*PPF (Public Provident Fund) Scheme 2019 – 5 Important Changes*

*PPF (Public Provident Fund) Scheme 2019 – 5 Important Changes*

Recently Government notified the PPF rules by withdrawing the earlier notifications. This notification is called as PPF (Public Provident Fund) Scheme 2019 which removed the earlier notifications with respect to Public Provided Scheme 1968.Let us see the major changes that happened in this new PPF (Public Provident Fund) Scheme 2019.

*PPF (Public Provident Fund) Scheme 2019 – 5 Important Changes*



*# Premature Closure is allowed for NRIs*
When in the year 2016, PPF premature rules were announced, the Government introduced certain eligibility to opt for premature closure of the account and they are as below. (Refer my old post “Premature closure of PPF account – New Rules 2016“)
Premature closure of the account is allowed in the event of the death of the account holder (This is the old rule and will continue).
Premature closure of account is allowed in the event of serious ailments of holder, spouse, parents or children.
Premature closure of the account is allowed in the event of the amount required for the higher education account holder or minor account holder.
However, with the new PPF (Public Provident Fund) Scheme 2019 rules, if the account holder turned NRI, then they are allowed to opt for premature closure. Refer the notification wordings “on change in residency status of the account holder on production of copy of Passport and visa or Income-tax return”. This facility of premature closure of account for NRIs will be available only after the completion of 5 years of period.
*# Interest Rate on the PPF Loan is reduced*
If you took a loan against your PPF Account, the PPF Scheme 1968 laid down an interest rate of 2% per annum above the prevailing PPF interest rate. For example, suppose the prevailing interest rate is 7.9%, then you used to pay the interest of 9.9% on your loan on PPF.This interest rate on PPF loan is reduced to 1% from the older 2%. Hence, if the prevailing interest rate is 7.9%, then the applicable interest rate on PPF loan is 8.9%. I think this is a big booster for many who can easily avail this rather than going for other forms of loans like a personal loan.In both cases, the interest is levied from the first day of the month in which the loan is taken to the last day of the month in which the last installment of the loan is paid.
*# No upper limit on the number of deposits in a Financial Year*
Earlier, the maximum number of deposits you are allowed to deposit in PPF is restricted to 12. The meaning of the year is FINANCIAL YEAR. In other words, you can make deposits to the PPF account as many times as you want, subject to the maximum limit.This gives a big booster and flexibility for many investors. Because if one has to fill Rs.1,50,000 a year, then his every contribution should be Rs.12,500 as he has to fill the maximum limit within 12 installments. With this change, PPF turned more flexible.
*# Deposit in the multiple of Rs.50*
Earlier the minimum deposit in a year was Rs.500 and thereafter in the multiple of Rs.5. This now increased to Rs.50. This change is required as there is no value for Rs.5. Hence, I think it is a good move.
*# Change in the Forms*
To streamline the process, the PPF(Public Provident Fund) Scheme 2019 rules changed the complete form structures and the new forms are as below.
Account Opening Form-Form 1 (Earlier it was Form A)
Contribution Form-Earlier it was Form B. However, nothing is specified under the new scheme.
Partial withdrawals- Form 2 (Earlier it was Form C)
Account closure after maturity: Form 3 (Earlier it was Form C)
PPF Loan- Form 2 (Earlier it was Form D)
Extension Form- Form 4 (Earlier it was Form H)
Premature Closure: Form 5 (This was not specified earlier)
Nomination-Form 1 (Earlier it was Form E)

WHAT THE CHANGE IN RATIOS MEAN

WHATTHECHANGEINRATIOSMEAN
If a firmrealises book debts in cash—No change in current assets, quick ratio, current ratio or net working capital.
If a firmrealises old assets or non current assets in cash or sell fixed assets in cash: current assets, quick ratio, current
ratio or networkingcapitalwillall improve
If a firmissues bonus shares—There is no change in any ratios
If a firmissues rights shares—Current ratio, quick ratio, net working capital, debt equity ratio, net worth will improve
If a firm revalues its fixed assets and creates revaluation reserve: Net worth and tangible networth increase. Debt
equity ratio declines / improves. There is no effect on current assets or quick assets or current ratio and quick ratio.
If increase in long term sources is more (say 125%) than increase in long term uses during a year liquid
asset would increase, liquidity would improve.
If increase in long term is uses more (say 125%) than increase in long term sources during a year — liquid
asset would decrease, liquidity would decline.
Lower and higher break even point : A firm with lower break even point has better chances for earning profits. A firm
with higher break even earns lower profits.
If break-even point of a firmgoes up—It is an indication of dedine in profits
If break-even point of a firmgoes down—It is an indication of increase in profits
If debtor-turnover ratio increase—It shows efficiency in recovery
If debtor-velocity ratio decrease—It shows firmis allowing credit to buyer of its products for a lesser period
If stock-turnover ratio increase—It is better use of stocks
If current ratio increases and quick ratio remain constant — It shows higher %age of stocks in or lower %age of
receivables in total current assets.
If current ratio is constant and quick ratio increases—It shows lower%age of stocks or higher%age in receivables in
total current assets.

Caiib BFM strategy

BFM::;;

The strategy for the study of Bank Financial Management which many people finds difficult to clear. If you study properly, it is easy to clear the BFM. This subject also contains 4 modules, they are;

-International Banking

-Risk Management

-Treasury Management

-Balance Sheet Management

Many people do not correlate the syllabus of the subject with day to day banking activity. So they find it difficult to score and understand this subject. But this not true, this subject is very much important which will increase your knowledge regarding top management & middle management functioning of your bank as well as banking as a whole industry.

All the modules are equally important, but you may clear the paper with three modules study also. Module A & B are relatively easy and scoring as well. Let us discuss strategy for each module.

Module A-International Banking

Important topics are Exchange Rates and Forex Business, Basics for Forex Derivatives, Documentary LC, and Facilities for Exporters & Importers

Rapid reading or bullet point reading is quite useful for this module. Practice numerical again and again.

Many numerical/case studies are asked from this module which are quite easy as compared to Module B & Module D case studies. Refer the case studies from McMillan given at the end of the topic. Also N.S.Toor book has many numerical and case studies. Questions are asked on Exchange rates, Shipment Finance etc.

Module B-Risk Management

All chapters are equally important as they are interlinked to each other. Again focus more on case studies/numericals given in Apendix at the end of chapter. Maximum case studies are asked from this module. Though short notes are useful for this module I would suggest McMillan reading for this module because some questions are twisted type for which you require details of the concept which is hard to get from short notes. RBI website contains FAQs which are quite useful for this modules, you should read them at least once.

Module C- Treasury Management

Important topics are Introduction, Types of treasury products, Treasury Risk Management, Treasury and Asset-Liability Management.

Mostly questions asked on this module are theoretical type, so through reading of McMillan is important. If you don’t get time then you can skip this module or read short notes since the weighted of this module for exam point of view is low according to me as compared to Module A&B. But those who wish to make carrier or work in treasury department, this is the best module to learn.

Module-D Balance Sheet Management

Important chapters are Components of ALM in Bank’s Balance Sheet, Capital and banking Regulation,, Capital Adequacy, Asset Classification and Provisioning Norms, Interest rate Risk management.

Though McMillan book contain sufficient material but I would suggest you to refer RBI website for this module. In this module focus more on Case Studies as compared to theoretical questions. Do not skip this module as it is much important for exam as well as knowledge point of view. No need to read McMillan line by line.

Overall you have to keep balance between theoretical reading as well as case studies/numerical since the paper would contain 40-45% case studies. N.S.Toor book contains good case studies and MCQs. Also there are many resources available on the internet from where you will get case studies for this module. After giving this paper you will realized that BFM is easier as compared to ABM and no need to worry for BFM.

CAIIB ABM Strategy

CAIIB ABM Strategy

ABM is one of the compulsory subjects for CAIIB. Most of the people find difficult to clear this paper. Today, I will tell you how to study for ABM subject.

This subject also contains 4 modules

MODULE – A: Economic Analysis

MODULE – B : Business Mathematics

MODULE – C : HRM in banks

MODULE – D : Credit Management

As we are bank employees we get very less time for study, so how to decide which topics to be read, which topics to be skipped?

-As I had told you in my previous blog article that generally paper consists of 60% theoretical & 40% numerical or case studies, so choose the module to be study in deep so as to clear the paper easily depending upon your personal strength and weakness.

If you observed all the modules, you will realize that Module A and Module C are most scoring modules. Do not skip these modules. Module B contains Business Mathematics which many people find difficult to study as the level of mathematics is tough, especially for non-engineering background people. Those who works in Credit/Loan Department will find that Module D easy as well as interesting. Module D is most important not only exam point of view but also for your daily working in Credit Department. So do not skip Module D.

IMPORTANT TOPICS FROM EACH MODULE

Module A- Supply and Demand, Money Supply and Inflation, Business Cycles, GDP Concepts and Union Budget.

No need to read McMillan Book line by line for thise module, short notes will be quite useful for studying this module. Don’t read stats given in these chapters. In GDP Concepts and Union Budget chapters numerical are asked which are quite easy provided you know the components and formula.

Module B-Time Value of Money, Sampling Methods, Simulation, Bond Investment

Don’t go to deep for study this module as mathematical calculations are difficult to understand especially for non engineering background people. Practice the examples given in McMillan. Those who are not good at math can skip this module and focus more on remaining modules.

Module C-Development of Human Resources, Human Implications of Organisations, Performamce Management, HR & IT

You need to read thoroughly all the topics from this module from McMillan. It is quite easy and theoretical only. Repeatedly read MCQs from N.S. Toor book of this module.

Module D-Overview of Credit Management, Analysis of Financial Statement, Working Capital Finance, Credit Control and Monitoring, Rehabilitation and Recovery.

Read this module from McMillan book only. The chapters in this module are not lengthy as compared to other modules. Practice Numerical from Financial statement and balance sheet.

Overall, you have to study at least three modules in detail so as to achieve the 50 score. You can choose the modules to study more depending upon your strength. I would suggest that you can keep module B at last, just read formulas from this module, as this module is quite boring, lengthy and hard to understand.

Very Useful RATIO analysis PDF

Very Useful RATIO analysis PDF as requested by many.

Useful for JAIIB,CAIIB & Certified Credit Professionals.

Down load PDF link

https://drive.google.com/file/d/1tugLTDD5pwhAg1tmSh8St9FOfLYg1bsu/view?usp=sharing

All the best for your exams

Very Useful Ratio analysis

		FORMULAS	IMPACT IF	IMPACT IF
			HIGH	LOW
	I. LIQUIDITY RATIOS	To know the Unit's ability to meet the short term liabilities
	1. CURRENT RATIO	Current Assets	High level of Inventory/ book	Unable to pay
		/Current Liabilities	debts	Creditors
	2. QUICK RATIO	(Current Assets –	Idle Funds	Strain on Liquidity
		Inventory- prepaid
		expenses) /
		Current Liabilities )
	GROSS WORKING	Total Current Assets (TCA)
	CAPITAL (NWC)
	NET WORKING CAPITAL	Current Assets – Current Liabilities
	(NWC)
	WORKING CAPITAL GAP	Current Assets – Current Liabilities other than Bank borrowings (short)
	(WCG)
	II. SOLVENCY	To measure the relationship between borrower's owned funds and
	(LEVERAGE) RATIOS	borrowed funds.
		Indicates size of stake, stability and degree of solvency.
	NET WORTH (NW)	Capital + Reserves + Profits or - Loss
	TANGIBLE NET	Net worth –
	WORTH(TNW)	Intangible Assets
	ADJUSSTED TANGIBLE	Tangible Net Worth –	IMPACT IF	IMPACT IF
	NET WORTH (ATNW)	Investments in	HIGH	LOW
		Subsidiary and
		affiliates
	1. TOL/TNW	Total Out Side	Higher ratio indicates increased	Low is good and
		Liabilities	dependence on borrowings and	too much low is
		(Total liabilities – Net	other liabilities.	alos not good. It
		worth) /		indicates
		Tangible Net Worth	Low Stake	Unable to get
				Credit
	2. TOL/ATNW	Total Out Side
			Over Trading	High Capital
		Liabilities
				gearing
		(Total liabilities – Net
				Conservating
		worth) /
				Management
		Adjusted TNW
	3. DEBT-EQUITY RATIO	Long Term	Indicates the proportion of	Anything below 2
		Loans/Net Worth	owners’ stake to that of the	is normally
			outsiders, in the long term	considered good.
			sources of the company.
			Anything over 2 is not normally
			considered good.
	4. GROSS DSCR	Net Profit +	Debt can be serviced faster	Repayment
		Depreciation + Int.	( Repayment capacity of loan is	obligations strains
		On T/L /	good)	resources
		T/L Installment + Int.
		On T/L
	5. NET DSCR	Net Profit + Depreciation (Cash accruals) /
		T/L Installment

		FORMULAS	IMPACT IF	IMPACT IF
			HIGH	LOW
	III. ACTIVITY RATIOS	Measures the Unit's efficiency in turning its inventory into sales and
		efficiency with which the debtors are turned over into cash.
	1. Inventory Turnover Ratio	Cost of Sales/	Brisk Sales	Obsolete Stock
	(times)	Average Inventory		Market Problem
		(Opening Stock +		Poor Demand
		Closing Stock/2 =
		Avg. Inventory)
	2. Inventory Velocity	Average Inventory/	Higher the figure, the slower is the turnaround of
	(Holding level) in Days	Cost of Sales(Cost of	current asset and in general higher the risk
		good sold) x 365
	3. Debtors Turnover Ratio	Net Credit Sales /	Cautious trading	Unable to collect
	(times)	Avg. Trade Debtors		debt
	4. Debtors Velocity	Avg. Trade	indicates the number of days	The company has
	(Holding level) (Debt	Debtors/Net Credit	credit given by the company as	an efficient
	Collection period) in Days	Salesx365	on the date of the balance sheet.	collection
			A high figure indicates sales on	mechanism
			easy terms.	Prompt payment
			Unable to collect debt	by customers
				The company is
				able to dictate
				terms due to good
				quality of its
				product.
	5. Creditors Turnover Ratio	Net Credit Purchases/	Poor Management	Unable to pay the
	(times)	Avg. Trade Creditors	Demand Product	creditors
	6. Creditors Velocity	Average Creditors/	Indicates number of days credit	the company is
	(Holding level) in days	Net Credit Purchases	received by the company, as on	adequate funds to
		X 365	the date of the balance sheet.	meet the Creditors
				Creditors are not
			Unable to pay the creditors or	allowing more time
				it is also called poor
			creditors are allowing more time
				management.
			due to its good financial	Demand Product
			reputation
	7.Holding level for Raw	Avg.RM Inventory/	To know the holding period (no. Of days of Raw
	Materials	Cost of RM	Materials, SIP and FG in an Operating Cycle. ( Efficiency in
		consumed x 365	maintenance of Inventory)
		RM Consumed =	The nature and availability of raw materials should be
			examined to correctly interpret the ratio.
		(Op.RM + RM
			High days indicates
		Purchases – Clg. RM)
			a) indiscreet buying b) presence of unsaleable stocks
			seasonal stocking
	8.Holding level for Stock in	Avg.SIP Inventory/ Cost of Production x 365
	process
	9.Holding level for  F.G.	Avg.F.G. Inventory/ Cost of Sales x 365

		FORMULAS	IMPACT IF	IMPACT IF
			HIGH	LOW
	IV.PROFITABILITY	To assess a Unit's ability to generate earnings
	RATIOS
	1. PBDIT	Profit before
		Depreciation, Interest
		and Tax
	2.PBDIT/INT (Interest	PBDIT/Interest	Int. Servicing capacity is good	Int. Servicing
	Coverage Ratio - ICR)			capacity is low.
	3.PAT/NET SALES %	Profit after tax/ Net	Profit % is good. Indicates	Indicates operating
		Sales x 100	operating efficiency	inefficiency

 

	PROFITABILITY RATIOS	FORMULAS	IMPACT IF	IMPACT IF
			HIGH	LOW
	4.PAT/Net Worth	Profit after tax/ Net	the owner’s funds have invested	the owner’s funds
		worth	profitably.	have
			To be compared with the ratio in	been not invested
				profitably.
			similar units.
	5. Expenses/Sales %	Operating	Trend for the company over a	Indicates efficiency
		Expenses/Sales x 100	period is to be examined.	As years go by
			If high it indicates Operating	sales should
			inefficiency.	increase without a
				corresponding
				increase in
				expenses
	6. Retained Profit/PAT %	Retained Profit/	Indicates prudence of the managers in conserving
		Profit after Tax x 100	financial resources and long term strategies of the
			unit.
	7. PBDIT/Total Assets	Profit before	This ratio is a measure of gross profitability or gross
		Dep+Int+Tax/ Total	return from the activity of the company. A
		Assets	percentage of more than 10 is considered healthy
			whereas below 2 is considered risky.
	8.OPM %( OP/NS %)	Operating Profit/ Net Efficiency in operating the unit		Low performance
		sales x 100	Should be comparable with	in operating
			similar industries
	9.PBT/Net Sales%	Profit before Tax/	Indicates operating efficiency	indicates operating
		Net Sales x 100		inefficiency
	10.Cash Accruals	PAT ( Net Profit) +
		Depreciation
	11.Net sales to Total	Net Sales /	Efficient utilization of assets	Idle/underutilized
	Tangible Assets (times)	(Total Assets –		assets
		Intangible Assets)
	12.PBT to Total Tangible	Profit before Tax/
	Assets (%)	(Total Assets –
		Intangible Assets)
	13.Interest/Cost of sales	Interest/ Cost of	Interest burden is more	Interest burden is
		Sales		less

	PROFITABILITY RATIOS	FORMULAS	IMPACT IF	IMPACT IF
			HIGH	LOW
	14.ROE% ( Return on	PAT*100 / Net worth
	Equity)	(Owners' funds)	Efficient utilization of assets	Idle/underutilized
				assets or Heavy
				Capital investment
	14.ROI% ( Return on	PBIT *100 / Debt +
	Investment)	Equity
	15.ROCE or ROA (Return	PBDIT *100/ (Total
	on capital employed or	Assets - Intangible
	Return on Assets)	Assets)
	V. STOCK EXCHANGE RATIOS (EFFICIENCY RATIOS)
	Ratio	Formula	Impact
	1. EPS (Earning per Share)	PAT/No. Of Shares	Indicates to what extent income is available per
			share, to pay dividend.
	2. Price Earning Ratio (P/E	Market Price per
	Ratio)	Share /
		Earning Per
		Share(EPS)
	3. Earning- Yield Rate	Earning Per Share	Assesses annual income accruing from the share
		(EPS)/	investment
		Market Price per
		Share
	4. Payout Ratio (Earnings -	PAT/ Total Dividend	Indicates the dividend paid to the net income.
	cover Ratio)	Paid
	5. Dividend-yield Rate	Dividend per	Enables comparison of Dividend policy and yield
		Share/Market price
		of Shares x 100