.

The ratio of 2:1 between current assets and current liabilities is considered as optimum

or sound. What this ratio implies is that the firm/ enterprise have sufficient liquidity to

meet operating expenses and current liabilities. It is important to mention that net

working capital will not increase with every increase in gross working capital.

Importantly, net working capital will increase only when there is increase in current

assets without corresponding increase in current liabilities.



Working Capital Gap :

Is defined as current assets minus current liabilities excluding bank borrowings. Current

assets will be taken at estimated values or values as per the tendon committee norms,

whichever is lower. Current assets will consist of inventory and receivables, referred as

chargeable current assets (CCA) and other current assets (OCA).

Maximum permissible bank finance (MPBF) in view of the above approach to bank



lending, the Tandon committee suggested the following three methods of determining

the permissible level of bank borrowings:

1. First method:- in the first method, the borrower will contribute 25 per cent of the

working capital gap; the remaining 75 per cent be financed from bank borrowings this

method will give a minimum current ratio of

2. Second method:- in the second method, the borrower will contribute 25 per cent of

the total current assets. The remaining of the working capital gap (the working capital

gap less the borrower‘s contribution) can be bridged from the bank borrowings. This

method will give a current ratio of .

3. Third method:- in the third method, borrower will contribute 100 percent of core

assets, as defined and 25 per cent of the balance of current assets. The remaining of

the working capital gap can be met from the borrowings. This method will further

strengthen the current ratio

Components of Working Capital: Three main components associated with

working capital management:

1. Accounts Receivable

Accounts receivable are revenues due – what is owed to a company by its customers

for sales made. Timely, efficient collection of accounts receivable is essential to a

company's smooth financial operation.

Accounts receivable are listed as assets on a company's balance sheet, but they are

not actually assets until they are collected. A common metric analysts use to assess a

company's handling of accounts receivable is days sales outstanding, which reveals the

average number of days a company takes to collect sales revenues.

2. Accounts Payable

Accounts payable, the money that a company is obligated to pay out over the short

term, is also a key component of working capital management. Companies seek to

strike a balance between maintaining maximum cash flow by delaying payments as long

as is reasonably possible and the need to maintain positive credit ratings while

sustaining good relationships with suppliers and creditors. Ideally, a company's average

time to collect receivables is significantly shorter than its average time to settle

payables.

3. Inventory

Inventory is a company's primary asset that it converts into sales revenues. The rate at

which a company sells and replenishes its inventory is an important measure of its

success.

Investors consider the inventory turnover rate to be an indication of the strength of sales

and as a measure of how efficient the company is in its purchasing and manufacturing

process. Inventory that is too low puts the company in danger of losing out on sales, but

excessively high inventory levels represent wasteful, inefficient use of working capital.

Source of Working Capital:

SPONTANEOUS (URGENT) SOURCES OF WORKING

CAPITAL FINANCE

The word ‗spontaneous‘ itself explains that this source of working capital is readily or

easily available to the business in the normal course of business affairs. The quantum

and terms of this credit depend on the industry norms and the relationship between

buyer and seller. These sources include trade credit allowed by the sundry creditors,

credit from employees, and other trade-related credits. The biggest benefit of

spontaneous sources as working capital is its ‗effortless raising‘ and ‗insignificant cost‘

compared to traditional ways of financing.

List of spontaneous sources of working capital

TRADE CREDIT

SUNDRY CREDITORS

BILLS PAYABLE

NOTES PAYABLE

ACCRUED EXPENSES

The cost factor and the quantum depends a lot on the terms of such credit viz.

maximum credit limit, the period of credit, and discount on cash payment. Each supplier

will have a maximum credit limit defined for the buyer depending on the business

capacity and creditworthiness of the buyer. Similarly, the credit period is defined say 30

days, 45 days etc. Discount on cash payment is allowed to the buyer if the payment

immediately on buying the materials. This percentage of discount is an opportunity cost

for the buyer.

SHORT TERM SOURCES OF WORKING CAPITAL FINANCE

Short term sources can be further divided into internal and external sources of working

capital finance. The

Short-term Internal Sources

TAX PROVISIONS

DIVIDEND PROVISIONS

Short-term External Sources

Short-term working capital financing from banks such as

BANK OVERDRAFTS,

CASH CREDITS,

TRADE DEPOSITS,

BILLS DISCOUNTING,

SHORT-TERM LOANS OR WORKING CAPITAL LOANS,

INTER-CORPORATE LOANS,

COMMERCIAL PAPER, ETC.

Tax and dividend provisions are current liabilities and cannot be delayed. The fund that

would have been used in paying these provisions act as working capital till the point

these are not paid.

Short-term working capital finance availed from banks and financial institutions are

costly compared to spontaneous and long-term sources in terms of rate of interest but

have a great time flexibility. Due to time flexibility, the finance manager can use the

funds and pay interest on the money which his business utilizes and can pay them

anytime when cash is available. Overall, in comparison to long-term sources where you

have to hold funds even when not required, these facilities prove cheaper.

LONG-TERM SOURCES OF WORKING CAPITAL FINANCING

Long-term sources can also be divided into internal and external sources. Long-term

internal sources of finance are retained profits and provision for depreciation whereas

external sources are Share Capital, long-term loan, and debentures.

Long-term Internal Sources

RETAINED PROFITS

PROVISION FOR DEPRECIATION

Long-term External Sources

SHARE CAPITAL

LONG-TERM LOAN

DEBENTURES

Retained profits and accumulated depreciation are as good as funds available to the

business without any explicit cost. These are the funds completely earned and owned

by the business itself. They are utilized for expansion as well as working capital finance.

Long-term external sources of finance like share capital is a cheaper source of finance

but are not commonly used for working capital finance.

Working capital can be classified as temporary working capital and permanent working

capital. It is advisable to use long-term sources for permanent and short-term sources

for temporary working capital requirements. This will optimize the working capital cost

and enforce good working capital management practices.



Various Methods of Assessment of Working Capital:

• Operating Cycle Method

• Drawing Power Method.

• Turnover Method.

• MPBF method (II method of lending) for limits of Rs 6.00 crores and above

• Cash Budget method - A cash budget is an estimation of the cash inflows and

outflows for a business over a specific period of time, and this budget is used to

assess whether the entity has sufficient cash to operate. Companies use sales

and production forecasts to create a cash budget, along with assumptions about

necessary spending and accounts receivable. If a company does not have

enough liquidity to operate, it must raise more capital by issuing stock or by

taking on debt.

Under this method, monthly cash inflow and outflow statement is prepared and

the highest gap between the two becomes the basis for sanction of credit limit.

Banks make use of cash budget method in case of seasonal industries, software

development, services sector activities including construction activity, etc.

Based on procurement and cash inflow) . It is mainly used for Seasonal

Industries (Sugar/ Rice Mills/Textiles/Tea/Tobacco/Fertilizers) Contractors &

Real Estate Developers , Educational Institutions, etc.



 Operating Cycle :



 Any manufacturing activity is characterized by a cycle of operations consisting of

purchase of raw materials for cash, converting these into finished goods and realising

cash by sale of these finished goods.

 Diagrammatically, the operating cycle is represented as under'













The time that lapses between cash outlay and cash realisation by sale of finished

goods and realisation of sundry debtors is known as the length of the operating cycle.



That is, the operating cycle consists of:

a. Time taken to acquire raw materials and average period for which they are in

store.

b. Conversion process time

c. Average period for which finished goods are in store and

d. Average collection period of receivables (Sundry Debtors)



 Operating Cycle is also called the cash-to-cash cycle and indicates how cash is

converted into raw materials, stocks in process, finished goods, bills(receivables) and

finally back to cash. Working capital is the total cash that is circulating in this cycle.

Theref





Traditional Method of Assessment of Working Capital Requirement



The operating cycle concept serves to identify the areas requiring improvement for the

purpose of control and performance review. But, as bankers, we require a more detailed

analysis to assess the various components of working capital requirement viz., finance for

stocks, bills etc.

Bankers provide working capital finance for holding an acceptable level of current assets, viz.

raw materials, stocks-in-process, finished goods and sundry debtors for achieving a

predetermined level of production and sales. Quantification of these funds required to be

blocked in each of these items of current assets at any time will, therefore provide a measure of

the working capital requirement (WCR) of an industry.



Raw Materials: Any industrial unit has to necessarily stock a minimum quantum of

materials used in its production to ensure uninterrupted production. Factors which affect or

influence the funds requirement for holding raw materials are



i. Average consumption of raw materials.

ii. Their availability - locally or from places outside, easy availability / scarcity, number of

sources of supply.

iii. Time taken to procure raw materials (procurement time or lead time)

iv. Imported or indigenous.

v. Minimum quantity supplied by the market (Minimum Order Quantity (MOQ)).

vi. Cost of holding stocks (e.g. insurance, storage, interest)

vii. Criticality of the item.

viii. Transport and other charges (Economic Order Quantity (EOQ)).

ix. Availability on credit or against advance payment in cash

x. Seasonality of the materials.

This raw material requirement is generally expressed as so many months’

requirement (consumption).



 Stocks-in-process : Barring a few exceptional types of industries, when the raw materials

get converted into finished products within a few hours, there is normally a time lag or

delay or period of processing only after which the raw materials get converted into finished

product. During this period of processing, the raw materials are being processed and

expenses are being incurred. The period of processing may vary from a few hours to a

number of months and unit will be blocking working funds in the stocks-in-process during

this period. Such funds blocked in SIP depend on:

i. The processing time

ii. Number of products handled at a time in the process

iii. Average quantities of each product, processed at each time. (batch quantity)

iv. The process technology adopted

v. Number of shifts

A rough and ready formula for computing the requirement of funds is to find out the cost of

production for the period of processing. viz. (raw materials consumed per month +

expenses per month) x period of processing in months.



Finished goods: All products manufactured by an industry are not sold immediately. It will

be necessary to stock certain amount of goods pending sale. This stocking depends on:

i. Whether the manufacture is against firm order or against anticipated order

ii. Supply terms

iii. Minimum quantity that can be despatched

iv. Transport availability and transport cost

v. Pre-despatch Inspection

vi. Seasonality of goods

vii. Variation in demand

viii. Peak level/ low level of operations

ix. Marketing arrangement - e.g. direct sale to consumers or through dealers

(wholesalers).

The requirement of funds against finished goods is expressed as so many months’ cost of

production.

















Sundry Debtors (Receivables) :

Sales may be effected under three different methods:

a. Against Advance Payment

b. Against Cash

c. On Credit

In the case of (a) no funds are blocked up. Instead it helps in meeting the working capital needs.

In case of Cash Sales (b) no funds are blocked up and hence there is no need for additional

working capital requirement. It is in the case of (c) credit sales that working funds are required to

meet delays in sales realisation. The entire sales of the industry will not be on cash basis. In fact

a major portion will be on credit. A unit grants trade credit because it expects this investment to

be profitable. It would be in the form of sales expansion and fresh customers or it could be in the

form of retention of existing customers. The extent of credit given by the industry normally

depends upon:

i. Trade Practices

ii. Market conditions

iii. Whether it is a bulk purchase by the buyer.

iv. Seasonality (e.g. rain coats, woolen products).

v. Price advantage.

Even in cases where no credit is extended to buyers, the transit time for the goods to reach the

buyer may take some time and till the cash is received back, the unit will have to be out of

funds. The period from the time of sale to the receipt of funds will have to be reckoned for the

purpose of quantifying the funds blocked in Sundry Debtors. Even through the amount of Sundry

Debtors according to the unit’s books will be on the basis of Sale price, the actual amount

blocked will be only the cost of production of the materials against which credit has been

extended - the difference being the unit’s profit margin - (which the unit does not obviously have

to spend).

The working capital requirement against Sundry Debtors will therefore be computed on the

basis of cost of production (whereas the permissible Bank Finance will be computed on the

basis of sale value since profit margin varies from product to product and buyer to buyer and

cannot be uniformly segregated from the sale value).

The working capital requirement is normally expressed as so many months’ cost of production.



 Expenses : It is customary in assessing the working capital requirement of industries, to

provide for one month’s expenses also. A question might be raised as to why expenses

should be taken separately, whereas at every stage the funds required to be blocked had

been taken into account. This amount is provided merely as a cushion, to take care of

temporary bottlenecks and to enable the unit to meet expenses when they fall due.

Normally one month total expenses, direct and indirect, salaries etc. are taken into

account. In cases where the operating cycle is very short say one month or 2 months the

provision for expenses can be reduced. Similarly, where the operating cycle is very long,

say 12 months or more, the provision for expenses may have to be increased, to take care

of contingencies.

While computing the working capital requirements of a unit, it will be necessary to take into

account two other factors, one is the credit received on purchases. Trade Credit is a

normal practice in trading circles. The period of such credit will vary from place to place,

material to material and person to person. The amount of credit received on purchases

reduces the working capital funds required by the unit. Secondly, industries often receive

advance against orders placed for their products.



necessarily give advance to producers e.g. Custom-made machinery. Such funds are used

for the working capital of an industry. It can thus be summarised as follows:

1. Raw Materials Months requirements Rs. A

2. Stocks-in- Process Months (Cost of Rs. B

(for Period of Processing) Production)

3. Finished Goods Months cost of Rs. C

production required

to be stocked

4. Sundry Debtors Months cost of production Rs. D

(outstanding credits)

5. Expenses One month(say) Rs. E

------------------

A+B+C+D+E

-------------------

Less: Credit received on purchases - Rs. F

(Months’ Purchases value)

Advance payment on order received - Rs.G

Working Capital Required (H) = (A+B+C+D+E) - (F+G)

The purpose of assessing the W/C requirement of the industry is to determine how the total

requirements of funds will be met. The two sources for meeting these requirements are the

unit’s long term sources (like capital and long term borrowings) and the short term borrowings

from banks



Drawing Power (DP) Method :

(for units with small limits)

Drawing power is arrived at on the basis of valuation of current assets charged to the

bank in the shape of hypothecation and assignment , after deducting the stipulated

margin

Illustration:

Paid stock – 4 Margin 25% - DP = 3

Semi-finished goods – 4 Margin 50% - DP=2

Finished goods -4 Margin 25% - DP = 3

Book Debts – 4 Margin 50% - DP = 2

Total DP= 10



Turnover Method :



(originally suggested by Nayak Committee for SSI units)

The WC requirements may be worked out on the basis of Naik Committee

recommendations for working capital limit upto Rs.6 crores from the banking system, on

the basis of minimum of 20% of their projected annual turnover for new as well as

existing units, beyond which WC be computed on the basis of WC cycle, after fixing

stipulated margins , on each component of the WC. In case of borrowers desiring

facilities under Naik Committee recommendations and having a WC cycle of more than

3 months in a year, the WC requirements will be funded after assessing his

requirements on the basis of his WC cycle, after fixing proper margins.

Example:

Applicable for limits upto Rs.6 crores



(a) Projected sales = Rs. 10,00,000

(b) Working capital requirements: 25% of projected sales i.e. Rs.2,50,000

(c) Margin (contribution of Owner) : 5% of projected sales i.e. Rs.50,000

(d) Working capital to be funded by bank : Rs.2,00,000





MPBF Method

(Tandon‘s II method of lending)





Tandon Committee also recommended inventory/ receivable norms for 22 major industries.



 Approach to lending

Regarding approach to lending, the Committee suggested three methods for assessment of

working capital requirements.

FIRST METHOD

The quantum of bank’s short-term advances will be restricted to 75% of working capital gap

where “working capital gap” is equal to “Current Assets” minus “Current Liabilities Other Than

Bank Borrowings”. Remaining 25% is to be met from long-term sources (Net Working Capital)

SECOND METHOD

Net Working Capital should at least be equal to 25% of total value of acceptable level of current

assets. The remaining 75% should first be financed by Other Current Liabilities (OCL) and the

bank may finance balance of the requirements.

THIRD METHOD

The borrower should provide for entire core current assets and 25% balance current assets from

the Net Working Capital.

To compute the level of working capital requirement of the unit, the analyst has to assess the

level of current assets it has to carry, consistent with its projected level of production and sales.

Inventory and receivables constitute most of the current assets. On the basis of the Committee

report, RBI gave inventory norms and advised the banks to decide the levels of inventory and

receivables taking into account, production, processing cycles and other relevant factors



• Working capital gap : Current assets – current liabilities (other than bank

borrowings)

• Minimum stipulated net working capital= 25% of current assets (excluding

exports receivables)

• Actual projected NWC









Cash budget method::



Assessment of working capital



The assessment of working capital is done through the Projected Balance Sheet

Method (PBS), Cash Budget method or Turnover Method.



 Under the PBS method, the fund requirements computed on the basis of borrower’s

projected balance sheet, the funds flow planned for the current/ following year

and examination of the profitability, financial parameters. etc. The key determinants for

the limit can, inter-alia, be the extent of financing support required by the

borrower and the acceptability of the borrower’s overall financial position including

the projected level of liquidity. The projected Bank borrowing thus arrived at, is

termed as ‘Assessed bank Finance’ (ABF). This method is applicable for borrowers

who are engaged in manufacturing, services and trading activities and who require

fund bases working capital (WC) finance of above Rs. 5 crores.



Cash budget method is used for assessing working capital finance for seasonal

industries like sugar, tea and construction activity. This method is also used for sanction

of ad-hoc WC limits. In these cases, the required finance is quantified from the

projected cash flows and not from the projected values of current assets and current

liabilities. Other aspects of assessment like examination of funds flow, profitability,

financial parameters, etc, are also carried out







.



Collection of financial data



CMA DATA

Introduction:   Credit Monitoring Arrangement (CMA) data is a very important area to understand a person who deals with finance in an organization. This is a critical analysis of current and projected financial statements of a loan applicant by the banker. Data CMA is a systematic analysis of working capital management of the borrower and the purpose of this statement is to ensure the use of long-term and short-term funds have been used . for the particular purpose . In this article I want to discuss the content database CMA CMA Basically contains data that, following the seven states.

1. particular existing and proposed limits:   It is the first statement in the CMA data that contains this fund and fund based limits of non-borrower credit limits and their use and history. With the current limitations of funds, which is the limit proposed or the borrower will be mentioned in this statement is a basic document information provided by the borrower, the banker.



2. operating Declaration:  This is the second statement provided by the borrower, it indicates that the business plan of the borrower gives the current sales, direct and indirect costs, pre-and after tax, as well as projections of sales, expenses and profit situation for 3-5 years based on the borrower's working capital demand. This statement is a scientific analysis of the capacity of production and financial current and projected income of the borrower.



3. analysis of balance:  balance sheet analysis for current and projected statement is the third in the CMA data. This statement gives a detailed analysis of current and non-current assets, fixed assets, cash and bank, the current position and long-term debt of the borrower. Moreover, this declaration indicates the position of the net worth of the borrower for the projected years. budget analysis gives a complete financial situation of the borrower and the generating capacity cash over the planned exercises.



4. Comparative table of current assets and liabilities:   . Fourth statement which gives a comparative analysis of current assets and current liabilities of the borrower movement This basically decides the cycle capital of actual work for the projection period and ability of the borrower to meet their working capital needs.



5. Calculate MPBF:  This is a very important statement and calculation that indicates the  M Aximum  P ermissible B ank  F inance. This statement, which calculates the borrower working capital GAP and finance eligible in two methods loan, the first method of loan will enable MPBF 75% of the work GAP net capital is Current assets less current liabilities, Second method loan will enable MPBF 75% of current assets less current liabilities. As limit MPBF is the credit component of cash the borrower generally known drawing power (DP Limit). So it is very important statement that decide the borrower `s borrowing limit of the bank.



6. fund cash flow:  cash flow analysis statement for the current period and projected is one of the states in the CMA data. fund this position analysis of the borrower's account with reference to the analysis of capital given in the calculations MPBF and projected balance sheets. Objective basis of this statement capture the movement of funds to the borrower for the period.



. 7 Ratio Analysis:  This is the last statement that gives the key ratios for the bank on the basis of data from the AMC prepared and presented to the bank financing. Ratios basic gross margin rate net margin, current ratio, limit DP MPBF, net worth, the ratio of the net value of liabilities, the liquidity ratio, inventory turnover, asset turnover, fixed asset turnover, the number of current business assets, working capital turnover, Debt Equity ratio etc.





For working capital assessment, the required financial data are obtained from the borrower

in the following forms:

Form I : Particulars of existing / proposed limits from the banking system

Form II : Operating statement

Form Ill : Analysis of balance sheet

Form IV : Comparative Statement of CA / CL,

Form VI: Funds flows statement.

Form VII: Statement showing the total cost of the project and sources  of finance



Information provided in the Forms II, III. IV, and VI serves the detailed financial analysis. In

Form I, in addition to information relating to working capital and term loan borrowings

(existing and proposed) information regarding borrowings from NBFCs, borrowings from

term leading institutions for WC purposes, Inter Corporate Deposits taken, lease finance

availed will also be collected..





Working capital:  Numerical

A newly formed company has applied to the Commercial Bank for the first time for financing its

working capital requirements. The following information is available about the projections for

the current year:

Per unit

Elements of cost: (Rs.)

Raw material 40

Direct labour 15

Overhead 30

Total cost 85

Profit 15

Sales 100

Other information:

Raw material in stock : average 4 weeks consumption, Work – in progress (completion stage,

50 per cent), on an average half a month. Finished goods in stock : on an average, one

month.

Credit allowed by suppliers is one month.

Credit allowed to debtors is two months.

Average time lag in payment of wages is 1½ weeks and 4 weeks in overhead expenses.

Cash in hand and at bank is desired to be maintained at Rs. 50,000.

All Sales are on credit basis only.

Required:

(i) Prepare statement showing estimate of working capital needed to finance an activity level

of 96,000 units of production. Assume that production is carried on evenly throughout the

year, and wages and overhead accrue similarly. For the calculation purpose 4 weeks may

be taken as equivalent to a month and 52 weeks in a year.

(ii) From the above information calculate the maximum permissible bank finance by all the

three methods for working capital as per Tondon Committee norms; assume the core

current assets constitute 25% of the current assets.

Answer

Calculation of Working Capital Requirement

(A) Current Assets

Rs.

(i) Stock of material for 4 weeks (96,000  40  4/52) 2,95,385

(ii) Work in progress for ½ month or 2 weeks

Material (96,000  40  2/52) .50 73,846

Labour (96,000  15  2/52) .50 27,692

Overhead (96,000  30  2/52) .50 55,385 1,56,923

(iii) Finished stock (96,000  85  4/52) 6,27,692

(iv) Debtors for 2 months (96,000  85  8/52) 12,55,385

Cash in hand or at bank 50,000

Investment in Current Assets 23,85,385

(B) Current Liabilities

(i) Creditors for one month (96,000  40  4/52) 2,95,385

(ii) Average lag in payment of expenses

Overheads (96,000  30  4/52) 2,21,538

Labour (96,000  15  3/104) 41,538 2,63,076

Current Liabilities 5,58,461

Net working capital (A – B) 18,26,924

Minimum Permissible Bank Finance as per Tandon Committee

Method I : .75 (Current Assets – Current Liabilities)

.75 (23,85,385 – 5,58,461)

.75 (18,26,924) – 5,58,461 = Rs. 13,70,193

Method II : .75  Current Assets – Current Liabilities

.75  23,85,385 – 5,58,461

17,89,039 – 5,58,461 = Rs. 12,30,578

Method III: .75 (Current Assets – CCA) – Current Liabilities

7.3

.75 (23,85,385 – 5,96,346) – 5,58,461

.75 (17,89,039) – 5,58,461

13,41,779 – 5,58,461 = Rs. 7,83,318








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MSME recollected questions on 15.09.2018

MSME recollected on 15 September 2018

question of msme certificate exam 15/09/2018 on memory based
1.composite loan
2. Current ratio
3.debt equity ratio
4.wto established
6.shareholder of public Limited company
7.Limited liability company
4.minor partner
9.Basel3
10.Npa doubt full assets
11.Msme act 2006
12.dscr ratio
13.working capital gap
14.gross profit Ratio
15.back to back lc
16.preshipment
17.women enterprinure
18.How many culstor
19.techinical viability
20.ssi comes in which act
21.mudra loan maximum
22.msme collateral free loan
24.Mudra Tarun loan
25.medium enterprises Amount in manufacturing unit
26.same small enterprises
27.performance guarantee
28.deferred payments guarantee
29.Loan Appraisal application
30.how many stages of msme
31.sick industry period
32.hand holding company
33.director of public Limited company
34.Cgtmse on 100 lakh
35.Smera credit rating
36.msme based on which credit rating
37.Otms by
38.Sarface comes
39.sarface works
40.Iso90001
41.cluster stage

Bcsbi recollected questions on 15.09.2018

BCSBI recollected question.
15-09-2018 (Many are Repetitive)

1) Educational loan for 3.5 lakhs what is percnt margin?
2) Guarantor ask bank for customer details, will bank provide?
3) A is a customer want deposits Rs. 10000 on 10-05-2017 to Mr. B account, where bank got information that Mr. B have died on 8-05-2017, what would should bank do?
4) FCNR accounts can be opened for a period of maximum?
5) Which one of the following is not a structural difference between marketing of goods and services?
Intangibility/inseparability/Homogeneity/perishability?
6) If bank is not responding to a complaint within how many days’ customer should escalate the matter to Banking ombudsmen?
7) Who has authority to approve research activities in BCSBI?
8) Function of Chief Executive Officer in BCSBI
9) BCSBI rating of member banks is using a scoring scale of
10) As per BCSBI Code regarding Do Not Call registry
11) Change in interest rate on loan products will be informed within?
12) As per BCSBI Code, for collection of dues customers should be contacted between
13) As per BCSBI Code, in case of inoperative/dormant accounts prior to when customer should have informed about this.?
14) In case a return cheque is lost in transit what should bank do?
15) In case of a cheque issued by B to A, amount in figures is Rs. 10,000 and in words is ten thousand which is strike off and written as five thousand.
16) Alteration is duly signed by B. In that case, what bank should do?
17) As per BCSBI code, bank will return all securities/documents/title deeds to mortgaged property of the repayment of all dues
18) though customer has guaranteed someone whose ac is in other branch, can bank retain his property?
19) For a MSE unit to be classified as a sick unit, for what
20) In small accounts, balance at any time should not exceed ----------
21) In order to provide customer satisfaction, bank should
22) Governing Council has max no of member?
23) After 2017 maximum amount claimed in Banking Ombudsman?
24) Bank receive a chq, where everything written in pen except signature in pencil, what bank will do?
25) Power of CEO of BCSBI?
26) Quasi Judicial
27) A gave a chq to B ,who is in different location and after a day A wants to see his chq as he cant recall which amount he had paid..what bank would do ?
28) A comes to Bank with a Minor to open Current account ..what bank do ?
29) What is the % security in MSE loan
30) Maximum collateral free loan amount in MSE

TT and Bill Rates

TT Rates and Bill Rates

Following 4 types of buying and selling rates are important:

1. TT Buying rate

2. Bill Buying rate

3. TT Selling rate

4. Bill Selling rate

In Interbank market, exchange rate is quoted up to 4 decimals in multiples of 0.0025. e.g.

1USD=53.5625/5650

For customers the exchange rate is quoted in two decimal places i.e. Rupees and paisa. e.g. 1

USD =Rs. 55.54.

Amount being paid or received will be rounded off to nearest Rupee.

TT Buying Rate

It is required to calculate when our Nostro account is already credited or

being credited without delay e.g. Receipt of DD, MT, TT or collection of

Foreign bills. This rate is used for cancellation of Forward Sales Contract.

Calculation

Spot Rate – Exchange Margin

Bill Buying Rate Bill Buying rate is applied when bank gives INR to the customer before

receipt of Foreign Exchange in the Nostro account i.e. Nostro account is

credited after the purchase transaction. In such cases.

Examples are:

 Export Bills Purchased/Discounted/Negotiated.

 Cheques/DDs purchased by the bank.

Calculation

Spot Rate + Forward Premium (or deduct forward discount) – Exchange

margin.

TT Selling Rate Any sale transaction where no delay is involved is quoted at TT selling rate.

It is desired in issue of TT, MT or Draft. It is also desired in crystallization of

Export bills and Cancellation of Forward purchase contract.

Calculation

Spot Rate + Exchange Margin

Bill Selling Rate It is applied where handling of documents is involved e.g. Payment against

Import transactions:

Calculation

Spot Rate + Exchange Margin for TT selling + Exchange margin for Bill

Selling

Examples

Q. 1

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%

Solution

TT buying Rate will be applied

34.25 - .274 = 33.976 Ans.

Q. 2

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

Solution

Bill Buying rate of August will be applied.

Spot Rate----34.75 Less discount .60 = 34.15

Less Exchange Margin O.15% i.e. .0512 =34.0988 Ans.

( Transit period is rounded to next month since currency will be cheaper as it is buy transaction)

Q. 3

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. 0.0516

TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.

Q. 4

On 12th Feb, received Import Bill of USD-10000. The bill has to retired to debit the account of

the customer. Inter-bank 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.

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 Ans.

Forward Contract – Due date and Transit period

(Bill Buying Rates and Bill Selling Rates)

If due date after adding transit period and forward period falls in a particular month

Buy Transactions

Quote rates applicable to lower month (if currency is at premium) and same month (if currency

is at discount) due to the reason that currency becomes cheaper and Buy low and Sell High

Sale Transactions

Quote rates applicable to Same month (if currency is at premium) and lower month (if currency

is at discount) due to the reason that currency becomes dearer and Buy low and Sell High

Forward contracts can be booked by Resident Individuals up to USD1lac.

Buy

Transactions-

Currency at

Premium

Transit Period is

rounded off to

lower month in

which due date

falls

Spot Rate on 16.07.2012 is 1 USD = 34.6850/7275

Spot August = 4000/4200, Spot Sep = 7500/7700, Spot Oct = 1.05/1.07

Spot Nov =1.40/1.42

Transit Period = 25 days , Exchange Margin = 0.15%

Calculate Forward Buying Rate of 3 M Usance bill.

Due date of realization of Bill = 16.7.2012 + 3M + 25 days = 9.11.2012

By Rounding Transit period to lower month, Oct Rate will be as under:

34.6850+1.05 - .0536 (exchange margin) = 35.6814

Buy

Transactions-

Currency at

Discount

Transit Period is

rounded off to

same month in

which due date

falls

On 22.7.2013,

Spot Rate is 35.6000/6500 Forward 1M=3500/3000 2M=5500/5000

3M=8500/8000

Transit Period ----20 days Exchange Margin = 0.15%.

Find Bill Buying Rate & 2 M Forward Buying Rate

Solution

Bill Buying Rate (Ready) : Bill Date +20 days = 11.8.2013

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

Solution:

TT Selling Rate will Apply

Spot Rate = 34.3825 Add Exchange margin (.15%) i.e. 0.0516

TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.

Q. 4

On 12th Feb, received Import Bill of USD-10000. The bill has to retired to debit the account of

the customer. Inter-bank 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.

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 Ans.

Forward Contract – Due date and Transit period

(Bill Buying Rates and Bill Selling Rates)

If due date after adding transit period and forward period falls in a particular month

Buy Transactions

Quote rates applicable to lower month (if currency is at premium) and same month (if currency

is at discount) due to the reason that currency becomes cheaper and Buy low and Sell High

Sale Transactions

Quote rates applicable to Same month (if currency is at premium) and lower month (if currency

is at discount) due to the reason that currency becomes dearer and Buy low and Sell High

Forward contracts can be booked by Resident Individuals up to USD1lac.

Buy

Transactions-

Currency at

Premium

Transit Period is

rounded off to

lower month in

which due date

falls

Spot Rate on 16.07.2012 is 1 USD = 34.6850/7275

Spot August = 4000/4200, Spot Sep = 7500/7700, Spot Oct = 1.05/1.07

Spot Nov =1.40/1.42

Transit Period = 25 days , Exchange Margin = 0.15%

Calculate Forward Buying Rate of 3 M Usance bill.

Due date of realization of Bill = 16.7.2012 + 3M + 25 days = 9.11.2012

By Rounding Transit period to lower month, Oct Rate will be as under:

34.6850+1.05 - .0536 (exchange margin) = 35.6814

Buy

Transactions-

Currency at

Discount

Transit Period is

rounded off to

same month in

which due date

falls

On 22.7.2013,

Spot Rate is 35.6000/6500 Forward 1M=3500/3000 2M=5500/5000

3M=8500/8000

Transit Period ----20 days Exchange Margin = 0.15%.

Find Bill Buying Rate & 2 M Forward Buying Rate

Solution

Bill Buying Rate (Ready) : Bill Date +20 days = 11.8.2013

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

USA, rate of interest is 6% whereas in Germany, rate of interest is 3% for

EURO. We will borrow from Germany and lend in USA where

1EURO =1.5 USD

Forward Point Calculation for 3 Months

Spot Rate x Interest rate difference x Forward Period

100 x Nos. of days in a year

= 1.5 x 3 x 90

100*360

=0.01125

3 month swap rate = 1.5 + 0.01125 = 1.5112

Calculation of Interest Differential

Forward Points x Nos. of Days x 100

Forward Period x Spot Rate

= 0.01125 x 360 x 100 =3%

1.5 x 90

Ex.1

Calculate TT selling rate for GBP/INR, if USD/INR is 43.85/87 & GBP/USD is 1.9345/49. A

margin of 0.15% is to be loaded.

Solution ; TT selling rate of GBP/INR

1 GBP = 1.9349 USD

= (1.9349 *43.87)+Margin 0.15%

=84.8841+.1273=85.0114 INR 85.0114-------------------------Ans.

Ex.2

A foreign correspondent intends to fund his Vostro Account maintained with Mumbai branch of

SBI. What rate will be quoted if 1 USD = 44.23/27 and margin is 0.08%

Solution : TT buying rate will quoted

44.23-.035 = 44.195 ---------------------------------------Ans.

Ex.3

If Swiss Franc is quoted as USD = CHF 1.2550/54 and in India, USD =INR43.50/52, how much

INR will exporter get for his export bill of CHF 50000.

Solution :

Swiss Franc will be sold for USD in overseas market and USD will be bought in local market i.e.

Sell Rate of CHF and Buy rate of USD.(Buy Low Sell High in both quotations)

1 USD = 1.2554 CHF and 1USD=INR 43.50

1CHF=43.50/1.2554 = 34.6503

Amount as paid to exporter = 34.6503*50000=17,32,515/- ----------------Ans.

(Both are direct quotations and Maxim Buy Low Sell High will apply in both)

Ex.4

If Swiss Franc is quoted as USD = CHF 1.2550/54 and USD =INR43.50/52, how much INR will

Importer pay for his import bill of CHF 50000.

Solution :

Swiss Franc will be bought against USD in overseas market and USD will be sold in local

market i.e. Buy rate of CHF and Sell rate of USD.

1 USD = 1.2550 CHF and 1USD=INR 43.52

1CHF=43.52/1.2550 = 34.6773

Amount to be received from Importer = 34.6773*50000

=17,33,865/- ----Ans.

(Both are direct quotations and Maxim Buy Low Sell High will apply in both)

Q. 5

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%

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.

(Both are direct quotations and Maxim Buy Low Sell High will apply in both)

Q.6 What rate will be quoted for repatriation of FCNR deposit (spot rate or TT rate)

Ans. No rate as the amount is to be paid in Foreign currency itself.

Forex Dealing

Room

operations

It is a service branch which deals Buying and Selling Operations of the

bank. It manages Foreign currency Assets and Liabilities and also

manages Nostro accounts.

A dealer has to maintain two positions:

1. Funds position

2. Currency Position

Currency position can be Overbought or Oversold.It is called Open

position. Hedging is done to square off the open position.

Mid Office deals with Risk Management.

Back Office takes care of settlement and Reconciliation.

Today cyber crime recollected questions 15.09.2018

CYBER CRIME QUESTIONS OF 15 SEPTEMBER PAPER...
Shared by Praveen  Kachhwaha

 Q1.what is honey pot. Q2. What are steps involved in a Ecommerce transactions. Q3. Difference between durability and consistency. Q4. What is firewell. Q5 .what is wankworm and NASA. Q6. Eucp published in which year. Q7.OLA is not a popular app store. Q8.what is circumstantial evidences. Q9.BOSS (Bharat operating system solution was developed by which organizations -CDAC Q10.what is malicious code writer's. Q11.What is multylayered security Q12. What is data. Q13.blackmailing is an example of cyber extortion. Q14 what is SCADA. Q15.what is cryptolocker Q16.smart card in metrorailway stations are examples Q17.packet filter firewall. Q18.micro ATM. Q19.cross site Scripting. Q20. What is A hectivist...
 Q21 . Rupay card is issued in which year. Q22 what is Trojan hourse. Q23. What is malware. Q.24.data backup is an example of which type of control. Q25.what is Lebance loop modulas oprendi in atm card frauds. Q26.CCTV is an example of which control. Q27.what is Cyber Smearing. Q28.what is operating system vulnerability Q29.what is full form of CISA cyber security information sharing Act. Q30 what is zeus viruses. Q31.what is hashh value and integrity. Q32.w difference between Authirization and Authentication. Q33. What is INFO stealer. Q34.e.what is A beck End Access. Q35.what is meaning of phrase of "Ab initio Unlawfully or Unlegally. Q36.what is security Administration and Quality Assurance. Q37.what is CAPTCHA. Q38.Intentionally misrepresentation of Data is called A Fraud. Q39. What is definition of Control. Q40.What is A John Deo Order. ...

Q41.what is payment walked and digital wallet Q42 what is Anonymous. Q43. What is trapdoor access. AQ44..Total branch automation TMA. Q45. .com and .org are TLD. Q46. TCS fraud in Andhra Pradesh is an example of reasonable security practises and procedures. Q47. The PVCL case in India refers to which Act of IT act Act_69 power to moniter,intercept or Block URL. Q48.one question on CBS and TBA total branch Automations. Q49. Sysadmin sysuser or teller all are examples of Spoofing. Q50.what is A network Analysis. Q51.what is vulnerability Q52.what is DNS sinkholding. Q53.e.Contactless smart card are example of which. Q54 .Lebance Loop card fraud rubber band type material inside Atm Fraud. Q55.what is Contigency pkanning. Q56.what is Nigrean 419 Fraud. Q57.Dumpster Diving. Q58.what is diffrence between Steersman and script kiddle , Q59.Staganography. Q60. What is SSL injections and Cross Site Scripting......
Q61. Preventive detective and compensating contol. Q62. DRONES ARE developed by Drdo. Q63.income tax. Q64.Director of DRDO and it's powers. Q65 .difference between Cert india and nasscom. Q66.TSP/IP. Q67.DDos Attack. Q68. Cyber Smearing and Cyber Defamation. Q69. Cyberwarfare and Cyber terrorism. Q70.BECKDOOR access. Q71.digital signature. Q72.symmetric and Asymmetric encrption. Q73.public and private keys. Q74.command Injections and SQL injections. Q75.details of Masquerding Attack. A76. Trapdoor access and BYOT device. Q77.Sec.43 and Sec 46 of IT act..... Q78.Sec. 69 B deals with...... Q79.Blue Hat hackers are a Part of testing team. Q80.what is crypyolocker and INFO Stealer
Q81.WHAT IS zeus virus Q82.What do you understand by Mean rea or destructive Mindset. Q83.what is DDL DATA definition language Q84.what is pecket filteration firewall Q85.what do you understand by the word ANONMOUS Q85.what is computer vandalism Q86.WHAT IS FRONT END validation control q87.what is DATA Q88.WHAT IS Locard Exchange PRINCIPLE Q89.WHAT is penalty under SECTION 46 AND 47 of IT AMENDMENT ACT Q90.What is xss cross site scripting Q91.what is TCS fraud IN andhrapredseh is EXAMPLE OF q92.WHAT is cybersmearing
 Q93.what is STEERSMAN Q94.WHAT do you mean by ALITE HECKER Q95.IDS is palced between internet and firewell Q96.what is PCIDSS Q97.WHAT is Matrix code barcoding Q98.WHAT is software Piarcy Q99.what is DNS SINKHOLDING Q100.WHAT do you understand by traditional criminals
 Q101.WHAT is beck end access Q102.IN WHICH year ekyc published and its detail Q103.BYOD DEVICE q Q104.WHAT is trapdoor Q105.what is PURPOSE OF FIREWELL Q106. BATCH processing is an example of oltp online transition precessing Q107.WHAT IS UTM Qq108. Loss of reputation is a serous adverse effect of DDOS ATTACK Q109.THE disciussion paper held on payment and settlement system of RBI held on 2013 was main focus on ENHANCED USE OF ENTERNET BANKING AND E COMMERCE q110.what is B2G business to government E COMMERCE TRANSCTION q111.boss was developed by cdac Q112.WHAT IS STAGANOGRAPHY Q113. WHAT IS ALGORITHM
Q114.WHT IS PKI Q.115 WHAT IS HONEY POT q116. WHAT IS MICROATM q117.DETAILS ABOUT I4C AND CERTIN Q118.SATYAM AND SIFY CASE q119.PUCL CASE IS AN example of sec.69 Q120.WHAT IS VBV THESE ARE RECOLLECTED QUESTION OF PAPER ON 15 SEPTEMBER 2018

MSME recollected on 15 September 2018

question of msme certificate exam 15/09/2018 on memory based
1.composite loan
2. Current ratio
3.debt equity ratio
4.wto established
6.shareholder of public Limited company
7.Limited liability company
4.minor partner
9.Basel3
10.Npa doubt full assets
11.Msme act 2006
12.dscr ratio
13.working capital gap
14.gross profit Ratio
15.back to back lc
16.preshipment
17.women enterprinure
18.How many culstor
19.techinical viability
20.ssi comes in which act
21.mudra loan maximum
22.msme collateral free loan
24.Mudra Tarun loan
25.medium enterprises Amount in manufacturing unit
26.same small enterprises
27.performance guarantee
28.deferred payments guarantee
29.Loan Appraisal application
30.how many stages of msme
31.sick industry period
32.hand holding company
33.director of public Limited company
34.Cgtmse on 100 lakh
35.Smera credit rating
36.msme based on which credit rating
37.Otms by
38.Sarface comes
39.sarface works
40.Iso90001
41.cluster stage

Posted by Niranjan Kumar 

SECURITISATION & RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF

SECURED ASSETS ORDINANCE 2002 - SARFAESI Act - 2002

1. Is it necessary to classify the account as NPA for initiating action under the Act? YES

2. The above Act is applicable in respect of debts due to Nationalised Banks only

3. The Provisions of the Act are applicable in respect of All NPA a/cs with liability above Rs. 1 lac

4. Enforcement is not possible under this Act in respect of Time barred debts, where the present

liability is less than 20% of principal + int. &where the secured asset is an Agricultural Land

5. Whether limitation is suspended or saved while proceeding under the act? No

6. Movables seized under this Act have to be got valued by Valuer in the panel approved by the

Board of the Bank

7. When there is more than one creditor in respect of a secured asset, action under this Ordinance

can be initiated only if 75% of creditors in value agree

8. Whether advocate can issue notice under the Act? No.

9. Under SARFAESI ACT 2002 whether demand notice is required to be issued to Guarantor also?

Only when the guarantor extends his property as a security apart from his Personal guarantee

10. Can appeal under SARFAESI ACT 2002 would be made to DRT even in cases for claims less than

10 lakhs Appeal can be made with DRT in all the cases

11. For an agricultural loan, if any security other than agricultural land is taken whether it can be

enforced under the act? The Act is not applicable only where the security is agricultural land and

hence, we can enforce the securities in the referred case.

12. Can the Bank entrust the work of taking possession of securities to seizure agent? Authorised

officer alone is entitled to take possession of the property

13. Who is the authority to fix the reserve price when the assets are auctioned? Authorized officer in

consultation with the appropriate authority

14. Who can issue the sale certificate under the act? Authorised officer (SMGS IV and above)

15. Whether Banks attach salary of the borrower/guarantor under the act? No, as these are not

secured assets

16. Provisions of SARFAESI Act 2002 enables the Bank to sell their financial assets to Asset

reconstruction company AND Securitisation company

17. When Mortgaged property is a tenanted property before the mortgage whether under SARFAESI

Act Tenant can be evicted NO Bank has to evict the tenant only through eviction proceedings as per

Law covered under Indian Tenancy Act.

18. Whether the Lease/tenancy created after the Mortgage will bind the Bank No it is not binding

on the Bank

19. Whether the Mortgagor has powers to lease the property As per Sec 65A of Transfer of Property

Act the Mortgagor can lease the property but not for more than 6 months and that too the lease is





subject to mortgage

Current Affairs on 15th September 2018

Today's Headlines from www:

*Economic Times*

📝 India's YoY exports up 19.21% in August

📝 August trade deficit narrows to $17.39 billion from $18.02 billion in July

📝 22.5 crore e-way bills generated since rollout: GSTN

📝 YES Bank to raise Rs 3,042 crore via bonds

📝 Morgan Stanley sees Sensex at 42,000 level by September 2019

📝 India ranks 3rd globally in terms of number of family-owned businesses

📝 RInfra consortium submits Rs 735 cr worth bank guarantees for sea link project in Mumbai

📝 Voltas Beko to export Make in India products

*Business Standard*

📝 AIF investments swell by 90% to Rs 750 billion in June quarter

📝 First USFDA approval for Sun Pharma's Halol plant after warnings

📝 StarGSM Cellular mulls setting up mobile manufacturing facility in Odisha

📝 Hinduja Leyland Finance to raise Rs 5 billion as primary capital

📝 US firm asked to pay over $300,000 to 12 H-1B workers for giving low wages

📝 WPI inflation drops to 4-month low of 4.53% in August vs 5.09% in July

📝 US sanctions impact: India's monthly Iran oil imports to drop by about half

*Financial Express*

📝 RBI announces OMO purchase for government dated securities

📝 India raises concern over CPEC project at UN

📝 Donald Trump readies tariffs on $200 billion more Chinese goods despite talks, claims source

📝 Forex reserves fall by $819.5 million to $399 billion

📝 Cooking oil imports rise 11% in August

📝 DoT eases wifi-equipped phones’ import, to speed up imported handsets rollout

📝 Nafed to begin disposal of 13k tonne buffer onion stock

*Mint*

📝 Govt announces five measures to stabilize rupee, curb current account deficit

📝 Infosys spends $76 million to buy Finnish firm Fluido

📝 Quikr looks to raise up to $150 million

📝 Cisco to step up investments in India; to focus on 5G, entrepreneurship

📝 Fitch downgrades JLR outlook, adding to Tata Motors woes

📝 India’s fuel demand rose 0.8% in August

📝 Bharti Airtel picks banks for London IPO of Africa business: Report.

Credit Information Companies (N H Siddiqui Working Group)

Credit Information Companies (N H Siddiqui Working Group)

A Credit Information Company (CIC) is an independent organization licensed by RBI that enters into an agreement with banks, NBFCs

and financial institutions (called credit institutions), as its members and aggregates data and identity information for individual

consumers and business entities, from its members.

Legal provisions : The Credit Information Companies (Regulation) Act, 2005 was operationalised with effect from December 14,

2006. In terms of Section 15(1) of the Act, every credit institution has to become member of at least one credit information

company within a period of three months from commencement of the Act or any extended time allowed by RBI on application.

As all commercial banks fall under the definition of credit institutions (Section 2 of the Act), they are required to take

membership of at least one credit information company and provide credit data (positive as well as negative) to the credit

information company in the format prescribed by the credit information company.

Sharing of credit report with customers : Section 21 of the Credit Information Companies (Regulation) Act, 2005, provides that any

person, who applies for grant or sanction of credit facility, from any credit institution, may request to such institution to furnish him a

copy of the credit information obtained by such institution from the credit information company. It also provides that every credit

institution shall on receipt of request furnish to such person a copy of the credit information subject to payment of charges specified

by RBI.

Charges for report : As per Credit Information Companies Regulations, 2006, framed under the Act, RBI has prescribed a

maximum fee of Rs. 50/- (Rupees fifty only) for the purpose.

Source of data : Members of the credit information companies, submit data of their borrowers on a regular basis which is

aggregated by the bureau and presented to its members. A credit bureau only reproduces information that is submitted by its

members.

With CIC Act coming into force, RBI advised banks (Jul 01, 2013) that consent of the borrower to share information with CIC,

prescribed earlier, need not be insisted upon by banks.

Wilful defaulters Banks/Pis are required submit the list of suit-filed accounts of wilful defaulters of Rs.25 lakh and above as at end-

March, June, September and December every year to a credit information company which has obtained certificate of registration

from RBI in terms of Section 5 of the Credit Information Companies (Regulation) Act, 2005 and of which it is a member. Credit

Information Companies have also been advised by RBI to disseminate the information pertaining to suit filed accounts of Wilful

Defaulters on their respective websites.

List of Credit Information Companies (July 2015)

1. CIBIL, 2. Experian Credit Information Company of India Private Ltd. 3. Equifax Credit Information Services Private Ltd., 4. High

Mark Credit Information Services Private Limited.

Copra and ombudsman

COPRA & OMBUDSMAN

1. Under COPRA 1986, what is the limit upto which State Forum can handle cases? Above 20

lakhs & upto 100 lakhs

2. What is the structure of consumer disputes redressal forum? Three Tier system

3. Limitation for filing complaint under COPRA from the date of cause of action is:Within 24 months

4. If a consumer is aggrieved with the verdict of the National Commission under C P Act, whether he

can appeal? YES. He can appeal to the Supreme Court

5. Under COPRA, a consumer can file a case at National Commission if the compensation claimed

exceeds: Rs. 100 lakhs



6. What is the cut-off limit for entertaining cases under COPRA at the District Forum? Rs. 20 lakhs

7. Fine for preferring vexatious complaints under COPRA is Rs. 10,000/-

9. When the new Banking Ombudsman Scheme was introduced? 1-1-2006.

10. What is the status of Consumer courts? Consumer Courts are quasi judicial authority

11. When a customer/Complainant can approach the Banking Ombudsman for redressal of

grievance? After expiry of 30 days from the date of his complaint to the Branch if his Complaint is

not addressed satisfactorily

12. On what ground the Banking Ombudsman can reject complaints?

If the complaint made is beyond pecuniary jurisdiction, then the Banking Ombudsman can reject the

complaints.

13. The underlying difference between approaching a Banking Ombudsman and filing a complaint

under the Consumer Protection Act is Customer/complainant can approach under CP Act

directly without prior notice to Bank.

14. Whether a person who has got an award under Ombudsman Scheme can prefer complaint under

COPRA also? YES.

15. An Ombudsman is appointed by whom? The Ombudsman is appointed by RBI.

16. Banking Ombudsman can act as Arbitrator? No. Arbitration provision has been removed

17. When a Bank is aggrieved on the Award given by the Ombudsman, what is the Alternative? Bank

can prefer appeal before the Appellate Authority

18. When the Appellate Authority finds that the reasons given by the Bank for appeal sound and

merit consideration, what is the alternative?

Record his observations and revert the matter to the ombudsman for reconsidering the issue

19. What are conditions for filing appeal before State forum against the orders of district forum

Appeal to be filed against orders of District Forum in State forum after depositing 50% of amount

granted by the District forum or Rs. 25000 whichever is less.

20. What are conditions for filing appeal before National forum against the orders of State forum

Appeal against Orders of State Forum can be filed in National Forum after depositing 50% of

amount granted by State forum or Rs. 35,000 whichever is less

21. What are the conditions for filing appeal before Supreme Court against the orders of National

forum Appeal against the orders of National Forum can be filed before Supreme Court after

depositing 50% of decreed amount by the National Commission or Rs.50,000 which ever is less.

22. What is the fine for non-compliance of orders of Consumer Forum Non-compliance of orders

of forum will attract a fine of Rs. 2000 UPTO Rs. 10,000 or imprisonment of 1- 3 years or

both.



23. What is the Limitation period for filing of appeal against the orders of a particular Forum in the

Higher Forum 30 Days of receipt of Order

Types of letter of credit

TYPES OF LETTERS OF CREDITS



Documents against

Payment LC or Si ght

LC

DP LCs or Sight LCs are those where the payment is made against documents on presentation.

(DA = Documents against payment, DP=Documents against acceptance)

Documents against

acceptance or

us ance



DA LCs or Acceptance LCs are those, where the payment is to be made on the maturity date in terms

of the credit. The documents of title to goods are delivered to applicant merely on acceptance of

documents for payment. (DA = Documents against payment, DP=Documents against acceptance)

Deferred Payment LC It is similar to Usance LC but there is no bill of exchange or draft. It is payable on a future date if

documents as per LC are submitted.



Irrevocable and

revocable credits

The issuing bank can amend or cancel the undertaking if the beneficiary consents.

A revocable credit is one that can be cancelled or amended at any time without the prior knowledge

of the seller. If the negotiating bank makes a payment to the seller prior to receiving notice of

cancellation or amendment, the issuing bank must honour the liability.

With or without recourse

Where the beneficiary holds himself liable to the holder of the bill if dishonoured, is

considered to be with-recourse. Where he does not hold Himself liable, the credit is said to be

without-recourse. As per RBI directive dated Jan 23, 2003, banks should not open LCs and purchase /

discount / negotiate bills bearing the 'without recourse' clause.

Restricted LCs A restricted LC is one wherein a specified bank is designated to pay, accept or negotiate.

Confirmed Credits A credit to which the advising or other hank at the request of the issuing bank adds confirmation that

payment will be made. By such additions, the confirming bank steps into the shoes of the issuing

bank and thus the confirming bank negotiates documents if tendered by the beneficiary.

Transferable Credits The beneficiary is entitled to request the paying, accepting or negotiating bank to make available in

whole or part, the credit Cu one or more other parties (Article 48 of UCPDC). For partial transfer to

one or more second beneficiary/ies the credit must provide for partial shipment.



Back to back

credits

A back to back credit is one where an exporter received a documentary credit opened by a buyer in

his favour. He tenders the same to the bank in his country as a cover for opening another LC in

favour of his local suppliers. The terms of such credit would be identical except that the price may

be lower and validity earlier.

Red Clause

Credits

A red clause credit also referred to a packing or anticipatory credit has a clause permitting the

correspondent bank in the exporter's country to grant advance to beneficiary at issuing bank's

responsibility. These advances are adjusted from proceeds of the bills negotiated.



Green Clause

Credits

A green clause LC permits the advances for storage of goods in a warehouse in addition to preshipment

advance

.

Stand-by

Credits

Standby credits is similar to performance bond or guarantee, but issued in the form of LC. The

beneficiary can submit his claim by means of a draft accompanied by the requisite documentary

evidence of performance, as stipulated in the credit.



Documentary or clean

credits

When LC specifies that the bills drawn under LC must accompany documents of title to goods such as

RRs or MTRs or Bills of lading etc. it is termed as Documentary Credit. If any such documents are not

called, the credit is said to be Clean Credit.



Revolving Credits These provide that the amount of drawings made thereunder would be reinstated and made

available to the beneficiary again and again for further drawings during the currency of credit.

Instahnent credit It is a letter of credit for the full value of goods but requires shipments of specific quantities of

goods within nominated period and allows for part-shipment. In case any instalment of shipment is

missed, credit will not be available for that and subsequent instalment unless of LC permits the

Current Affairs on 14th September 2018

Today's Headlines from www:

*Economic Times*

📝 Govt seeks help from IT biggies to make Ayushman insurance scheme fraud free

📝 E commerce companies set to collect tax from sellers

📝 Government may auction power contracts with coal supplies

📝 India offers safe haven as default risks rise in EMs

📝 TDS/TCS provisions under GST to come into effect from October 1

📝 No word from government to subsidise fuel: ONGC

📝 Vedanta makes gas discovery in Krishna Godavari block

📝 Digital commerce to touch Rs 2.37 lakh crore by December 2018: IAMAI

*Business Standard*

📝 Market for vitamin D likely to touch $2.5 billion by 2020, says report

📝 Hindustan Power looking to acquire stressed thermal power plants

📝 Titan's recraft strategy pays off, sees watch business return to growth

📝 Artificial Intelligence related jobs on the rise in India, says study

📝 New launches and strong growth pressures weigh on Crompton Consumer

📝 Exim Bank expects merchandise, non-oil exports to grow over 12% in Q2 FY'19

📝 PSUs cut dividend 2nd time in a decade as cash reserves continue to dwindle

📝 Essar bid: ArcelorMittal assails NCLAT order asking it to pay Rs 70 bn

*Financial Express*

📝 Atlas Copco India to focus on industrial business

📝 Air India puts up for re-auction properties worth Rs 350 cr

📝 US lawmakers ask Google if it will rejoin Chinese market

📝 NBCC to buy HSCC for Rs 285 crore

📝 United Bank of India increases MCLR by 5 basis points

📝 Vistara rolls out complimentary in-flight entertainment across its flights

📝 Pawan Hans stake sale: Government extends deadline for initial bids

*Mint*

📝 PE investments in August at lowest in 6 months, buyouts on rise: report

📝 Jeff Bezos launches $2 billion fund for homeless

📝 Patanjali enters dairy business, to sell cow milk

📝 Voltbek eyes ₹10,000 crore from sale of appliances

📝 Railways eyes ₹15,000 crore in 10 years from non-fare revenue

📝 Trai decides to reduce scope of regulation for WhatsApp, Skype

📝 ITC enters hand sanitiser category, plans to turn Savlon into Rs 500 crore brand.

Very important Amendments for KYC aml 2005 June 2017 notification

Prevention of Money Laundering (Maintenance of Records) Rules, 2005

Amendments vide Notification dated 1st June 2017

Salient Highlights

The Prevention of Money Laundering (Maintenance of Records) Rules 2005 have been

amended vide Gazette Notification dated 1st June 2017. Consequential, modifications in

RBI KYC Directions are yet to be issued. This memo captures the highlights of the

amendments made. Only those aspects that have been changed are enumerated below.

Other provisions continue to be as already stated in these Rules.

Changes Made:

(1) ‘Officially Valid Document’ (OVD) definition amended – the Permanent Account

Number (PAN) Card; and the letter issued by the Unique Identification Authority of India

have been removed from this definition.

(2) Now OVD definition includes - the passport, the driving licence, the Voter's Identity

Card issued by Election Commission of India, job card issued by NREGA duly signed by

an officer of the State Government, the letter issued by the National Population Register

containing details of name, address or any other document as notified by the Central

Government in consultation with the Regulator;

(3) KYC Document Requirement for an Individual changed –

(a) An individual eligible for Aadhaar number is required to submit (i) the Aadhaar number

(AN); (ii) the Permanent Account Number (PAN) or Form No. 60.

(b) An individual (eligible for AN), who does not have AN, is required to submit (i) proof

of application of enrolment for Aadhaar (in lieu of AN) and (ii) PAN (and not Form 60).

(c) An individual (eligible for AN), who does not have both AN and PAN, is required to

submit (i) proof of application of enrolment for Aadhaar (in lieu of AN), (ii) one certified 

copy of an OVD, and (ii) Form 60.

(d) An individual not eligible for AN is required to submit PAN.

(e) An individual, who is not eligible for AN and does not have PAN, is required to submit

(i) one certified copy of an OVD, (ii) Form 60, and (iii) one recent photograph .

(f) An individual is also required to submit such other documents (including in respect of

the nature of business and financial status of the client) as may be required by the reporting

entity (bank, etc.) (also in earlier rules).

(h) In case of ‘small accounts’ on suspicion of money laundering/ terrorism financing/ other

high risk scenarios to establish identity of the individual customer through (i) an OVD, and

(ii) AN, and where AN has not been obtained proof of application for AN.

(i) In case of ‘small accounts’ on completion of initial 12 month period or additional 12

month period (as the case may be) to obtain an OVD. (as per earlier rules)

(4) KYC Requirement for juridicial entities – These have been modified in repsect of KYC 

documents pertaining to individuals connected with these entities. Instead of an OVD (as

per earlier rules) the requirements for the concerned persons are as indicated below.



No.

Type of

Entity

To obtain in respect of KYC Requirement





1 Company managers, officers or

employees holding an

attorney to transact on

the company's behalf

(a) (i) AN, and (ii) PAN/ Form 60.

(b) If does not have AN, (i) proof of

application of enrolment for Aadhaar (in

lieu of AN) and (ii) PAN (and not Form

60)

(c) If does not have both AN and PAN, (i)

proof of application of enrolment for

Aadhaar (in lieu of AN), (ii) one certified

copy of an OVD, and (ii) Form 60.

(d) If not eligible for AN and does not

have PAN, is required to submit (i) one

certified copy of an OVD, and (ii) Form

60.





2 Partnership

Firm

person holding an

attorney to transact on

3 Trust its behalf

4 Unincorpora

ted

association

or Body of

individuals

(5) On receiving AN to carry out authentication using either e-KYC or Yes/No

authentication facility provided by Unique Identification Authority of India (UIDAI).

(6) NRIs and residents in the States of Jammu and Kashmir, Assam or Maghalaya who do

not submit PAN to submit (i) one certified copy of an OVD, and (ii) photograph and (iii)

such other document including in respect of the nature of business and financial status as

may be required by the reporting entity.

(7) If a person eligible for AN and PAN does not submit these at the time of commencement

of an account based relationship, should submit the same within a period of six months

from the date of the commencement of the account based relationship. If AN and PAN are

not submitted within 6 months, the said account shall cease to be operational till submitted.

(8) For existing clients, eligible for AN and PAN should submit these by 31st December,

2017. If AN and PAN are not submitted by 31st December, 2017, the said account shall

cease to be operational till submitted.

(9) In case the identity information relating to AN and PAN does not have current address

of the client, the client shall submit an OVD to the reporting entity.

MSME very important MCQS

 MSME Very important  MCQs

1. Which sector TUF applies to? a)Textile* b)Shoe manufacture, c)Food processing,

d)Glass manufacture

2. Which one of the following institution has initiated Project uptech scheme?

a)SIDBI, b)SBI*, c) IDBI, d)TIFAC

3. Market failure refers to : a) Imperfect markets, b)Perfect markets*, c)Traditional

markets

d)Both (a) and (b) above

4. Which one of the following factors is not included in the Market Gap?

a)Innovations, b)Lack of capital, c)Lack of premises, d)Technology*

5. BDS Supervisor is known as : a) Facilitator, b)Team Leader, *c) Correspondent ,

d)Group leader

6.Under the Revised RBI Guidelines on Priority Sector Lending, loans to food and agro

processing units are classified under a) Agriculture *b) MSME c) Others d) None

7. Under the Revised RBI Guidel ines on Priority Sector Lending, loans to

medium enterprises are not included for the purpose of reckoning of advances

under the priority sector. a) True b) False*

8. Bank loans up to per unit to Micro and Small Enterprises and to Medium

Enterprises under services sector are classified under priority sector. a) Rs 5 and 10

crore* b) Rs 10 and 15 crore c) Rs 10 and 5 crore d) Rs 15 and 10 crore

9. The quantum of loan limit under the revised General Credit Card (GCC) Scheme is

a) 1 lakh b) 2 lakh c) 5 lakh d) no ceiling on the loan amount*

10.The maximum claim settlement under Credit Guarantee Trust Scheme for Micro and

Small Enterprises (CGTMSE) is at Rs lakhs. a) 50 b) 62.5 c) 75 d) 200*

11. MSME loans covered under Guarantee Fund Trust for Micro and Small Enterprises

(CGTMSE) attracts risk weight for capital adequacy purpose: a) Five b) Fifty c)

Hundred d) Zero*

12. Provisioning requirements in respect of Standard Assets under Direct Advances to

agriculture and SME Sectors : a) A general provision of 0.1% of total outstanding

b) A general provision of 0.25% of total outstanding,* c) A general provision of

0.4% of total outstanding d) No provision is required to be made

13. The rate of subsidy under PMEGP scheme ranges from ___% to ___% : a) 10&

15 b) 15 & 20 c) 15 & 35* d) 20& 40

14. Advances to MSMEs up to Rs crore may be done on the basis of credit scoring

model.

a) 1 b) 2* c) 3 d) 4

15. The Chairman of Committee on Financial Architecture for Micro, Small and

Medium Enterprises (MSME) sector set up by Government of India is

a) M V Nair b) K C Chakrabarty c) UshaThorat d) K V Kamath*

16. The small finance bank shall primarily undertake finance to the following entities

a) unserved and underserved sections ,b)small business units, c) unorganized

sector ,d) micro and small industries, e) all the above*

17. MUDRA stands for : a)Metropolitan and Urban Development Regulatory Authority

b)A scheme under Ministry of AYUSH

c)Micro Units Development and Refinance Agency* ,d)None of the above

18. As per RBI guidelines, a MSME unit is treated as sick when

a) any of the borrowal account of the enterprise remains NPA for three months or

more

b) There is erosion in the net worth due to accumulated losses to the extent of 50% of its net

worth, c) Any of the borrowal account of the enterprise remains NPA for 6 months or more. d) a and b*

19. Micro (manufacturing) enterprises are defined as those whose original investment in Plant and

machinery do not exceed Rs. ... a) 5 lakhs b) 10 lakhs c) 25 lakhs *d) 50 lakhs

20. Under the proposed MSMED Amendment Bill, 2014, the revised investment limit in plant and

machinery for micro (manufacturing) enterprises is at Rs

a) 25 lakhs b) 50 lakhs *c)75 lakhs d)100 lakhs





21. Under the Debt Restructuring Mechanism for MSMEs, the following entities will be considered.

a) All non-corporate MSMEs irrespective of the level of dues to banks.

b) All corporate MSMEs, which are enjoying banking facilities from a single bank, irrespective of the

level of dues to the bank.

c) All corporate MSMEs, which have funded and non-funded outstanding up to Rs.10 crore under

multiple/ consortium banking arrangement, d)All the above*

22. The Code of Bank's Commitment to MSE's which set minimum standards of banking and practices

for banks to follow when they are dealing with MSEs has been formulated by a)BCSBI* b) SIDBI c)

RBI d) GOI

23. Which agency provides subsidy for credit rating of SMEs

(a) SIDBI (b) DIC (c) NSIC *d) SMERA

24. Banks are mandated not to accept collateral security in the case of loans upto Rs. extended to units

in the MSE sector. a) 25 lakh b) 10 lakh* c) 5 lakh d) 1 lakh

25. The quantum of loan limit under the revised General Credit Card (GCC) Scheme is

a) 1 lakh b) 2 lakh c) 5 lakh d)no ceiling on the loan amount*

26. The concept of teaching adults is called : a) Anagogy, b) Andragogy*, c) Pedagogy, d) Mystagogy

27. An individual needs the following to perform a task (i)

Knowledge (ii) Skill (iii) Attitude iv) All of these*

28. The first step in training design is the identification of a) Trainee b) Training Needs*

c) Training Institution d) Training Materials

29. Active Methods of Training are, a)Lecture, b)Group Discussion, c) Demonstration, d)Case Study

i) a,b,c ii) b,c,d iii) b,d* iv) a,b,c,d

30. Training can solve all performance problems : a) True b)False*

31. Make in India programme aims : a) To increase GDP growth b) To increase tax revenue.

c) Aims at high quality standards, d) Minimizethe impact on the environment, e) All of these*

32. Governing Council of Skill India Mission is Chaired by a) MSME Minister b) Finance Minister

c) Prime Minister* d) Deputy Chairman of NITI Ayog

33. What is eBiz?

a) A single window IT platform for services of all Central GovtDepts and Ministries**

b) A single window IT platform for services of all State GovtDepts and Ministries

c) A single window IT platform for services of all International Agencies ,d) None of these

34. What is NICDA?

a) National Institute for Coal Development Authority

b) National Industrial Corridor Development Authority**

c) National Information Centre for Data Administration , d) None of these

35. TReDS stands for

a) Treasury Rupee Dealing System

b) Trade Remittance and Discounting System

c) Trade Receivables Discounting System, **d) None of these

36.The total loans and advances extended by commercial banks to Micro

and Small Enterprises for 2014-15 is:a) Rs.8,461 bn, b)Rs.6,872 bn, c) Rs.25,229bn, d)Rs.9,645bn**

37.Small Finance Banks can lend to :

a)Small business units b) MSEs c)Unorganized Sector d)All of these**

38.Ministries/ Govt departments/PSUs to source % of their requirements from MSE units.

a) 10 b)15 c)20** d)5

39.The implementing agencies of CLCSS are : a)SIDBI, b)NABARD c)SIDBI & NABARD d)RBI &**

SIDBI

40.UNIDO has identified industrial clusters for development

a)450 b)288 c)388 **d)121

41.As per MSMED Act, time limit for buyer to make payment to MSMEs is,

a) 60 days b)180 days c)90 days d)45 days**

42.Maximum claim amount settled for micro enterprises with loan upto

Rs.5.00 lakh under CGTMSE is: a)85% *b)80% c)75% d)50%

43.Application for guarantee cover should be lodged with CGTMSE within of loan sanctioned.

A )Next months b) next quarter** c) within six months d) no time limit

44.Pre-requisites for lodging claims with CGTMSE are,

a) Guarantee Cover is in force , b) Account classified as NPA ,c) Recall Notice issued

d) Lock-in period expired**, e) Recovery proceedings initiated : i) a&b, ii)a,b,c iii) a,b,c,d iv)All

45. Debt equity ratio is:

a) Total outside liability/ Tangible Net Worth**

b) Long Term Liabilities/Tangible Net Worth ,c) Both the above , d) None of the above

46. A very high debt equity ratio means the unit is :

a) Having more own funds than outside liabilities**

b) Having more outside liabilities than own funds

c) Having funds surplus ,d) Having no equity at all

47. The debt-equity ratio of a firm has increased (increase in long term sources) along with its current

ratio. Which of the following is certainly true?

a) Sources of funds have been utilised for purchase of fixed assets

b) Sources of funds have been used for payment of current liabilities

c) Sources of funds have been used for payment of current assets ,d) (b) & (c) both**

48. Debt service coverage ratio is (DSCR) :

a) Profit after tax + depreciation - interest on term loan/annual term loan instalment + interest on

term loan

b) Profit before depreciation and Interest / Interest and annual instalment of Term Loan***

c) Profit/debt, d) None of the above

49.Desirable current ratio for a borrower is: a) 1:1 b) 1.33:1 **c) 2:1 d) None of the above

50. If current ratio is above 2:1, it generally means that the firm :

a) Has very high investment in current assets

b) Does not require working capital from the Bank

c) Liquidity is very high , d) All the above**

51. Quick Ratio is:

a) Other name of acid test ratio**

b) Equal to quick assets: quick liabilities

c) Both the above ,d) None of the above

52. Assets turnover ratio of a company is increasing, which indicates:

a) Low capacity utilisation

b) Better capacity utilisation**

c) Increase in liquidity d) None of the above

53. The term Quasi Equity refers toa)

unsecured loans from friends and relatives**

b) unpaid share capital c) capital reserve, d) all of the above

54. An overdraft/cash credit account is considered as NPA if t remains

a) Out of order for more than 90 days **, b)Out of order for more than 180 days

c) Out of order for more than 270 days, d) Out of order for more than 360 days

55. The Standard Provision for MSME loans prescribed by RBI is: a)0.40% b)0.25%**, c)1.00%

d)0.75%

56. SMEs are important for the nation's economy because they significantly contribute to:-

industrial production ,b )exports, c) employment, d) innovation, e) all above**

57. The minimum and maximum members that can exist in a partnership firm are

___________ & _________ : a)2 & 10, b) 2 & 100,** c)2 & 30, d) 2 & 50, e)No restriction

58. Public Ltd Company has minimum shareholders :a)50, b)20, c)100, d)7**

59. MSMED Act was enacted in ________ :a) 2005, b)2008, c)2006**, d)2010

60.Which one of the following activities is not included in Micro & Small (Service)

Enterprises? : a)Professional persons, b)Small business, c)Dairy***, d) Self employed persons

61.PPP denotes ________ :a) Private Public Participation, b) Promoter Partner Participation

c) Public Private Participation,*** d) Partner Private Public



62. Which one of the following stages of development of SMEs regulations are not required?

a)Entry stage, b) Operational stage, c) Manufacturing stage,*** d)Implementation stage

63. LLP stands for _________: a)Long term Liability Participation, b) Limited Liability Partnership**

c) Legitimate Liability Partnership, d)Liability Limited Partnership

64. Composite Loan limit for SSI that can be sanctioned without security is Rs.__: a)1 Mn. , b)2.5 **Mn.

c) 50,000/-, d) Any limit

65. What is the minimum and maximum number of participants in LLP? :a)2, 50, b) 2, 20

c) 2, 100, d)2, unspecified*

66. The organizational set up of SSI came into being in : a)1950 **, b)1954, c) 1969 , d)1975

67. Which one of the following support services are not provided by MSME DO?

a)Training for entrepreneurship development, b)Financial assistance,** c)Tool making

d) Preparation of project and product profiles

68. EDIs stands for ________: a)Export Development Institute, b)Entrepreneurship

Development Institute, **c)Entrepreneurship Development of India, d)Entrepreneurship Design

Instruments

69. Which one of the following organizations is not under the control of the State Government?

a) Directorate of Industries, b)District Industries Centre, c) Technical Consultancy Organization

d)EDII*

70. What is the maximum amount of guarantee available for Micro Enterprise upto credit limit of

Rs. 5.00 Lakh? : a) Rs. 5.00 Lakh**, b)Rs. 3.75 Lakh, c)Rs. 2.50 Lakh, d) Rs. 4.25 Lakh

71. What is 'hurt money'? :a) Equity (***b)Loan, c) Debt d) Venture Capital

72. Hybrid Capital means: a) Equity+ debt,** b)Debt+ loan,

c)Equity+ Venture capital, d)Insurance+ credit card

73. Venture Capital means: a)High Risk Fund, b)Private equity,

c) Dedicated pools of capital privately held,*** d)Share capital

74. Pre-shipment credit refers to : a)Financing ships for export ,b)Payment to supplier before shipment

of goods, c)Working capital finance to enable the exporter to procure material for export,***

d)Financing for repairs to ships

75. Post Shipment Credit refers to: a) Financing the shipping companies, b)Credit posted after shipping

the goods, c)Working capital finance from the time of export to the time of actual***

realization of dues , d) Loans and Advances against documents covering shipment of goods.

76.The objective of Make in India programme is,

a) to encourage companies to manufacture their products in India**

b) to encourage foreign companies to manufacture their products in India

c) to encourage companies to manufacture their products in India and export abroad

d) to encourage companies to manufacture their products in India for domestic markets

77. The Make in India Programme is focusing on sectors of the economy for job creation and skill

enhancement : a) 10 sectors b) 17 sectors c) 22 sectors d) 25 sectors**

78. MSE credit by scheduled commercial banks as per cent of ANBC as at the end of March 2014 stood

approximately at a) 15.0 **b) 30.5 c) 50.5d) 75.5

79. As per 4th NSSO survey, extent of financial exclusion in MSME sector is around

a) 25% b) 50% c)75% d) 93%**

80. Under the Revised RBI Guidelines on Priority Sector Lending,the sub-target for lending to micro

enterprises is fixed at a) 8% b) 9% c)7.5%** d) 7.0%

81. Which one of the following is not a characteristic of a successful cluster? : a) Inter-firm cooperation

b)Cooperation blended with competition , c) Sectoral specialization d)Sharing of capital resources*

82. Which one of the following approaches is not applicable in respect of MSMEs? a) Work together

b)Produce together goods and services, c) Share benefits individually **d)Come together

83. Which one of the following steps is not involved for launching a Cluster Development project?

a) Identification of cluster, b)Capacity building,** c) Creation of cluster, d)Formulation of final selection

84. UNIDO Projects evolve following various steps for promoting networking and development.

i) Mapping the competitiveness, ii)Assisting the cluster's actors for efficient supply chain management

Capacity building , iii) Providing advisory services, iv) Setting special financial institutions for SMEs

a) (i), (iii), (iv), (v) is correct, b)(ii), (iii), (iv), (i) is correct**

c) (iii), (v), (iv), (ii) is correct, d) (v), (i), (ii), (iv) is correct

85. UNIDO stands for : a)United Nations Institution Development Organisation

b)United Nations Innovative Design Organisation

c) United Nations Industrial Development Organisation,** d) None of the above

86. Rehabilitation of a sick unit can be taken up if it : a)creates employment, b) is a profitable unit

c) proves viable after rehabilitation,** d)repays all outstanding dues immediately.

87. Viability should be examined and approved by: a)State level Inter-institutional Committee, b) The

concerned Bank, **Commissioner of Industries of the State Government, d)Association of Sick

Industries



88. OTS scheme refers to : a)Sanctioning of ad hoc limits to the Sick Units, b) Settlement of all

outstanding dues as on a specified date as agreed to between the Bank and the Borrower,***

c) Sanction of rehabilitation package, d)Consortium lending of banks to the sick unit.

89. What is NICDA?

a) National Institute for Coal Development Authority

b) National Industrial Corridor Development Authority**

c) National Information Centre for Data Administration , d) None of these

90.. Securitization means: (Tick appropriately) : a) Pooling of financial assets for forming into a

scrip for sale in a financial market, *b) Pooling of loans of a single borrower, c) Converting loans to

capital of banks, d)Arranging for repayment of dues

91. Which one of the following features of Microfinance is incorrect? : a) Borrowers are from low

income group, b)Long duration loans, ***c)Loans without collaterals, d) High frequency of repayment

92. Relationship banking allows several special contractual features as under:- i) Discretion

,ii)Flexibility

iii) Inclusion of collateral requirements, iv) Decision, v) Use of covenants

a) (i), (ii), (iii) (iv) is correct , b)(ii), (iii), (iv), (v) is correct

c) (v), (iii), (i), (ii) is correct, ***d) (iv), (v), (iii), (i) is correct

93. Which one of the following grey areas of concern for growth is not related to Microfinance sector?

a) Regulation, b)Pricing, c) Cluster formation, d) Technology**

94. Which one of the following factors is not related to pricing?

a) Character of the customer,** b)Elasticity of demand, c) Cost structures, d)Economic conditions

95. SMEs are facing various challenges under WTO regime as under:- i) Technology, ii) Removal of

Quantitative Restrictions, iii) Funding through FDI/JVs, iv) Infrastructure, v)Quality of goods

a) (ii), (i), (v), (iv) is correct,** b) (i), (iii), (v), (ii) is correct, c)(iii), (v), (iv), (i) is correct

d) (iv), (v),(ii), (i) is correct

96 National Bank is maintaining a current account of a Public Trust with 4 trustees. Bank receives an

information that two of them have died in a road accident while going for a pilgrimage. The remaining

trustees now want to operate the account.

a bank would permit them to operate the account as they are now the surviving trustees

b bank will refuse the operations as the power was vested with all of them

c bank will examine the trust deed to determine the future course of action

d if the trust deed allows the surviving trustees to operate the

account they will be allowed. Otherwise the bank would insist on a direction from a competent court

e c and d both***

97. The Secretary of Seth Chanan Mal Public Trust, a reputed trust having 3 Trustees, has approached

you to open a saving bank account in favour of the Trust. While going through the Trust Deed

submitted alongwith the application you find that there is no provision for operation of the bank

account. What would you do under such circumstances ?

a the account would be allowed to be opened by the Secretary

b operation in the account will be allowed jointly with the Chairman of the Trust

c operation can be allowed against the joint signatures of all the Trustees***

d account will be opened only when the trust deed is modified.

e account cannot be operated in the absence of any provision

98. Ramesh and Ashok are trustees of a trust and execute a power of attorney in favour of Tarun.

Trust deed is silent regarding the delegation of power. Tarun comes to operate the account:

a Tarun can be permitted to operate the account

b Tarun can be permitted after obtaining consent of beneficiaries.

c Tarun cannot be permitted to operate.*

d Tarun can be allowed if credit balance is there. e b and d

99. Universal Bank is having a current account of Dhara Charitable Trust which is operated by their

two trustees. In road accidents, both the trustees expire and this fact comes to the notice of the bank.

What precautions should be taken by the bank for future operations in the account?

a the beneficiaries will have to appoint another trustee and on the basis of their resolution the

next trustee would be allowed to operate the account.

b the beneficiaries will be allowed to operate the account themselves.

c the operations in the account will be stopped

d the beneficiaries will be told to approach a court for appointment of new trustee in case the

trust deed is silent about this** e b and c

100. Your branch receives from the trustees of a trust, a resolution passed by the trustees resolving that the

current account would be operated by two out the three trustees, as the Td trustee is proceeding abroad. The

account is presently operated by all the three in terms of the trust deed.

a the bank will accept the resolution and the request and permit the remaining trustee to operate the

account, strictly as per the resolution.

b the bank will not accept the resolution since the Trust Deed provides for operation of

the account by all the three***

c the bank will not accept the resolution and will suggest for power of attorney to be given by the third

trustee.

d the bank will allow operations, since they are working as agents. e none of the above

101 A partnership firm with three partners, named M/s Durani Brothers opened a current account with

Corporate Bank with the operational instruction that 151 two partners will operate the account. The firm

received a cheque in its favour and in order to meet the urgent payment requirement, on behalf of M/s

Durani Brothers, the 3Ni partner endorsed the same in favour of another firm M/s Shivani Cables, from

whom the raw material was purchased:- a Shivani Cables will become holder in due course if it

is not known to them that the 3rd partners has no authority to endorse, b Shivani Cables will not

become holder in due course if they know that only 1st and 2nd partner have authority to operate the

bank account, c Shivani Cables's title will remain doubtful in all circumstances, d a and b,

e a to c***

102 Universal Bank has granted cash credit limit of Rs:10 lac to M/s Kale Traders, a partnership

firm. The account is showing a debit balance of Rs.9.50 lac when the notice is received about the

insolvency of one of the partners. Which among the following steps should be initiated by the bank to

safeguard its interest? a account should be recalled and party be asked to adjust the

account, b operations in the account to be stopped and balance confirmation letter to be

obtained from all the partners, c operations in the account to be stopped and notice of

demand to be issued on the remaining partners, d notice about the outstanding dues

to be sent to the official assignee in whom the estate of the insolvent partner has been vested,

e c and d above**

103 Your branch maintains a current account in the name of M/s Site Ram Gita Ram & Sons. A new

partner, the younger son of Mr. Gita Ram joins the firm and bank gets information about this

development. Which among the following actions would be more appropriate to deal with this

account:- A operations in the account should be stopped failing which the rule in Clayton case can

apply, B account should be closed and new account should be opened observing all formalities

C new partner can be admitted with the approval of the bank only. Hence the firm should be advised

to obtained permission from the bank, d bank can obtain new partnership declaration

letter and allow operations as per new mandate, **e bank can insist on for new partnership

deed duly registered with Registrar of firms

104 Two partners of a partnership firm M/s Hyderabad Trading Company with three partners,

approaches you to open a current account with initial deposit of Rs.10 lac and promise that the

signatures on the account opening, form shall be obtained on the return of 3rd partner from abroad,

although the said partner is not to actively engage himself in the business and he will function as a

dormant partner. They also do not have any partnership deed in writing.

A the bank will open the account as the 3rd partner is not to operate the account

B the bank will open the account and will not permit any withdrawaltill the 3rd partner signs the account

opening form C the account will be opened but cheque book will be given when the 3rd partner returns,

D the account will not be opened unless all the partners have signed, E none of the above**

105 Capital Bank maintains a current account of M/s Bihari Lal Sham Lai with the same name

partners having operating instructions as 'any one can operate'. Mr. Sham Lai informs the bank that

due to some dispute amongst the partners, the cheques signed by Mr. Bihari Lal should not be paid

as he has acquired the whole share from Mr. Bihari Lal and is shortly introducing another partner.

Meanwhile a cheque signed by Mr. Sham Lal is presented for payment. What should the bank do?

A The operations in the account will be stopped and the mandate for operation of the

account by any one, shall become inoperative, ***B The operations in the account will be stopped

only after receipt of the notice from both of them. C The cheque signed by Mr. Sham Lal shall be

passed since he has acquired the whole share now, D The partners will be advised to sort out the issue

Current Affairs on 13th September 2018

Today's Headlines from www:

*Economic Times*

📝 Telecom department chalks out plan to reduce rows with telcos

📝 Government determined to contain fiscal deficit at 3.3 per cent

📝 Rs 1 lakh crore plan for 14 mega national job zones in the works

📝 Centre approves Rs 2,250 crore scheme to build capacity to bring out important sets of data

📝 Bank credit rose by 13.49%; deposits by 8.9%

📝 CIL aims aspirational production of 652 million tonne for FY19

📝 Bandhan Bank backs out of race to acquire PNB Housing

*Business Standard*

📝 Apple unveils larger iPhones, health-oriented watch to monitor heartbeat

📝 At a 10-month low of 3.69% in Aug, retail inflation below RBI target

📝 Industrial production grows at 6.6% in July; electronics, pharma shine

📝 YES Bank evaded Rs 330 mn tax via 'cut and pay' scheme: GST authority

📝 Cabinet okays new procurement mechanism for crops

📝 Garden Reach Shipbuilders & Engineers' Rs 3.4 bn IPO to open on Sept 24

📝 Cabinet approves 100% electrification of railways at a cost of Rs 121.34 bn

📝 PNB puts 21 NPA accounts on sale to recover over Rs 13.2 billion

*Financial Express*

📝 ASEAN leaders agree to tap 4th Industrial Revolution

📝 Sugar stocks rise after govt hikes ethanol price by 25%

📝 Cabinet approves MoU on blockchain by Exim Bank

📝 Amazon business supply program may reach $25 billion by 2021

📝 China puts off licenses for US companies amid tariff battle

📝 Exports up 19.21 per cent in August; trade deficit at $17.4 billion

📝 Cashew exports hit hard on high operation cost, competition: Icra

*Mint*

📝 Govt prohibits manufacture, supply, sale of 328 FDC drugs

📝 Nayara Energy to spend Rs 1.5 lakh crore for capacity expansion, petrochem complex

📝 Payment security mechanism for private power firms on the cards

📝 Fiat Chrysler is seeking more than $7 billion for Magneti Marelli from KKR

📝 BPCL to shift LPG facility out of Mumbai refinery

📝 Deutsche Bank weighs forming a holding company

📝 Texas retirement fund pledges $75 million for IndoSpace’s venture.

5 life lessons you can learn from Lord Ganesha

5 life lessons you can learn from Lord Ganesha

Lord Ganesha, the Elephant God, is not only the Lord of Beginnings and Remover of Obstacles, but also a teacher if you pay close attention to the tales of Hindu mythology. Also known as Ekdant, his anecdotes form an integral part of Hindu mythology and impart great life lessons to his followers. We can all learn a thing or two about life from these tales:

1. Duty is above all else

It is believed that Goddess Parvati created Lord Ganesha by carving out a boy's idol from turmeric paste and breathing life into it, in the absence of Lord Shiva. She told the boy to guard the door while she bathed, and he obediently followed his mother's instructions. Around the same time, Lord Shiva returned from his expedition, and demanded entry into Parvati's bathing area--which Lord Ganesha refused. The event turned into a fight between the father and the son, and ended with Ganesha being beheaded. Later, Lord Shiva resurrected the boy after placing an elephant's head on his body.

This very story is a lesson that even gods are bound to fulfill their duties, and there's no greater virtue than being dutiful, especially towards a parent. Despite being well-aware of the might of Lord Shiva, and the repercussions that could follow, Lord Ganesha refused to budge even if when it cost him his life.

2. Nobody is more important than one's parents



Once, Lord Shiva and Goddess Parvati offered a miraculous fruit of knowledge to their sons, Lord Kartikeya and Lord Ganesha, but only one of them could get the sacred fruit. To decide who deserved the fruit more, Lord Shiva asked them to circumnavigate the world thrice, and the one who finished the navigation first would be blessed with the fruit. The elder son, Lord Kartikeya, eager to win the race, left on his vehicle, a peacock, while Lord Ganesha wondered how he was ever going to be victorious riding his rat-vehicle.

After ambitiously circling the earth thrice, Kartikeya returned to find Lord Ganesha already home. Lord Ganesha had won the race, but instead of the earth, he had circled around Lord Shiva and Goddess Parvati--who were his idea of the world. He was blessed with the fruit of knowledge, and came to be known as the Lord of Knowledge.

This story is a lesson on how parents can never cease to be important, even if you're a god. This lesson has the power to change the fate of millions of abandoned parents today.


Picture courtesy: Pinterest/wiki.yoga-vidya.de

3. Forgiveness is the ultimate virtue

The legend says that Lord Ganesha once cursed the moon for mocking his pot-belly after he was returning from a satiating dinner party thrown by the Lord of Fortune, Kuber. The lover of food and desserts, Lord Ganesha was returning home after having a hearty meal, when he stumbled and rolled over on his belly. The Moon saw it from high above, and burst into a cynical laughter that miffed Lord Ganesha, and compelled him to curse him. Lord Ganesha cursed the moon to disappear from the sky completely, while he begged for forgiveness. Ultimately, the generous Lord Ganesha gave in to his requests, but since he couldn't revoke the curse, he reduced the disappearance span of the moon from the sky to one day.

Lord Ganesha's story explains how anger gets to the best of us, but it is our power to overcome it that makes us a better human being.

4. You should finish every task you take up

The legend says that sage Vyasa (Ved Vyasa) wanted to write the epic, Mahabharata, and he requested Lord Ganesha to write it down while he narrated the verse. The Lord agreed on one condition--Sage Vyasa was supposed to finish reciting the verses without a pause, and Lord Ganesha would write without taking a break. The two sat down to write one of the greatest epics known to mankind, but faith had something else in store--Lord Ganesha's pen broke while he was still writing. Lord Ganesha broke one of his tusks, and continued writing the epic.

Lord Ganesha sacrificed his own tusk to finish a task meant for greater good. If we could all imbibe this lesson from him, we'd all be closer to success than we already are.
5. Always stand up for your self-respect

Legend has it that once, all the gods and goddesses left Lord Ganesha in-charge of the Swargalok, as they left with Lord Vishnu's marriage procession headed towards Goddess Laxmi's abode. Lord Ganesha was tricked into taking care of Swargalok, because the other deities were embarrassed of his physical appearance and massive diet. On getting to know the truth, Lord Ganesha wanted to avenge himself, and devised a clever plan that would make them realise his importance. Ganesha sent his rat-vehicle, Gajasur, to dig up the roads that led to Goddess Laxmi's abode, and he obeyed. As expected, the deities couldn't proceed further, and called for help. A farmer who was crossing by the road decided to help the deities, and pulled out the carriage stuck in the road in the first attempt after chanting Lord Ganesha's name. He explained how only Lord Ganesha's name could have induced the strength in him to lift the carriage, since he is the Remover of Obstacles. This made the deities realise that there's more to a being than his physical appearance, and they returned to offer their apologies to Lord Ganesha.

Lord Ganesha's story is a lesson to never let anyone undermine your abilities, or your physical appearance cloud people's judgement of you.

Difference between Primary Security & Collateral Security

Difference between Primary Security &  Collateral Security

Primary Security : Primary security is the asset created out of the
credit facility extended to the borrower and / or which are directly associated
with the business / project of the borrower for which the credit facility has
been extended. For example, hypothecation of stocks, book debts etc.
Stocks include Raw Materials, Stock in process, Finished Goods, Spares
etc.Book debts are based on invoices and delivery challans. Hypothecation is
the established practice whereby a borrower offers to the lender charge on an
asset as security for a loan, while retaining ownership of the asset and enjoying
the benefits there from. With hypothecation, the lender has the right to seize
the asset if the borrower cannot service the loan as stipulated by the terms in
the loan agreement.

• Collateral Security: Collateral security is any security, other than
Primary Security, offered to additionally secure the credit facilities
sanctioned by the Bank. Collateral security is normally obtained as a risk
mitigating measure and to sustain the promoters’ interest in the venture.

BCSBI

BCSBI::
Key Commitments: Important rights of the customer are covered under the BCSBI Code, which are:
• Right to fair treatment
• Right to transparency, fair and honest dealing
• Right to suitability of services
• Right to privacy
• Right to grievance redressal and compensation
Functions: The functions of BCSBI cover three areas, which are:
• It ensures bank’s commitment to minimum standards of service to individual customers in relation to products and services offered by the bank.
• It protects individual customers in their day to day operations
• It persuades member banks to be voluntarily compliant to the code
Applicability of the code: The Code is applicable to different products and services offered by banks, such as:
• Deposits
• Loans and advances
• Payments
• Cards
• Third party products
• Digital Products
• Miscellaneous services
Provisions of the Codes: Time lines are laid down in the Codes for certain services/functions of banks, which are:
• Closure of accounts – 3 working days
• Transfer of accounts – 3 working days
• Issue of duplicate DDs – 14 days
• Customer complaint redressal – 30 days
• Settlement of deceased customer’s accounts – 15 days
• Choice of changing type of account – 14 days
• Documents/Securities/Title deeds return on closure of loan accounts – 15 days
Information – Transparency: It is mandatory under the BCSBI guidelines for banks to maintain transparency in their dealings with customers through different channels, such as:
• Notice Board in the branch
• Contacting the branch or Helplines
• Bank website
• Asking the designated staff / help desk
• Referring to the tariff schedule at the branch / website
Monitoring the Code of Compliance: The role of BCSBI in monitoring the compliance of banks with the guidelines is clearly defined by:
• Ensuring a Code Compliance officer at each Controlling office above the level of the branch
• Obtaining an annual statement of compliance
• Visiting branches of member banks to verify code implementation
• Studying the customer complaints
• Analyzing orders from Ombudsman to find any service deficiencies
How you can involve with BCSBI codes?
• As an employee at branch level, you can comply with BCSBI Codes in all areas of branch functioning, by:
• Ensuring a Help desk/Helpline at the branch
• Ensuring the display of your branch name and contact number of the Code Compliance Officer
• Displaying the name and address of the Banking Ombudsman
• Customers need to be treated with utmost care so that they are not forced to resort to complaints. As an employee of the bank, be aware of all the products and services of the bank so that you can engage with the customers appropriately and be aligned with BCSBI guidelines.

Negative lien and set off

Negative lien and set off

There is no legal definition of 'negative lien'. Lien is the right to retain goods of a borrower or pledgor for the debt. Negative Lien is used in banking parlance for a borrower to undertake not to create any charge on his property without the consent
of the lender. The borrower may sometime be having non-encumbered assets which are not charged to the bank as security. The borrower is thus free to deal with these assets
and may even sell them if he so desires. To restrict this right of the borrower, bank may sometimes request him to give an undertaking to the effect that he will neither create any encumbrance on these assets nor sell them without the previous permission of the bank so long as the advance continues......

Negative Lien: When goods and securities are in possession of borrowers creditor
obtains an undertaking from the borrower that he will not create any charge on those
securities without the prior permission of the creditor this kind of lien is called as
negative lien.
The borrower may sometime be having non-encumbered assets which are not charged
to the bank as security. The borrower is thus free to deal with these assets and may
even sell them if he so desires. To restrict this right of the borrower, bank may
sometimes request him to give an undertaking to the effect that he will neither create
any encumbrance on these assets nor sell them without the previous permission of the
bank so long as the advance continues.
Set Off: The set-off refers to ―combining of two or more account for final settlement of
accounts‖
In other words set off is a process where the bank recovers its due loan, to the debit of
deposit account of the burrower
The essential condition is that one of such accounts must show a debit balance and the
other, a credit balance
Different Branches are one unit
For exercising the right to set off all branches of a bank are treated as a single unit,
which means a loan from branch-A can be adjusted by the funds in branch-B

Current Affairs on 12th September 2018

Today's Headlines from www:

*Economic Times*

📝 White goods companies not passing on GST benefits come under lens

📝 Cairn says it took $500 mn hit due to retro tax in India

📝 Indian demi-billionaires to rise by 70% by '22: Survey

📝 Mutual funds garner Rs 7,600 cr via SIPs in August

📝 JioPhone grabs 80% market share in sub-Rs 1,500 segment, claims Reliance Retail

📝 Not possible to introduce ghost entries into Aadhaar database: UIDAI

📝 National Fund set to buy IDFC infra debt fund

📝 US to probe Mahindra & Mahindra over Fiat Chrysler Jeep complaint

*Business Standard*

📝 Irdai asks insurers to sell their holdings in Tata Sons promptly

📝 Paytm's losses rise by almost 80% on the back of massive expansion plans

📝 Suzlon to offload 49% stake in two solar projects in Maharashtra to CLP

📝 States to get Rs 227 billion windfall from rupee plunge, crude spike

📝 India aims to become second largest steel producing nation after China

📝 Flipkart doubles seller additions ahead of BigBillionDays sale next month

📝 From Oct 2, unlisted firms will issue new shares in demat form, says govt

📝 Wrong Brexit deal could cost tens of thousands of car jobs: JLR chief

*Financial Express*

📝 SEA opposes NCDEX plan to extend trading hours

📝 Rupee at new closing low of 72.44; loses 12% since Jan

📝 BoI recalls upper Tier-II bonds worth Rs 500 cr

📝 Samsung doubles down in India, opens its biggest store world-wide in Bengaluru

📝 Lenovo pins hope on gaming PC growth, expects 25% share in 5 yrs

📝 Pension fund managers may get marketing rights

📝 GAIL to expand gas pipeline network capacity by 50% in 3 years

📝 Corruption costs $2.6 trillion or 5 per cent of global GDP, says UN chief Antonio Guterres

*Mint*

📝 Germany’s Blaupunkt to invest $300 million in TV business in India in next 5 years

📝 Ather Energy begins delivery of its electric scooters

📝 Lightbox raises 3rd India fund, aims to close at $200 million

📝 Reliance Capital posts net profit of ₹272 crore in Q1

📝 Tata Power to offer suite of services in rooftop solar drive

📝 Yes Bank raises $400 million through syndicated loan facility

📝 Set up e-auction platform to speed up sale of confiscated assets, govt tells state-run banks.