CASE STUDIES ON DOCUMENTARY CREDITS AND UCP600

CASE STUDIES ON DOCUMENTARY CREDITS AND UCP600
CASE STUDY 1
Banks have a practice of calling for the original LC at the time of presentation of documents and
endorse any drawings on its reverse.
LC's may be made available by Acceptance / Defferred Payment / Negotiation and to be freely
available with any bank.
Is it mandatory to endorse the original LC on its reverse?
Analysis
Most LCs contain a clause indicating such a requirement.
The practice is required by SWIFT standards cat.7, for freely negotiable credits, available with any
bank.
Conclusion
What is the problem?
CASE STUDY 2
If a nominated bank does not incur a deffered payment undertaking on presentation of complying
documents and forwards them to the Issuing Bank.
Subsequently can it a purchases a deferred payment undertaking from the issuing bank and seek
protection under UCP600?
Articles 7c. UCP600
CASE STUDY 3
If a LC is confirmed and is available with the Confirming Bank and the beneficiary chooses to
present the document directly to the Issuing Bank and the Issuing Bank wrongfully dishonors.
Should the confirming bank honor the presentation given that the LC has meanwhile expired?
Article 8a. UCP600
CASE STUDY 4
A documentary credit requires all documents must to be issued in English language.
The presentation includes a Certificate of Origin bearing a Stamp / Legalisation done in another
language
Is this a discrepancy?
Issued in?
CASE STUDY 5
As per Article 38 of UCP 600, A LC can be transferred to more than one second beneficiary. This
can be done preferably when the Partial Shipments are allowed under the LC.
If the first Beneficiary is certain that he would be able to comply with article 31(b) of UCP600 (re
partial shipments – submission of multiple BLs on the same voyage), can a LC be transferred to
more than one second beneficiary even if the LC states Partial Shipment is prohibited provided
Article 38.d. UCP600
CASE STUDY 6
If the nominated bank does not accept a bill of exchange drawn on them by the beneficiary, can the
same bill of exchange be presented to the issuing bank or should they present a fresh bill of
exchange drawn on the Issuing Bank
UCP Article 7a (iv)
CASE STUDY 7
Under the documents required a LC calls for a Bill of Lading.
Bill of Lading submitted with the documents is signed by a forwarder as carrier.
Is it a discrepancy?
Article 20 UCP600
CASE STUDY 8
L/C requirement: invoices in 3 fold and Legalized by Chamber of Commerce.
Beneficiary submits invoices with only one legalized and others without being legalized.
Is it a discrepancy?
Article 17e. UCP600
CASE STUDY 9
LC calls for a Beneficiary's certificate stating the expiry date (of the product).
The certificate presented states only the month and the year of expiry.
Is it a discrepancy?
Bankers are expected to have a certain amount of general knowledge and common sense
CASE STUDY 10
The documents required in a transferable LC calls for an Inspection Certificate issued by the First
Beneficiary.
At the request of the First Beneficiary LC is transferred to a Second Beneficiary without calling for
the Inspection Certificate, which the first beneficiary undertakes to submit along with drafts and
invoices to be presented for substitution.
Has the Transferring Bank acted in aprudent manner.
Sub-article 38g of UCP600
CASE STUDY 11
A LC states the last date for shipment as 09 November 2014 and the expiry as 30 November 2014,
is silent on the period of presentation and also states ‘Stale Bills of Lading Acceptable”.
Documents presented on 01 October 2014 with the Bill of Lading dated 01 June 2014 refused by
the Issuing Bank stating Late Presentation (not presented within 21 days after the BL date as per
article 14.c UCP600)..
The negotiating Bank does not agree with the reason for refusal.
Should the Issuing Bank honour?
Rule A19.b ISBP745
Case Study 12
The documentary credit in question issued subject to UCP600 called for shipment from “ANY
NORTH EUROPEAN PORT” and the transport document required in field 46a was: “FULL SET OF
CLEAN ON BOARD BILL OF LADING”.
The Nominated Bank received a bill of lading evidencing shipment from Antwerp, which we found to
be within the scope of North Europe, since the geographical area of North Europe was not defined
in the Credit.
The Issuing Bank refused the documents arguing that Antwerp is not within the geographical area
or range stated in the Credit.
The Issuing Bank further argued that Belgium is in Western Europe and not in Northern Europe and
quoted an internet website (www.mapsofworld.com) where we could easily recheck.
Is the discrepancy cited by the issuing bank valid?
Analysis
UCP 600 sub-article 14 (a) states that a bank must examine a presentation on the basis of the
documents alone.
It is not a matter for the ICC Banking Commission to define or determine geographical areas or
ranges. The requirement in the credit is vague and clearly ambiguous.
In accordance with ISBP 745 Preliminary Considerations paragraph (v), the applicant bears the risk
of any ambiguity in its instructions to issue or amend a credit.
Furthermore, an issuing bank should ensure that any credit or amendment it issues is not
ambiguous or conflicting in its terms and conditions.
It should not be necessary to refer to external resources in order to determine relevant facts.
Conclusion
The applicant and issuing bank must bear the risk of ambiguity for failing to express specifically how
“Any North European Port‟ is to be defined.
In this case, the document is not discrepant.
Case Study 13
Under a credit issued subject to UCP600 by Bank V in country W available by negotiation and
expiring with Bank A in country N, Bank A added its confirmation. Upon presentation of complying
documents Bank A negotiated and discounted. Documents were refused by Bank V for the following
reason: “Health Certificate to be presented in 1 original and 2 copies but only presented in 1 original
plus 1 copy.”
Bank A stated that all required originals and copies were presented to them within the time limits
foreseen by the credit, but admitted to having made an operational mistake by leaving one copy of
the Health Certificate in their file and by only sending 1 original and 1 copy to Bank V.
Bank A requested Bank V to create a second copy on Bank A‟s account, or to instruct Bank A to
courier the missing copy, but Bank V did not provide agreement. In the absence of any instructions,
and after the expiry date of the credit, Bank A couriered the missing copy document to Bank V,
certifying on their letter that it was presented within the time limits of the credit. Bank V still refused
to honour the presentation.
Has the Issuing Bank the right to refuse the documents on the basis of the missing copy of the
Health Certificate, in spite of the fact that the missing copy was sent to them after the expiry date,
but with the declaration of the negotiating bank that the copy was presented within the time limits
foreseen under the LC?
Analysis
The credit was available for negotiation with the Nominated Bank and expired at their counters.
UCP 600 sub-article 6 (d) (ii) states: “The place of the bank with which the credit is available is the
place for presentation. The place for presentation under a credit available with any bank is that of
any bank. A place for presentation other than that of the issuing bank is in addition to the place of
the issuing bank.”
UCP 600 article 6 (e) states: “Except as provided in sub-article 29 (a), a presentation by or on
behalf of the beneficiary must be made on or before the expiry date.”
In accordance with UCP 600 sub-article 7 (c) an Issuing Bank undertakes to reimburse a nominated
Bank that has honoured or negotiated a complying presentation and forwarded the documents to
the Issuing Bank.
The Issuing Bank did not receive all the required documents and subsequently issued a refusal
notice. The Nominated Bank, after an exchange of correspondence with the Issuing Bank,
forwarded the missing copy document to the issuing bank certifying that it had been presented
within the time limits required by the credit.
Conclusion
The initial cited discrepancy is valid. However, upon receipt by the issuing bank of the missing copy
document, and on the basis that it also received a certification from the negotiating bank that the
document was presented within the time limits required by the credit, the issuing bank must
reimburse the confirming bank.
Cade Study 14
Under a credit issued by Bank V in country V available by negotiation and expiring with Bank A in
country N, Bank A added its confirmation. Upon presentation of complying documents Bank A
negotiated and discounted. Documents were refused by Bank V for the following reason: “Health
Certificate to be presented in 1 original and 2 copies but only presented in 1 original plus 1 copy.”
Bank A stated that all required originals and copies were presented to them within the time limits
foreseen by the credit, but admitted to having made an operational mistake by leaving one copy of
the Health Certificate in their file and by only sending 1 original and 1 copy to Bank V.
Bank A requested Bank V to create a second copy on Bank A‟s account, or to instruct Bank A to
courier the missing copy, but bank V did not provide agreement. In the absence of any instructions,
and after the expiry date of the credit, Bank A couriered the missing copy document to Bank V,
certifying on their letter that it was presented within the time limits of the credit. Bank V still refused
to honour the presentation.
Has the Issuing Bank the right to refuse the documents on the basis of the missing copy of the
Health Certificate, in spite of the fact that the missing copy was sent to them after the expiry date,
but with the declaration of the negotiating bank that the copy was presented within the time limits
foreseen under the LC?
Analysis
Although not indicated in the query, it is assumed that the credit was issued subject to UCP 600.
The credit was available for negotiation with the nominated bank and expired at their counters.
UCP 600 sub-article 6 (d) (ii) states: “The place of the bank with which the credit is available is the
place for presentation. The place for presentation under a credit available with any bank is that of
any bank. A place for presentation other than that of the issuing bank is in addition to the place of
the Issuing Bank.”
UCP 600 article 6 (e) states: “Except as provided in sub-article 29 (a), a presentation by or on
behalf of the beneficiary must be made on or before the expiry date.”
In accordance with UCP 600 sub-article 7 (c) an issuing bank undertakes to reimburse a nominated
bank that has honoured or negotiated a complying presentation and forwarded the documents to
the issuing bank.
The issuing bank did not receive all the required documents and subsequently issued a refusal
notice. The nominated bank, after an exchange of correspondence with the issuing bank, forwarded
the missing copy document to the issuing bank certifying that it had been presented within the time
limits required by the credit.
Conclusion
The initial cited discrepancy is valid. However, upon receipt by the issuing bank of the missing copy
document, and on the basis that it also received a certification from the negotiating bank that the
document was presented within the time limits required by the credit, the issuing bank must
reimburse the confirming bank.
Cade Study 15
Bank A (Issuing Bank) in country A issued a standby credit subject to UCP 600 which was advised
to the beneficiary in country B by Bank B (Advising Bank).
The beneficiary presented a demand under the credit which arrived at the counters of the Bank A
before the expiry date of the credit.
Bank A issued a notice of refusal on the third day following presentation stating one discrepancy:
“Original Standby LC Not Presented”.
There was no wording in the credit requiring presentation of the original Standby LC.
1) Is the discrepancy stated by the Bank A correct?
2) Can Bank A raise further discrepancies at a later date in respect of the one presentation made by
the beneficiary under the credit?
Analysis
1) The wording of the credit did not require the presentation of the original credit as part of the
claim. Unless the credit was issued by mail or in paper format, it is doubtful how the originality of the
document could be determined. Accordingly, unless otherwise specifically required within the terms
and conditions of a credit, there is no requirement for the original credit to be included in the
presentation.
2) UCP 600 sub-article 16 (c) states that when a bank decides to refuse or negotiate, it must give a
single notice to that effect to the presenter. UCP 600 clearly does not allow for further discrepancies
to be raised that were apparent at the time of the initial presentation, as is referred to within former
ICC Opinions R196, R328, R271 and TA764rev.
Conclusion
1) The discrepancy is not valid.
2) Additional discrepancies are not to be considered, as banks only have one opportunity to raise
discrepancies for each presentation.
Cade Study 16
Under a documentary credit subject to UCP 600 the beneficiary of the L/C presented, amongst
other documents, a charter party bill of lading (CPBL), made out in accordance with the terms and
conditions of the respective L/C, signed and stamped as shown hereafter:
According to UCP 600 sub-article 22 (a) (i), a CPBL must appear to be signed by any of the
following parties:
· the master,
· the owner,
· the charterer, or
· a named agent for any of the above.
The stamp shows, however, that the master is signing “On behalf of Owners”.
As this is a case not contemplated by UCP 600 sub-article 22 (a) (i) like the signing by a carrier or a
named agent for the carrier as indicated in Official Opinion 470/TA.775rev., we would like to know
the opinion of the ICC Banking Commission to this case, i.e. whether this is an acceptable way of
signing or not: If the answer is that it is not acceptable, whether it would be acceptable, if the name
of the owner(s) would be stated.
Analysis
UCP 600 sub-article 22 (a) (i) states that a CPBL must appear to be signed by:
· the master or a named agent for or on behalf of the master, or
· the owner or a named agent for or on behalf of the owner, or
· the charterer or a named agent for or on behalf of the charterer.
Furthermore, it states: “Any signature by the master, owner, charterer or agent must be identified as
that of the master, owner, charterer or agent.”
ISBP 745 paragraph G4 (b) states: “When the master (captain), owner or charterer signs a charter
party bill of lading, the signature of the master (captain), owner or charterer is to be identified as
“master” (“captain”), “owner” or “charterer”.
ICC Opinion 470/TA.775rev does not apply as it relates to a CPBL issued and signed by a carrier or
its agent.
The signature on the CPBL is identified as that of the master (captain). The master is signing for
and on behalf of the owner.
Conclusion
The document is acceptable.
Cade Study 17
The Documentary Credit issued subject to UCP 600 by an Issuing Bank located in country X on
behalf of an applicant also located in country X and confirmed by a Bank located in country Y
required in field 46a “documents required” amongst other the following document:
Quote Bank guarantee from international first class bank payable in country X equivalent to EUR
xxxxx [the guarantee indicates an amount] valid till xx.xx.xxxx [the guarantee indicates a fix date].
Unquote
The bank guarantee presented to the Confirming Bank is issued by a bank located in country Y and
states that it is subject to the laws of country Y. The wording of the presented guarantee shows the
applicant of the Letter of Credit as beneficiary of the guarantee. The amount and expiry date of the
guarantee are in compliance with the requirements stipulated in the Letter of Credit. The payment
undertaking of the guarantee is worded as follows:
QUOTE
We, xxx [the guarantee indicates the guaranteeing bank], hereby irrevocably undertake to
pay you [the guarantee is addressed and directed to the applicant of the Letter of Credit]
without delay on your first written demand for payment an amount up to xxx [the guarantee
indicates an amount] provided your demand for payment is simultaneously supported by (…)
UNQUOTE
The wording of the guarantee does neither contain an express indication that it is “payable in
country X” nor any express reference to country X being the place of payment.
The Confirming Bank accepted the presented guarantee but the Issuing Bank raised the following
discrepancy: “Bank Guarantee from international bank is not payable in country X.”. Please let us
have your official opinion whether and if so why the issuing bank was entitled to raise the
discrepancy by answering the following questions:
1. Is the guarantee only compliant if it either indicates expressly that it is “payable in country X” or
contains an express reference to country X being the place of payment? Or can it be argued that
the guarantee meets the requirement “payable in country X” because it is issued in favour of a
beneficiary located in country X and as it provides that payment thereunder has to be made to this
beneficiary?
2. Would the requirement “payable in country X” be met if the guarantee is made out as described
above but is not issued by a bank located in country Y but in country X?
3. Does the stipulated requirement “payable in country X” require the document checker to
determine whether the presented guarantee‟s place of payment is country X?
4. Could the confirming bank argue validly that the Letter of Credit does not stipulate that the
requirement “payable in country X” must be met by an express reference or wording in the
guarantee document (e.g. 46a: Bank guarantee from international first class bank indicating that it is
“payable in country X” equivalent to (…)”) and that this requirement may therefore be deemed as
non-documentary and not stated and thus be disregarded according to UCP 600 sub-article 14 (h)
5. Could the confirming bank argue validly that the checking of the document falls with respect to
the requirement “payable in country X” under the auspices of UCP 600 sub-article 14 (f) because
this requirement is worded in way that does not amount to a stipulation of the document‟s data
content ?
Analysis
The credit included, in field 46a of the MT700, a requirement for a guarantee to be issued by an
international first class bank payable in country X (the country of the credit issuing bank). Apart from
amount and expiry date, no other requirements were provided. The credit was confirmed by a bank
in country Y (the country of the credit beneficiary).
The actual guarantee that was presented to the confirming bank was issued by a bank in country Y,
stating that it was subject to the laws of country Y.
The guarantee contained a statement from the guarantee issuing bank that they irrevocably
undertook to pay the guarantee beneficiary (the applicant of the credit) without delay on first written
demand for payment. It did not include an explicit statement or reference that the guarantee was
payable in country X.
Whilst the Confirming Bank accepted the guarantee as a compliant document under the credit, the
Issuing Bank refused on the basis that the guarantee was not payable in country X.
In view of the fact that the beneficiary of the credit was located in country Y, it is not unusual that
they would use a bank in their own country to issue the guarantee, as was the case in this query.
The guarantee had been issued directly in favour of the beneficiary (the credit applicant) in country
X, and not via another bank in country X. It included a condition that payment would be made
against first written demand. It does not state a place for presentation. Because the guarantee did
not state a place for presentation, demands must be presented at the issuing bank. The issuing
bank is located in country Y.
Conclusion
1. The guarantee needed to clearly state that it was payable in country X. In order to achieve this, it
would have needed to be payable at the counters of a bank in country X, and not at the counters of
the guarantee issuing bank in country Y. The fact that the guarantee was issued directly in favour of
the beneficiary (credit applicant) in country X and was payable against first written demand, did not
fulfil this requirement.
2. If the guarantee had been issued by a bank in country X, this would have met the requirements of
the credit.
3. The place of payment of the guarantee was to be stated as “in country X‟ or determinable as
being within country X.
4. The requirement for the guarantee clearly related to a requirement for an actual document.
Consequently, UCP 600 sub-article 14 (h) is not applicable.
5. The condition in the credit “payable in country X‟ is a specific requirement that must be clearly
reflected in the guarantee document if it is to fulfil its function. The discrepancy raised by the issuing
bank is valid.
CASE STUDY 18
The relevant LC conditions:
1) (Under documents required): Full set of clean on-board marine bills of lading consigned to order,
blank endorsed, notify applicant and marked “freight payable as per charter party”
2) (Under other conditions): Charter Party BL acceptable
The presented BL shows:
a) “freight payable as per charter party”
b) signed by XXX Logistics Co Ltd as agent for carrier YYY Shipping Lines Ltd
c) the reverse page shows the shipper’s blank endorsement
d) reverse page also shows typical shipping contract terms & conditions (i.e. not the usual Charter
Party BL terms & conditions)
In short, the BL (front and back), other than the freight statement, does not display anything to
suggest that it is subject to a charter party contract.
Issuing Bank paid but deducted a discrepancy fee for the waived discrepancy of “Charter Party BL
signatory’s capacity not as master, owner, charterer or agent for any of the aforesaid”. Issuing
Bank’s position appears to be that, by virtue of the LC‟s BL freight requirement, the LC is actually
calling for a Charter Party BL. And because the BL does show such freight statement, the BL is to
be treated as being subject to a charter party contract, and therefore the BL must be signed in
accordance with Article 22 (a) (i).
Negotiating Bank of course disagreed and countered that the freight phrase was not enough
evidence that the BL was a Charter Party one. It argued that, save for the freight phrase; its terms &
conditions (on reverse page) were those of a conventional BL. If it is a conventional BL, then issuing
bank’s discrepancy is incorrect. It should be instead: “Conventional BL presented but contains an
indication that it is subject to a charter party”..
ANALYSIS
The credit required a marine bill of lading marked “freight payable as per charter party‟. In this
respect, the credit was badly worded. The presented bill of lading was marked “freight payable as
per charter party”.
ISBP 745 paragraph G2 (b) states: “A transport document, however named, indicating expressions
such as “freight payable as per charter party dated (with or without mentioning a date)”, or “freight
payable as per charter party”, will be an indication that it is subject to a charter party.
ISBP 745 paragraph G1 states: “When there is a requirement in a credit for the presentation of a
charter party bill of lading, or when a credit allows presentation of a charter party bill of lading and a
charter party bill of lading is presented, UCP 600 article 22 is to be applied in the examination of
that document.
Where a credit simply allows for or requires the presentation of a CPBL, a CPBL issued and signed
by a carrier or its agent is discrepant under UCP 600 sub-article 22 (a) (i).
CONCLUSION
The discrepancy raised by the issuing bank, “Charter Party BL signatory‟s capacity not as master,
owner, charterer or agent for any of the aforesaid”, is correct.
CASE STUDY 19
L/C available with Advising Bank by payment, however the Advising Bank did not act under our
nomination and has sent documents presented by the beneficiary to the Issuing Bank without
examining them (in accordance with beneficiary's request). No message was received from the
issuing bank, Advising Bank received a MT910 from their correspondent bank informing us of the
credit entry on our account and containing information in field 72: /EUR100 deducted as discr.fee/.
The documentary credit included the following clause: 'discrepancy fee of EUR 100.00 will be
deducted from the proceeds any drawing if documents are presented with discrepancies'
We have contacted issuing bank arguing that since they had not acted in accordance with UCP 600
sub-article 16 (c) (ii), quoting every single discrepancy they should be precluded from deducting
discrepancy fee.
An answer was received that their action has nothing to do with UCP 600 article 16 and that if we
want to find out about discrepancies we will have to ask for it. It seems that they are acting in line
with the conclusion of a/m Opinion. Nevertheless, we cannot agree with it.
In the opinion of the Issuing Bank and according to UCP600 sub-article 16 (a) an issuing bank
determines if a presentation does not comply. By deducting their discrepancy fee they obviously
wanted to indicate that the presented documents did not comply.
As per article UCP 600 sub-article 16 (b) issuing bank may in its sole judgment approach the
applicant for waiver, but that does not extend period of time mentioned in UCP 600 sub-article 14
(b), nor does it (in our opinion) annul the provisions of UCP 600 sub-articles 16 (c), (d), (e) and (f).
Achieving applicant's acceptance of discrepancies does not justify the action of not listing all
discrepancies, even when sending message indicating acceptance (such as in MT752).
Advising Bank is of the opinion that if Issuing Bank determines that presented documents contain
discrepancies, all discrepancies should be quoted either in separate MT734 or in MT752 within 5
working days. Otherwise they are precluded claiming that documents are discrepant (and
accordingly not allowed to deduct discrepancy fee)
ANALYSIS
A presentation of documents had been paid by the issuing bank deducting their discrepancy fee.
Prior to payment no notice of refusal has been sent nor had any information on discrepancies been
provided by the issuing bank.
When an issuing bank finds discrepancies in documents, it has two options available to it under
article 16: to provide a refusal message to the presenter in terms of sub-articles 16 (c) and (d) or, to
approach the applicant for a waiver without first providing a notice of refusal (sub-article 16 (b)).
When the option of approaching the applicant for a waiver is chosen, and such waiver is given and
accepted by the issuing bank, the practice is for the issuing bank to honour, and such honour will be
less any discrepancy fee that was stated in the credit.
When this course of action is taken, the issuing bank should provide the presenter, as part of their
payment message or in a separate communication, details of the discrepancies that were observed.
The presenter can then choose to dispute the discrepancies, therefore questioning the relevance of
the deduction representing the discrepancy fee. If the issuing bank does not provide such an
indication, the presenter may seek, and the issuing bank must provide, such details. The actions of
the issuing bank, as described in situation D, do not represent preclusion under sub-article 16 (f).
Conclusion:
The Issuing Bank is entitled to a discrepancy fee as outlined in the credit, but it should inform the
presenter of the discrepancies that were found, either in the advice of payment or in a separate
communication.
The issuing bank is not required to send a notice of refusal to the presenter if it elects to contact the
applicant for a waiver and to receive a waiver that is acceptable to it. Sub-article 16 (f) does not
apply in these circumstances.
If the covering schedule listed the discrepancies that the presenter had found, the Issuing Bank
should either advise the presenter that the documents were taken up despite the discrepancies that
had been identified by the presenter, or list the discrepancies for which the issuing bank had sought
waiver from the applicant.
It is only when an issuing bank does not indicate the discrepancies that there should be a need for
the presenter to seek such details. The default position is that an issuing bank, in order to justify a
discrepancy fee, should always indicate the discrepancies by one of the methods described above.
When an issuing bank has approached the applicant for a waiver, and received such waiver and
decided to act upon it, it does not need to send a notice of refusal in accordance with UCP 600 subarticle
16 (c) in order to be entitled to deduct a discrepancy fee when it honours a presentation. In
such circumstances, UCP 600 sub-article 16 (f) does not apply.
When a bank deducts a discrepancy fee on the basis of a “discrepancy fee clause‟ in a credit, it is
good banking practice to inform the presenter of any discrepancies that were found in the
documents, either in the advice of payment or in a separate communication. In the event they fail to
do so, this does not preclude them from providing such information subsequently.

Caiib IT

CAIIB recollected questions by members
2019 june IT paper, Batch-II :
Case studies on SDLC 5 questions.
Case studies on operating system 3 questions.
Case studies on object oriented programming structure.
Case studies on data and information.
Case studies on e commerce business start up.
Question on FTP,
 SMTP,
 Networking,
routing,
TCP/IP layer,
 DATA MINING,
 Data warehouse,
 Sql, firewall,
VPN,
malware and virus related,
network security,
software licensing,
call centre,
private key cryptography,
http protocol,
 RBI IT policy on banks,
 relational database,
 disaster recovery plan,
software versioning deployment,
internal external and system audit, communication,
project design etc...

Credit management

Credit Management – Very Simple ..Read everyone important

Credit management is one of the core processes for all banks and therefore, the
ability to manage its process is essential to augment interest income and to enhance
its profitability. The success of a bank crucially depends how it manages its Asset
Portfolio as it is the major source of income and has direct bearing on the bottomline
of the Bank. This demands an ability to perceive the early warning signals, which
necessitates control of both the quantitative and qualitative aspects of credit
evaluation. Thus, managing credit risk plays an important role and its effectiveness
lies in proper identification of borrower and appraisal besides adopting an efficient
recovery and exit strategy.
1. Know Your Customer (KYC): Proper identification of the borrower attains
utmost importance in the entire credit cycle for which adoption of KYC guidelines is a
must. It is observed that majority NPA accounts pertain to either new customers or
introduced by strangers or middlemen or consultants. Thus, it is desirable for the
banks to approach the customers rather they approach the banks. It is the
responsibility of the bank to look into the identity & residential proof, business
address, PAN, TAN, GST etc., before inviting the customer into bank’s fold.
Photocopies of all these must be verified with original and also get them signed by
the borrower and kept on record. Due diligence is to be done either by the bank staff
or external agencies as per extant guidelines. With regard to firms/companies etc.,
the profile of the partners/directors must be checked thoroughly along with the
history of the organization. One can get good information from the web about the
partners/directors, borrowings and the health of the organization. Obtain confidential
reports from other banks and financial institutions.
2. Credit Appraisal: The objective of credit appraisal is to extend the required
credit limits to the borrowers to meet their genuine financial/business requirements.
To address the issue, banks are required to look in to the following financial aspects
with utmost care while appraising the credit requirements of the borrowers:
i) Project Report for containing details of the machinery to be acquired, price,
name of suppliers, capacity utilization, assumed production & sales, projected profit
& loss and balance sheets for the years till the proposed loan is to be paid. Project
report should be analyzed carefully and feasibility of the project is to be arrived duly
taking the capacity of the promoters as well as external factors which has bearing on
the operations of the proposed activity.
ii) Assets & Liabilities statements of all borrowers/guarantors must be obtained
in the prescribed format along with credit proposal and the veracity of the properties
is to be verified.
iii) Balance Sheets – In order to assess the credit limits, banks need to obtain
copies of the audited balanced sheets, preferably last 3 years, along with
Income/Sales tax returns besides projected balance sheets. The estimated figures
must be thoroughly analyzed and credit limits are to be assessed realistically. The
appraising officials are required to evaluate how capital or fund is raised/used,
existing loans and liabilities, business turnover, financial stability of the firm,
profitability, repayment capacity, etc.
After verifying all the documents, the concerned official to prepare appraisal note
with SWOT (Strong points, Weak points, Opportunities and Threats) analysis and it is
expected that the appraisal should reveal the risk factors.
3. Credit History: There are many tools available now to the banks to get the
history of the borrowers/guarantors and the following are the few important reports
on which the lending institutions can bank upon:
i) Defaulter List is available on RBI’s website and banks should ensure that
borrower/guarantors name do not appear in the list and confirmation of the same
must be put on record.
ii) CIBIL Reports – Search the CIBIL reports of the borrower and guarantors and
commercial CIBIL report in case of firms/companies and these reports should be
analyzed thoroughly beyond score. The number of loans availed from various
banks/financial institutions and the enquiries made provide valid inputs (credit
profile) to the lending institutions to take informed decisions.
iii) CERSAI – Wherever mortgage of property is involved, search should be made by
the credit officer with CERSAI site before according sanction to ascertain that no
mortgage is outstanding against the said property in any other Bank or Financial
institution.
iv) Legal Entity Identifier (LEI) – RBI has advised all Scheduled Commercial
Banks to obtain LEI code (20 digit unique code) from all large corporate borrowers
having total exposure of `50 crore and above. It is a key measure to improve the
quality and accuracy of financial data systems for better risk management. It
facilitates assessment of aggregate borrowings by corporate groups, and monitoring
of the financial profile of an entity/group. Legal Entity Identifier India Ltd., a
subsidiary of the Clearing Corporation of India is authorized to issue LEI to the large
borrowers. The guideline is applicable to existing borrowal accounts also.
v) Credit Fraud Registry (CFR) – It is a centralized registry of frauds across the
banking industry which is accessible to all authorized officials of the bank. It enables
the banks to make detailed and in depth enquiries before granting/reviewing any
facility to the parties named in the CFR report.
4. Credit Rating must be done for all borrowal accounts including retail loans as per
bank’s guidelines. With regard to working capital limits, the rate of interest should be
fixed as per credit rating. However, no rating is needed for agriculture loans. Credit
rating should be done judiciously based on key financial ratios and account data. It is
desirable not to consider the proposal where the credit rating is below 3. External
rating is mandatory for high value accounts.
5. Exposure norms – It should be ensured that the credit limits sanctioned falls
well within the bank’s exposure norms (Individual, Group and Sector) and
discretionary powers of the sanctioning authority.
6. Pre-sanction visit to borrower’s residence/office/factory and the collateral
securities is to be done by the bank staff independently. The objective of the visit is
to determine the “bank-ability” and access related riskiness of the proposal.
Identification of borrower and site must be ascertained beyond doubt by inquiring
from neighbors and other surrounding people. The observations must be noted down
and kept on record.
7. Legal opinion - Verification of title deed of the securities is utmost necessary. It
must be ascertained from the concerned authorities that the documents submitted
are original and not fake. As far as possible, bank should ensure that the securities
offered (other than agricultural properties) are enforceable under SARFAESI act
2002. Certificate of change of land must be obtained in case unit to be financed is to
be built on agriculture land. The opinion should be clearly spelt-out the properties
are having clear and marketable title.
8. Valuation of property is to be done by the bank’s approved valuer only. The
report should clearly mention the market value as well as realizable value. Normally
banks should take realizable value only into consideration while sanctioning credit
limits. With regard to agriculture land, the valuation should be done by the Field 
and income thereon. The valuer report must be thoroughly analyzed and it should
not contain any comment which is detrimental to the interest of the bank. The title
deed date & number, survey number/Plot or House number, extent of land/building
must tally with registered document, legal opinion and valuation report. The
valuation report invariably accompany with clear route map with longitude/latitude
and land marks for easy access/verification at later stage.
9. Sanction terms & conditions are to be communicated to the borrower in writing
without any ambiguity and acknowledgement is to be kept on record. The sanction
letter should invariably mention the limits sanctioned, margin requirement, collateral
securities, interest rate (fixed or variable & simple or compound) & its frequency and
repayment schedule. Wherever, gestation period is allowed, the same is to be
mentioned in the sanction letter along with date of first installment.
10. Documentation – Documentation should be done very carefully and thoroughly
duly adhering all the sanction terms and conditions as any lapse in this regard may
cost the bank heavily on account of protracted litigation.
11. Legal Audit - The executed documents of high value accounts, as decided by
the banks, must be got vetted by the approved bank’s advocate or law officers of the
bank and certificate should be obtained and kept on record before disbursement of
the loan.
12. Disbursement - The disbursement should be as per schedule approved by the
bank duly ensuring the progress of the project and the amount is to be paid directly
to the suppliers. It is the responsibility of the bank to create charge with the
concerned authorities well within the time frame.
i) CERSAI: It is mandatory for the bank to register the mortgage details with
CERSAI within one month of mortgage. The asset code generated is to be recorded
in the loan file.
ii) ROC: In case of corporate borrowers, the bank’s charge on assets of the company
must be registered with ROC within 30 days of creation of charge. Generate search
report and copy of the same should be kept on record.
13. Post sanction visit is very important to verify the end use of funds. Assets to be
created by the loan sanctioned must be verified physically and facts noted in the visit
report. Transactions with sister concerns should be monitored. Scrutinize the stock
statements which are periodically submitted. Ensure proper Drawing Power is
present as per the sanction. The review/renewal of accounts must be done on due
date on basis of latest financial documents.
14. Periodical inspections enables bank to keep check on the stocks hypothecated
and securities mortgaged to bank. The inspecting official should undertake physical
verification of the stocks as per the extant norms without any deviation. The bank’s
name should be prominently displayed onsite the unit where goods are hypothecated
to bank. In case of pledge- ensure that storage area is properly maintained,
earthquake and flood resistant, goods are stored in a proper manner, stock audit is
regularly conducted and a proper register is maintained. Also note that the stocks or
securities that are offered should be adequately insured and that too on continuous
basis. Maintain inspection register where all the findings at the site should be noted.
It is a good idea to take 2-3 snapshots and paste them on register with signature of
visiting officials. Inspection should be done vigorously and without information to
borrower. In case if housing loans, visit office of sub registrar or revenue office to
verify charge of bank on the mortgaged property

Asset Quality and Recovery Management: Timely follow up is the key to keep
the quality of assets intact and enables the banks to recover the
interest/installments in time. To have better control on the assets created out of
borrowings, banks need to watch the functioning of the units by paying frequent
visits and this is to be done to all the units irrespective whether the account is
performing or non-performing one. Thus, Banks should focus attention on:
i) Awareness Calling – When the first payment is due, a call is initiated to make
him aware of the date of payment of installments/dues. This can be done either by
the branch or by call centre or through SMS.
ii) Reminder Call – When the demand is not paid, a reminder call may be made
with a request to make payment of the dues and note the response or commitment.
Repeat calls are made if the borrower fails to honor his promises.
iii) Demand Notice – In case where there is no response to the calls, a written
communication is issued to the borrower informing the status of the account with an
advise to pay the dues. Banks can also make use of technology and notice may be
sent through SMS or E-mail.
iv) Field Visits – It involves paying visits to borrower’s office or residence either by
bank staff or its agents to appraise the position of the dues and need for repayment.
Continuous persuasion definitely yields positive results. These visits also enable the
banks to assess the functioning of the activity and quality of the assets. If they found
that the financial position of the borrower is deteriorated, bank may strike a
compromise deal to recover the dues.
v) Recovery Agents: RBI permitted the banks to appoint recovery agents for
recovery of NPA/written-off accounts with more than 2 years old and with Real
Account balance of `5 lakh and above. However, in exceptional cases the mandatory
period of 2 years can be waived. The agency should be either Partnership or
Corporate entity with required expertise to handle NPA accounts. The agents
appointed under this scheme are required to be complied BCSBI code and Bank’s
Model Code of conduct for collection of dues and repossession of secured assets.
However, the agency shall not have any right to sub-delegate or appoint any subagent.
The engagement of agent is account specific and for a specified period only.
Resolution of NPAs: Inculcating financial discipline among the borrowers is the
need of the hour as any delay in payment of interest or installment may lead to
slippage of the account from standard to substandard which has adverse impact on
the profitability of the banks on account of loss of interest income besides increased
provisioning on NPAs. While focusing attention on recovery through normal channels,
banks need to initiate steps for recovery through disposal of assets.
i) SARFEASI: In the event of failure of the borrower to repay the dues despite the
said initiatives, the bank need to proceed to take possession of the assets including
collateral duly invoking provisions of SARFEASI act. Sale of assets can be done by
Authorized Officer (AO) by issuing proper notice and taking possession of the
securities. Auction of the securities is to be done by AO through bidding process and
the auction proceeds are to be credited to the loan account.
ii) Asset Reconstruction Companies (ARC): The sale of high value NPAs to ARCs
has gained momentum in the recent years in the light of increased pressure on
banks due to introduction of stringent norms on restructuring of stressed assets.
However, banks receive around 5% to 15% of the value as upfront and the
remaining amount through Security Receipt (SR) which enable them to show
improved asset quality in the bank books. Wherever the banks unable to recover the
dues in normal course may prefer this route especially with regard to high value NPA
accounts.

iii) Legal action: Banks are empowered to recover the dues by initiating legal
action against the borrowers/co-obligants by filling suit in DRT or other courts
depending on the value of the accounts. As far as possible it is desirable for the
banks to initiate SARFEASI action only. However, wherever SARFEASI action is not
feasible such agriculture securities, low value accounts etc., banks should go for legal
action against the borrowers/co-obligants.
iv) Insolvency and Bankruptcy Code (IBC) is a major reform where once the
account is referred by a creditor to National Company Law Tribunal (NCLT), the powers
of the management and the board are transferred to an independent insolvency
professional and the entire resolution process is to be completed within 180 days,
extendable by another 90 days in exceptional cases. If there is no resolution within
this period, liquidation must take place. It is an opportunity for the banks to refer high
value NPA accounts to NCLT for speedy resolution and clean up the books of the
banks. However, this may pose a major challenge to banks to provide higher
provisioning where the stressed company is subjected for liquidation.
iv) One Time Settlement Schemes (OTS): Prompt recovery of loans and advances
not only increases liquidity and profitability but also keeps funds cycle moving by
continuous lending for the development of the economy. As a last resort, RBI
permitted banks to negotiate with NPA borrowers under OTS policy duly approved by
the respective bank boards. It is a negotiated settlement where it should be ensured to
recover dues to the maximum extent possible with a minimum sacrifice. The
opportunity cost of funds in hand vis-à-vis that of funds, which could come in hand at
a later period should be calculated to establish a comparative advantage of ‘now or
later’. These guidelines are applicable to NPAs and Technically Written-off accounts. To
impart further transparency especially with regard to high value compromise accounts,
the proposals need to be vetted by Settlement Advisory Committee headed by Retired
Judge, Retired ED/CMD of a Bank and Retired General Manager of a Bank. With regard
to small loans, banks are framing their own simplified OTS policies from time to time
for recovery of NPAs with increased sacrifice.
v) Wealth Tax Returns of chronic defaulters – Governments of India, Ministry of
Finance has informed that Banks may obtain the information about the assets of the
loan defaulters from Income Tax Department to enable the banks to proceed against
the chronic defaulter’s assets for recovery of dues.
The above checklist is only indicative and not exhaustive. The guidelines may slightly
vary from bank to bank. Nevertheless, it will help the staff dealing with credit
portfolio to take judicious, prompt and prudent credit/recovery decisions.
Credit Management is an important aspect for all banks to enhance its profitability.
The proper management of credit will definitely enhance the value of all stakeholders
in general shareholders in particular. Thus, it should be the endeavor of all units and
staff members to focus attention on this vital activity for survival as well as for
further growth.

MSME :: ( Most imp Exam point of view) MCQs

MSME :: ( Most imp Exam point of view)

1. A Small Manufacturing Enterprise unit is considered as Sick Industrial Unit: when account remains sub
standard for more than six months or there is erosion in the net worth due to accumulated cash losses to
the extent of 50% or more of its net worth during the previous accounting year and the unit has been in
commercial production for at least two years
2. A small scale unit (manufacturing) can be treated as micro unit if the original investment in plant and
machinery does not exceed : Rs.25 lac
3. A unit in service enterprise is considered as medium if the investment in equipment is: more than Rs 2
crore but up to Rs 5 crore.
4. A Unit will be called as Small Service Enterprise if investment in equipments is up to: Rs 2 crore.
5. Amount of maximum loan given to micro and small enterprises that is covered under-CGFTMSEscheme
: Rs.200 lac
6. As per Micro, small and medium enterprise development Act 2006, a small manufacturing enterprise is
one in which original investment in plant and machinery is: more than Rs 25 lakh and up to Rs 5 crore.
7. As per RBI guidelines, banks are required to provide__% of advance to small enterprises to units in
which original investment in plant & machinery does not exceed Rs 10 lac in the case of manufacturing
units and does not exceed Rs 4 lac in equipment in the case of service enterprises: 40%
8. As per RBI guidelines, Loans to Agro and food processing Units are eligible to be classified under
Agriculture Ancillary Activity under Agril. Finance Priority Per borrower Rs. 100.00 crores.
9. Bank limit for working capital based on turn over method: 20% of the projected sales turnover
10. Banks are required to make 40% of advance to Micro and Small enterprises to manufacturing units
with investment up to Rs 10 lakhs and/or service enterprises with investment in equipment up to: No
criteria (earlier Rs 4 lakh) and now Micro has to reach 7.00% by March 2016 & 7.5% by March
2017 of ANBC/ceobe which ever is higher.
11. Banks will not obtain collateral security in respect of loans to micro and small enterprises which are
covered by Credit Guarantee Scheme for Micro and Small enterprises?: Rs 1 crore
12. CGTMSE fee: For North East & women; Loan up to Rs 5 lakh – 0.75% p.a.; Loan more than
Rs 5 lakh – 0.85% p.a.
13. Composite loan limit for Small Manufacturing enterprises: Rs.1.00 crore
14. For being defined as Medium enterprise, the original investment in plant & machinery should be: More
than Rs 5 crore and up to Rs 10 crore.
15. For being eligible to be classified as small (service) enterprise, the original investment in equipment
should not exceed: Rs 2 crore.
16. Full form of CGTSME: Credit Guarantee Fund Trust for Micro & Small Enterprises.
17. If a small enterprise in manufacturing has a good track record, collateral security can be waived up
to: 25.00 lacs
18. If an MSME units holds a margin of Rs.20 lac and its projected sales are Rs.400 lac, its working
capital limit will be : Rs.80 lacs
19. In case of advance granted to Micro and small enterprises, banks will not obtain collateral security up
to: Rs 10 lakh
20. In case of advance to Micro and Small manufacturing enterprises, working capital limit by a bank as
per turnover method is calculated as: 20% of projected annual turnover.
21. In case of loan guaranteed under CGTMSE, what is the extent of cover for loan upto 50 lac granted to
a women?: 80% of amount in default.
22. In case of loan to micro and small enterprises guaranteed by CGTMSE, no collateral security is
required for loans up to: Rs 100 lac.
23. Khadi Village Industry part of MSE; irrespective of investment in P&M.
24. Maximum Guarantee coverage for loans guaranteed by CGTMSE if loan up to Rs 5 lakh: 85% of the
amount in default with a maximum of Rs 425000.
25. Micro, Small and Medium Enterprises is under which Ministry: Ministry of Micro Small & Medium
Enterprises.
26. SMERA stands for: Small & Medium Enterprises Rating Agency.
27. The definition of Micro and Small enterprise in the manufacturing Sector is based on investment in :
Plant and Machinery.
28. Under CGFT scheme for MSE, for loans up to Rs 50 lac, 80% coverage is not available for: SC/ST

29. What is the maximum amount of loan covered guarantee scheme of CGTMSE for loans made to micro
and small enterprise: Rs.200.00 Lac

30. What is the rate of guarantee fees charged under CGSMSE for loan of more than Rs 5 lac to a
women?: 0.85% p.a. of limit sanctioned.
31. Advantages of Cluster based finance to MSMEs: Risk mitigation.

Caiib bfm

Interbank rate US Dollar

 Spot USD 1 = Rs. 65.2000/2575

 1 Month 3500/3600

 2 Months 5500/5600

 3 Months 8500/8600

 4 Months 1.1500/1.1600

 5 Months 1.3500/1.3600

 6 Months 1.5500/1.6600

Transit period is 25 Days. All forward Rates are for Fixed Delivery Exchange Margin is 0.10%.

From the above information, calculate :

1. Ready Bill Buying Rate

a. 65.1350

b. 65.1850

c. 65.2350

d. 66.2825

Ans - a

2. 2 Months Forward Buying Rate for Demand Bill

a. 65.6350

b. 65.6850

c. 65.7350

d. 66.7825

Ans - b

3. 3 Months Forward Buying Rate for Demand Bill

a. 65.5350

b. 65.6850

c. 65.7850

d. 65.9850

Ans - d

4. 4 Months Forward Buying Rate for Demand Bill

a. 65.2375

b. 65.7375

c. 66.2825

d. 66.5825

Ans - c

5. Ready Rate for 60 Days Usance Bill

a. 65.6350

b. 65.6850

c. 65.7350

d. 66.7825

Ans - b

6. 2 Months Forward Buying Rate for 60 Days Usance Bill

a. 65.2375

b. 65.7375

c. 66.2825

d. 66.5825

Ans - c

7. 1 Month Forward Buying Rate for 30 Days Usance Bill

a. 65.6350

b. 65.6850

c. 65.7350

d. 66.7825

Ans - b

8. 2 Months Forward Buying Rate for 30 Days Usance Bill

a. 65.5350

b. 65.6850

c. 65.7850

d. 65.9850

Ans - d

Solution :

1. Ready Bill buying Rate

Dollar / Rupee market spot buying rate = Rs. 65.2000

Less: Exchange margin at 0.10% On Rs. 65.2000 = Rs. 0.06520

= 65.2000 - 0.06520

= Rs. 65.13480

Rounded off to nearest multiple of 0.0025, the rate quoted for ready bill buying is Rs. 65.1350

2. 2 Months Forward Buying Rate

Dollar / Rupee (market) spot buying rate = Rs. 65.2000

Add: Forward premium for 2 months (Transit period 25 days and Forward period 2 months, Rounded off to lower month)

= 65.2000 + 0.55000

= Rs. 65.7500

Less: Exchange margin at 0.10% On Rs. 65.7500 = Rs. 0.06575

= 65.7500 - 0.06575

= Rs. 65.68425

Rounded off, the rate quoted for 2 months forward purchase of dollar bill is Rs. 65.6850

3. 3 Months Forward Buying Rate

Dollar / Rupee (market) spot buying rate = Rs. 65.2000

Add: Forward premium for 3 months (Transit period 25 days and Forward period 2 months, Rounded off to lower month)

= 65.2000 + 0.85000

= Rs. 66.0500

Less: Exchange margin at 0.10% On Rs. 66.0500 = Rs. 0.06605

= 66.0500 - 0.06605

= Rs. 65.98395

Rounded off, the rate quoted for 2 months forward purchase of dollar bill is Rs. 65.9850

4. 4 Months Forward Buying Rate

Dollar / Rupee (market) spot buying rate = Rs. 65.2000

Add: Forward premium for 4 months (Transit period 25 days and Forward period 2 months, Rounded off to lower month)

= 65.2000 + 1.15000

= Rs. 66.3500

Less: Exchange margin at 0.10% On Rs. 66.3500 = Rs. 0.06635

= 66.3500 - 0.06635

= Rs. 66.28365

Rounded off, the rate quoted for 2 months forward purchase of dollar bill is Rs. 66.2825

5. Ready Rate for 60 Days Usance Bill

Dollar / Rupee (market) spot buying rate = Rs. 65.2000

Add: Forward premium for 2 months (Transit period 25 days And forward period 2 months, Rounded off to lower month)

= 65.2000 + 0.55000

= Rs. 65.7500

Less: Exchange margin at 0.10% On Rs. 65.7500 = Rs. 0.06575

= 65.7500 - 0.06575

= Rs. 65.68425

Rounded off, the rate quoted for 2 months forward purchase of dollar bill is Rs. 65.6850

6. 2 Months forward rate for 60 days bill

Dollar / Rupee (market) spot buying rate = Rs. 65.2000

Add: Forward premium for 4 months (Transit period 25 days and Forward period 2 months, rounded  Off to lower month)

= 65.2000 + 1.15000

= Rs. 66.3500

Less: Exchange margin at 0.10% On Rs. 66.3500 = Rs. 0.06635

= 66.3500 - 0.06635

= Rs. 66.28365

Rounded off, the rate quoted for 2 months forward purchase of dollar bill is Rs. 66.2825

7. 1 Months forward rate for 30 days bill

Dollar / Rupee (market) spot buying rate = Rs. 65.2000

Add: Forward premium for 2 months (Transit period 25 days And forward period 1 month, Rounded off to lower month)

= 65.2000 + 0.55000

= Rs. 65.7500

Less: Exchange margin at 0.10% On Rs. 65.7500 = Rs. 0.06575

= 65.7500 - 0.06575

= Rs. 65.68425

Rounded off, the rate quoted for 2 months forward purchase of dollar bill is Rs. 65.6850

8. 2 Months forward rate for 30 days bill

Dollar / Rupee (market) spot buying rate = Rs. 65.2000

Add: Forward premium for 3 months (Transit period 25 days and Forward period 2 months, rounded  Off to lower month)

= 65.2000 + 0.85000

= Rs. 66.0500

Less: Exchange margin at 0.10% On Rs. 66.0500 = Rs. 0.06605

= 66.0500 - 0.06605

= Rs. 65.98395

Rounded off, the rate quoted for 2 months forward purchase of dollar bill is Rs. 65.9850

50 banking terms

FIFTY BANKING TERMS FOR BANK INTERVIEWS/EXAMS

( Don't miss ... Read every one and Get knowledge)

1. Repo Rate

1.When RBI provides a loan to the bank for short-term between 1 to 90, RBI takes some interest from the bank which is termed as Repo Rate.

2. Reverse Repo Rate
⏫When bank deposit it's excess money in RBI then RBI provides some interest to that bank. This interest is known as Reverse Repo Rate.

3. SLR –(Statutory Liquidity Ratio)
⏫Every bank has to maintain a certain % of their total deposits in the form of (Gold + Cash + bonds + Securities) with themselves at the end of every business days.

4. Retail banking
⏫Retail banking is a type of banking in which direct dealing with the retail customers is done.
⏫This type of banking is also popularly known as consumer banking or personal banking.
⏫It is the visible face of banking to the general public.

5. Bitcoin
⏫Bitcoin is a virtual currency/ cryptocurrency and a payment system.
⏫It can be defined as decentralized means of tracking and assigning wealth or economy, it is a software protocol.
⏫Bitcoin uses two cryptographic keys, one public (username) and one private (password) are generated.
⏫1Bitcoin= 108 Satoshi.

6. Call money
⏫Call/Notice money is the money borrowed on demand for a very short period. When money is lent for a day it is known as Call Money.

7. Notice money
⏫When the money is borrowed or lent for more than a day up to 14 days it is called Notice Money.

8. Difference between Capital market and Money market
⏫A capital market is an organised market which provides long-term finance for business.
⏫Whereas Money market provides short-term finance for business

9. Scheduled bank
Banks which are included in 2nd Schedule of RBI Act 1934 are known as a scheduled commercial bank. These banks should fulfil two conditions:
⏫Paid up capital and collected funds should not be less than Rs.5 Lacs.
⏫Any activity of the Bank should not adversely affect the interests of the customers.

10. Non Performing Assets
⏫NPA is an asset of a bank which is not producing any income.
⏫Bank Usually classify as nonperforming assets any commercial loans which are more than 90 days overdue and any consumer loans which are more than 180 days overdue.

11. Money Inflation
⏫Money Inflation is a State in which the Value of Money is Falling and the Prices are rising, over a period of time.

12. Negative interest rate
⏫When there is less demand for loans the banks park their excess fund with the central bank by which they get an interest.
⏫Negative interest rate policy (NIRP) means that central banks will deduct money from commercial banks for depositing their money with the central bank. Commercial banks, in turn, will do the same to common people.

⏫So the end effect is that people will have to pay money to banks to hold their cash.

13. Green Banking
⏫Green banking means promoting environmentally friendly practices and reducing your carbon footprints from your banking activities.
⏫Green banking aims at improving the operations and technology along with making the clients habits environment-friendly in the banking business.

⏫It is like normal banking along with the consideration for social as well as environmental factors for protecting the environment.

14. Blockchain system
⏫These days the transactions in the banking sector are becoming a very tedious task and so as to ensure that this tedious task to be removed, our banking sector is trying to emerge towards blockchain technology.

⏫To simplify the transactions without the help of any third party in a secure manner is really a great challenge, but to overcome this challenge an anonymous online ledger (collection of financial accounts) which uses the data structure to simplify it is called blockchain technology.

15. Balloon mortgage
⏫A mortgage is a transfer of a right to stable property for the security purpose of a loan amount.
⏫Balloon mortgages are just for short term and it has fixed rate mortgage.
⏫In balloon mortgage, a monthly payment is lower because of large payment at the end of a term.
⏫A balloon payment is for the honest and qualified borrowers who have the good credit history.

16. Retail credit operations
⏫Retail Credit Operations means the sequential process which involves screening, evaluation of risk(s), and ensuring that the bank lends to a creditworthy client from the asset products applications sourced.

17. Skimming
⏫Skimming is a method used by fraudsters to capture customer's personal or account information of credit card.
⏫Customer's card is swiped through the skimmer and the information contained in the magnetic strip on the card is then read into and stored on the skimmer or an attached computer.

⏫Skimming is a tactic used predominantly for credit-card fraud, but it is also a tactic that is gaining in popularity among identity thieves.

18. Money laundering
⏫Money laundering is a process of conversion of illegal money from various sources to appear to have originated from legitimated (Legal) source.

⏫The major sources of illegal money are tax evasion, bribe, Smuggling etc.

19. Cheque
⏫Cheque is an unconditional order addressed to a banker, signed by the person who has deposited money with a banker, requesting him to pay on demand a certain sum of money only to the order of the certain person or to the bearer of the instrument.

20. Direct Debit
⏫Direct Debit is a financial activity in which one person withdraws funds from another person's bank account.
⏫It is a facility in which the payee withdraws the amount from the payer's account, the payer has instructed the bank to allow the payee directly withdraw the amount from the account.

21. Cash Credit
⏫Cash Credit is a proper limit sanctioned by the bank to the borrowing manufacturing/trading unit against the value of the raw materials, semi-finished goods and finished goods including stores.

22. Bill of Exchange
⏫A bill of exchange is a non- interest bearing written order which is used primarily in foreign trade which binds one party to pay a fixed amount of money to another party at a decided future date.

⏫A bill of exchange is signed by the creditor and accepted by a debtor.

23. Cash Reserves Ratio
⏫Every bank Maintain certain % of their total deposits with RBI in the form of Cash and Net demand & Time Liabilities.
⏫Current CRR is 4%. Every Bank has to pay the amount to RBI on every 15 Days.

24. Bank Rate
⏫Bank rate is also termed as “Discount Rate”
⏫The rate through which RBI charges certain % for providing money to other banks without any security for a Long period of time for 90 Days &

25. Marginal standing facility
⏫MSF is the rate through which bank can borrow funds for Short time – Overnight basis.


26. Minimum Reserve system of RBI
⏫The current system of the Indian government to issue notes is “Minimum Reserve System”.
⏫Under this policy, the minimum reserves to be maintained in the form of gold and foreign exchange should consist of rupees 200 crores.

⏫Out this reserve, the value of gold to be maintained is rupees 115 crores.
⏫This system was introduced in 1956 replacing the proportional reserve system.

27. Clean note policy of RBI
⏫Lots of people in our country have a bad habit of writing something on the currency note, folding currency note, also somebody staple it which spoils the Note and reduces notes durability.

⏫So to avoid such occurrences RBI introduced the Clean Note Policy in 2001 in an order to increase the life of currency notes.
⏫The main objective of this Clean Note Policy is to provide good quality currency notes and coins to the citizens of our country.

28. CAMELS rating system
⏫CAMELS is a rating system developed in the US that is used by supervisory authorities to rate banks and other financial institutions.

⏫It applies to every bank in the U.S and is also used by various financial institutions outside the U.S.

Each factor is assigned a weight as follows:
⬅Capital adequacy 20 %
⬅Asset quality 20%
⬅Management 25%
⬅Earnings 15%
⬅Liquidity 10%
⬅Sensitivity 10%

29. Masala Bonds
⏫The bonds listed on the London Stock Exchange (LSE) is termed as Masala Bonds.
⏫These bonds are offered and settled in US dollar to hike Indian Rupee in International market .
⏫These bonds help to raise Indian rupees from International investors for infrastructural development in India.
⏫International Financial Corporation (IFC) converts bond from dollars into rupees and uses the rupees to finance private sector investment in India.

30. Core Banking Solutions
⏫Core Banking Solution (CBS) is networking of branches, which enables customers to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account.

⏫The customer is no more the customer of a Branch.
⏫He becomes the Bank’s Customer.

31. Unified Payment Interface
⏫This interface will integrate the entire payment systems in India.
⏫It uses a single application programme interface with a series of Application Programme interface (API’S).
⏫The mobile devices are the primary object for all the payments.

32. Micro ATM S
⏫Micro ATMs are not any special type of ATMs
⏫It is the advanced version of Point of Sale (PoS) having an additional feature of Biometric scanning.
⏫It is also known as a mini version of ATMs.
⏫These machines are connected with the GPRS (General Packet Radio Service) mobile internet and it uses Core Banking Solution (CBS) platform to perform the different types of services.

33. Letter of Credit
⏫The letter of credit is one of the negotiable instrument.
⏫It is given by the bank, that guarantee’s buyer’s payment to the seller shall be received on time along with the proposed amount to be paid.

⏫In this instinct, if the buyer is unable to make the agreed payment to the seller, then the bank will cover the full or remaining amount of purchase.

34. Bancassurance
⏫Bancassurance is the concept of selling insurance products of insurance companies by banks.
⏫The bank acts as an agent and promotes Banca (bancassurance) products under section 6(1)(o) of the Banking Regulation Act, 1949.
⏫It was originated in Europe in the 1980s and was successful.
⏫The bancassurance business model is a globally accepted profitable business.

35. Banking Ombudsmen
⏫Banking Ombudsman is a senior official appointed by RBI.
⏫He handles and redresses customer complaints against deficiency in certain banking services.
⏫The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.

36. The Balance of Trade
⏫The difference of the country’s exports and the value of its imports are known as the Balance of Trade.
⏫It normally incorporates trade in services unless mentioned as the balance of merchandise trade.
⏫It includes earnings (interest, dividends, etc.) on financial assets.

37. A Balance of Payments
⏫A list that states a country’s transactions with other countries for a certain time period (generally 1 year).
⏫Payments into the country (receipts) are entered as positive numbers, called credits.
⏫Payments out of the country (payments) are entered as negative numbers called debts.
⏫A single number summarises the country’s international transactions: the balance of payments surplus.

38. NOSTRO Account
⏫A NOSTRO account is one which is maintained by an Indian Bank in the foreign countries.

39. VOSTRO Account
⏫A VOSTRO account is one which is maintained in India by a foreign bank with their corresponding bank.

40. LIBOR
⏫The full form of LIBOR is London Interbank Offered Rate.
⏫It is the interest rate at which funds are borrowed by banks in marketable size, from other banks in the London interbank market.

41. MIBOR
⏫The full form of MIBOR is Mumbai Interbank Offered Rate.
⏫It is the interest rate at which funds are borrowed by banks in marketable size, from other banks in the Mumbai interbank market.

42. CASA Account
⏫CASA stands for Current Account Savings Account.
⏫The CASA ratio displays the value of deposits maintained in a bank in the form of current and savings account deposits in the total deposit.

⏫A higher CASA ratio means the better operating efficiency of the bank.

43. RAFA Account
⏫RAFA stands for Recurring Deposit Account Fixed Deposit Account.
⏫The RAFA ratio shows how much deposit a bank has in the form of Recurring and fixed deposits.

44. DEMAT account
⏫The full form of Demat Account is Dematerialized account.
⏫This is a type of bank account for citizens in India so that they can trade in stocks or debentures which are listed in the stock market.

⏫Just as a savings account contains money saved, a demat account has stocks saved.

45. Legal Tender
⏫As per provisions of coinage Act 1996, bank notes, currency notes and coins (Re. 1 and above) are legal tender for the unlimited amount.

⏫The subsidiary coins (below Re. 1) are legal tenders for the sum not exceeding Re 1.
⏫Issue of 1, 2 and 3 paisa coins discontinued wef Sep 16, 1981.

46. Currency Chest
⏫Currency chests are operated by the Reserve Bank of India (RBI) so that they can provide good quality currency notes to the public.
⏫However, RBI has appointed commercial banks to open and monitor currency chests on behalf of RBI.
⏫The money kept in currency chests in the commercial banks is considered to be kept in RBI.

47. Insolvency
⏫An organization, a family, person, or company is declared as insolvent when they are unable to pay their debts back on time.
⏫One of the most common solutions for insolvency is bankruptcy.

48. Bankruptcy
⏫Bankruptcy is a legal declaration of person who is unable to pay off debts.
⏫In generally, Bankruptcy is of two types- Reorganization and Liquidation bankruptcy.
⏫Under the bankruptcy of reorganization, debtors should restructure their bill plans to make them more easily met.
⏫Whereas under liquidation bankruptcy, Debtors has to sell their assets to make money so that they can pay off their creditors.

49. Amortisation
⏫Amortization is a periodic payment of a debt like a loan or a mortgage.
⏫Amortization is the arrangement of a lump sum cash flow into many periodic instalments over a span of time, which is also called amortization agenda.

50. Credit Crunch
⏫A credit crunch is also known as a Credit squeeze or credit crisis.
⏫A credit crunch is a condition in which there is an immediate decline in the availability of a loan or the credit.
⏫A situation in which suddenly the credit becomes difficult to get.
⏫Sometimes it can be done by reverse actions like by strict rules and regulations to avail the fund from the financial institutions like banks, NBFCs, and many other lenders.

5 TIPS TO CRACK JAIIB-CAIIB IN 1st ATTEMPT.

If you've just joined the Banking Industry, you must have applied for JAIIB/CAIIB or If not, you'll be applying room & 1 thing everyone wants to know is how to pass JAIIB/CAIIB is get an extra increment. So sooner you pass the Exam, earlier you get an extra increment. If you've as Officer JMGS-I (PO), your initial basic salary would be ₹.23700. If You Clear JAIIB/CAIIB, you get 2 increments & your basic salary increase by ₹.1940. So if you miss it 1st time, your Increment gets delayed by 6months. That means loss of ₹.11640+DA. So it becomes important to clear JAIIB/CAIIB Exam in 1st attempt itself.
Around JAIIB 1.50lacs & CAIIB 1lac candidates appear for the Exam. Only 22-25% candidates are able to clear the exam each time. So does it mean that JAIIB/CAIIB is difficult to crack? What should be the Strategy to clear the Exam in 1st Attempt? How 1 should prepare for Exam?
Passing marks for JAIIB are 50% aggregate & 45% in each Subject. If aggregate marks less than 50% or Marks in a particular paper less than 45%, but you score 50%/more in any other 2 sub. You don't qualify the exam but need not give that particular paper in 2nd,3rd,4th attempt, in which you score 50%/more. The best part of Exam is that result of each paper is shown to you immediately after submit your online Exam.

Simple 5 Steps to Prepare for the JAIIB/CAIIB Exam:
Take off the burden from your mind, you're required to score only 50% which's not very difficult & the Good thing is that there's No NEGATIVE (-) Marking.
Here is a simple step by step guide which will help the Bankers to be prepared for JAIIB/CAIIB.
If you come from Commerce/Finance background  (BBA/MBA), It's relatively easy to break the JAIIB/CAIIB. Because you would have studied atleast 65% of topics covered. If you're not from Commerce/Finance backgroue you need to make little Extra Efforts.
1. GET THE RIGHT BOOKS: After reg. for JAIIB/CAIIB, 1st thing you should do is to get the Books for all 3 Subjects. Best books available for JAIIB/CAIIB are by McMillan, which IIBF also suggest. these Books are available on Amazon:
-JAIIB (PPB-AFB-LRAB)
-CAIIB (ABM-BFM-OPTIONAL SUB).
These Books might seem bulky but has covered the entire syllabus & has everything you need to know. The Book is designed in a way that 1can easily be prepared by just reading the definition & summary. the MCQs will give you a fair Idea of level of preparations.
If you don't have enough time & don't want to study IIBF Books, you can by the Books JAIIB/CAIIB by N.S.Toor, which are in QA format.
2. KNOW YOUR SYLLABUS: As a Banker it's likely that there will not be a lot of time left for studies after a hectic day of work. Hence it's best to start early. the Idea is to plan for the Syllabus & Time them so that the Level of Preparedness is High. Knowing your syllabus will give Idea, how much time need to prepare.
If you've been a Commerce student, you'll find the AFB & some part of LRAB, you've already covered during your studies earlier. So 60% of your Job is already done. You can mark these topics & focus on those topics which you've not studied earlier.
If You've been Arts/Science & Engg Student, everything is New for you & need to prepare for everything..

3. MAKE A STRATEGY FOR STUDYING: ( I've already posted about JAIIB-CAIIB Study Strategy & Study Plan a Month Ago, You must keep follow them out of action).

4. PRACTICE & ATTEMPT SOME MOCK TESTS: Another great step is to find out previous 3years Question Papers. Prepare them all leaving 1 which will work as a model test before you actually face the Exam. the Idea is to practice a lot of question type compared to cramming. You can attempt in JAIIB-CAIIB Forum, Blogs website 'Free Mock Tests for JAIIB-CAIIB', which will give you an Idea how the actual exam is held. attempting Mock Test help you practice the actual Exam conditions.
5. ON THE ACTUAL TEST DAY: Choose the easy questions 1st as they will give you an estimate of the Score. then come back to the Questions which were missed. Also, there's No NEGATIVE (-) Marking, so attempt all Questions. If you stuck in a question, leave that by Marking & Go ahead..

ALL THE VERY BEST.
WISH YOU GOOD LUCK...

DIFFERENT KINDS OF RISKS RELATED TO FOREX TRANSACTIONS

Foreign exchange operations face large no. of different type of risk due to a variety of reasons such as location of forex

markets without any single location, markets existing in different time zones, frequent fluctuations in the foreign currency

rates, effect of policies of the government and central banks of the related country etc.

Foreign exchange exposure: The exposure can be classified into 3 categories:

1. Transaction exposure : This arises on account of normal business operation. A transaction in foreign exchange can

exposure a firm to currency risk, when compared to the value in home currency.

2. Translation exposure : It arises on valuation of assts and liabilities created through foreign exchange and receivables or

payable in home currency, at the end of accounting period. These are notional and not actual.

3. Operating exposure : These are the factor external to a firm such as change in competition, reduction in import duty,

reduction in prices by other country exporters etc.

Exchange rate risk : Even the major currencies may experience substantial exchange rate movements over relatively short

periods of time. These can alter the balance sheet of a bank if the bank has assets or liabilities domiciled in those currencies.

An adverse movement of the rate can alter the value of the foreign exchange holdings, if not covered properly. The dealers

have to cover the position immediately.

Positions in a foreign currency : When the assets and the outstanding contracts to purchase that currency are more than the

liabilities plus and the outstanding contracts to sell that currency.

 Long or overbought position : When the purchases (and outstanding contracts to purchase) are more than the sale (the

outstanding contracts to sell).

 Short position or oversold position : When the purchases (and outstanding contracts to

purchase) are less than the sale (the outstanding contracts to sell).

Overbought or oversold position : It is called open position

Covering of position risk : The position is covered by fixing suitable limits (such as daylight position limit, overnight position limit,

single deal limit, gap-for-ward mismatch limits).

Prudent limit prescribed by RBI for open position : RBI has given discretion to bank Boards to fix their own open position limits

according to their own requirement, expertise and other related considerations.

Pre-settlement risk : It is the risk of failure of the counter party, due to bankruptcy or closure or other risk, before maturity of the

contract. This may force the bank to cover the contract at the ongoing market rates resulting into loss due to difference prevailing

between the contracted rate and rate at which the contract covered.

Settlement risk: Payment/delivery of one currency and received of other currency by both the parties. Settlement risk is the

risk of failure of the counter party during the course of settlement due to time zone differences between the two currencies

which are to be exchanged. For example, if a bank in the earlier time zone (say in Australia) performs its obligation and

delivers the currency and a bank in a later time zone (say USA) fails to deliver or delivers with delay, the loss may be caused to

the bank in the earlier time zone.

Foreign exchange settlement risk is also called temporal risk or Herstatt risk (named after failure of Bankhaus Herstatt in Germany)

The settlement risk can be taken care of by operating the system on a single time basis and also on real time gross settlement

(RTGS) basis.

Liquidity risk: The liquidity risk is where a market does not have the capacity to handle, at least without significant adverse

impact on the price, the volume of whatever the borrower buys or sells at the time he want to deal. Inability to meet debt

when they fall due could be another form of such risk.

For example, if there is deal of UK Pound purchase against the rupee and the party selling the UK Pound is short of pound in its

NOSTRO account, it may default in payment or it may meet its commitment by borrowing at a very high cost.

Country risk: It is the risk that arises when a counter party abroad, is unable to fulfill its obligation due to reasons other than the

normal risk related to lending or investment.

For example, a counter party is willing and capable to meet its obligation but due to restrictions imposed by the govt. of the

country or change in the polices of the govt., say on remittances etc. is unable to meet its repayment / remittance capacity.

Country risk can be very high in case of those countries that are having foreign exchange reserve problem.

Banks control country risk by putting restrictions on overall exposure, country exposure.

Country risk is in addition to normal credit risk. While the normal credit risk is due to failure on meeting obligation on the part of

counterparty on its own, the country risk arises due to actions initiated by the Govt. of that country due to which counterparty is not

able to perform its part.

Sovereign risk : It is larger than country risk. It arises when the counterparty is a foreign govt. or its agency and enjoys sovereign

immunity under law of that country. Due to this reason, legal action cannot be taken against that counterparty. This risk can be

reduced through disclaimers and by imposing 3,d country jurisdictions.

Interest rate risk: The potential cost of adverse movement of interest rates that the bank faces on its deposits and other

liabilities or currency swaps, forward contracts etc. is called interest rate risk. This risk arises on account of adverse

movement of interest rates or due to interest rate differentials. The bank may face adverse cost on its deposit or adverse

earning impact on its lending and investments due to such change in interest rates.

Interest rate can be managed by determining the interest rate scenario, undertaking appropriate sensitivity exercise to estimate the

potential profit or losses based on interest rate projections.

Gap risk : Banks on certain occasions are not able to match their forward purchase and sales, borrowing and lending which

creates a mismatch position, which is called gap risk. The gaps are required to be filled by paying or receiving the forward

differential. These differentials are the function of interest rates.

The gap risk can be managed by using derivative products such as interest rate swaps, currency

swaps, forward rate agreements.

Fledging risk: This occurs when one fails to achieve a satisfactory hedge for one's exposure, either because it could not be

arranged or as the result of an error. One may also be exposed to basic risk where the available hedging instrument closely

matches but does not exactly mirror or track the risk being hedged.

Operational risk : It is a potential catch that includes human errors or defalcations, loss of documents and records, ineffective

systems or controls and security breaches, how often do one consider the disaster scenario.

Legal, jurisdiction, litigation and documentation risks including netting agreements and cross border insolvency. Which country's

laws regulate individual contracts and the arbitration of disputes ? Could a plaintiff take action against a borrower in an

overseas court where they have better prospects of success or of higher awards ? There is a growing and widespread belief

that, whatever goes wrong, someone else must pay. The compensation culture whatever its justification or cause, is becoming

a big problem for many businesses.

Letter of credit

JAIIB LEGAL:

Letter of Credit
Applicant-Buyer-Importer-Opener : He is the person who applies to bank for Letter of
Credit

Issuing Bank : The bank which opens the Letter Of Credit on the request of
applicant/Buyer.
Beneficiary-Exporter-Seller : The person who is entitled to receive the benefit under
Letter of Credit.
Advising Bank / Notifying Bank : The bank in the Beneficiary/Exporters Country through
which the letter of credit is advised to the beneficiary.
Negotiating Bank : The bank in the Beneficiary/Exporters Country which negotiate the
bills (i.e. make payments on the bills drawn by the seller and accepts the documents.) If
the LC specifies a bank then that bank is the Negotiating Bank and is also called the
Nominated Bank / Paying Bank. If the LC however does not specify the bank, than any
bank can be negotiating bank.
Confirming Bank : The advising bank is only required to advise the credit to the
beneficiary. If however in addition to advising the credit the advising bank were to
confirm it, then the advising bank will also become confirming Bank.
Reimbursing Bank : It is the bank which is appointed by the Issuing Bank to make
reimbursement to the Negotiating, Paying or confirming Bank.

ACTION POINTS PROCEEDINGS UNDER SECTION-138 OF N.I.ACT,1881

ACTION POINTS

PROCEEDINGS UNDER SECTION-138 OF N.I.ACT,1881

IN CASE OF POST DATED CHEQUE (PDC)TAKEN AS SECURITY FOR LOAN

1. Branch should present the Cheque for payment within its validity.

2. If the Cheque is dishonored, please ensure following steps before initiating legal action.

a. First, the Branch has to send a Demand Notice to the drawer of the cheque within a

period of 30 days from the date of receiving the information from the Branch/Bank

regarding the return of the cheque as unpaid.

b. The Demand Notice should contain all the relevant facts, such as:-

(1). The nature of transaction. (2). Amount of Cheque. (3). Date of depositing the cheque

in the Branch/Bank. (4). Date of dishonoring of the cheque. (5). The drawer has to be

advised to pay the cheque amount within 15 days.

3. In case the notice could not be served for any reason within a period of 30 days, the

Branch/Bank has to re-submit the Cheque for payment within the period of validity of the

Cheque. If the Cheque is dishonored again, the procedure as laid down above, to be

followed.

4. The drawer of the Cheque need to make payment within a period of 15 days from the

days of receipt of notice. If the borrower fails to make payment within 15 days from the

date of receipt, the Branch/Bank can file a complaint in the Judicial Magistrate First Class

Court. The complaint should be filed within a period of 1 month from the date of

expiry of above mentioned 15 days period.

5. If the Branch/Bank fails to file the complaint within the period of 1 month, the same will

become time-barred and hence, may not be entertained by the court.

6. On receiving complaint, along with an affidavit and relevant papers, the court will issue

summons and hear the matter.

7. If the court finds the Drawer guilty, the court may award punishment which may extend to

two years imprisonment or with fine which may extend to twice the amount of Cheque or

with both.

8. In view of the above, when any Branch/Bank keeping PDC for any loan, it is required that

the concerned Branch should maintain proper records / registers in respect of the dates of

validity of the Cheques, notice in proper time, evidences of service of notice on the

drawer of the Cheque etc.

Individual elements of Balance sheet and their analysis

Most important topic forever useful::

Individual Elements of Balance Sheet
and Their Analysis:::

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IT security recollected on 27.09.2019

Some of the recalled questions/topics are as following...

2-3 questions on Escrow
Security governance
Cert in
Major change from it act to it amendment act
BC DRP steps
2 questions on firewall
RTO
RPO
CISO reports to whom
Who are responsible for IT security
Maker checker difference
Spyware
VoIP
Black/white box testing
Salami attack
ISMS
PDC and DRC
2 questions on fault tolerant systems
Disadvantage of check list audit
2-4 questions on physical security
ITAM 2 questions
What cant be disclosed under RTI act 2005
Schema
Modem
Green server
Telnet uses which port
2-3 questions on security standards
E wastes
2-3 questions related to software development
COBIT
Threat vector
DoS
SQL
Cross site scripting
Steganography
Cryptography
Beta testing
Multiplexers
CAPTCHA
Dual core processor

Certified credit professional yesterday's exam review 28.09.2019

Certified credit professional yesterday's exam review 28.09.2019

Forfaiting ,factoring- 5Marks
IRR,NPV 5 Marks
Sarfaesi 1Mark
Cersai 2Marks
IBC 5Marks
LC MBPF 5Marks
Ratio 4 Marks

annual imports 2200 lakhs

fixed costs 70 lakhs
insurance 30 lakhs
customs duty 200 lakhs

EOQ 500 LAKHS

LEAD TIME 2 MONTHS
USANCE 5 MONTHS

CALCULATE NO OF LC'S REQUIRED
LC FREQUENCY
LC AMOUNT

GIVE ME SOLUTION PLS.
This question in today exam 5 Marks


Please read thoroughly Macmillan Book Bankers Hand Book on credit management and cover the follow topic:
Factoring and forfaiting,
CP, PSL, PSLC certificate,
5 marks on LC on EOQ based, numerical on ANBC, Ratio analysis, NPV, Payback period, NPV, IRR, Questions related to wc management, CR, Activity Ratio, CERSAI, MSME act, MSME Rehabilitation, credit monitoring, NCLT, CAP, IBC, Treds, margin on HL, etc..

Certified treasury professional yesterday's exam review 28.09.2019

Certified treasury professional yesterday's exam review 28.09.2019

Cleared treasury operations today first stage ,second stage training programme is pending but few things I want to illustrate:

1.I prepared from MC Millan book only but some things were from Fabozzi book also

2.Make sure read and learn bond valuation must because about 10-15 questions from bond

3.one case study from FRA WAS THERE IN EXAM BUT SIMPLE ONE

4.FOREIGN EXCHANGE RATES MEANS WHEN AND HOW TO APPLY

5.READ EXAMPLES AT BACK OF BOOK MOST IMPORTANT 

6.HAVE THOROUGH READING OF LAST CHAPTERS BECAUSE MOST OF QUESTIONS WERE REGARDING STRATEGY U OPT WHEN U ARE IN TREASURY

PAPER WAS TOUGH I PERSONALLY FELT

Cleared treasury professional today , paper was tough main topics were FRA, FOREX,BOND MOST IMPORTANT . Read treasury management book line by line