Showing posts with label IIBF Certifications and Blended Courses. Show all posts
Showing posts with label IIBF Certifications and Blended Courses. Show all posts

Sunday, 22 March 2020

New All IIBF Certifications PDFs in single link 2020-2021

All IIBF Certification PDFs in single link 2020-2021

Read corresponding  IIBF books .. Macmillan / Taxmann.

These all materials are extra information to get knowledge.

All the best


Face book:

https://www.facebook.com/groups/543054539662893/

Certified credit officer/Professionals 2020

https://drive.google.com/file/d/1lUW00Y-qnVzH9R9QB4ZjGqeShYDATS-e/view?usp=sharing

CAIIB ABM 2020

https://drive.google.com/file/d/10AkzgCtLyYexdKulaYY3B1ljHRJPGuLu/view?usp=sharing


MSME 2020

https://drive.google.com/file/d/1m1qF2hh9D0hpVvFTlNCR2rvpYAiEQTD8/view?usp=sharing


KYC AML:2020

https://drive.google.com/file/d/1T__7x42LV1HaG9YBQuMkAIPvS9GAHeL8/view?usp=sharing


BCSBI:2020

https://drive.google.com/file/d/1lSOKtV5OrThXmCwiB4TGVyOjZVVtjThd/view?usp=sharing


CAIIB IT:2020

https://drive.google.com/file/d/1t7Ein_FE5YMruvDQPOG4Z3Z-TE-Xmp_1/view?usp=sharing


Certified Treasury Professionals:2020
https://drive.google.com/file/d/1lVvYYtYC797vn1DKuSAsCxJhkv3E1JxK/view?usp=sharing


Digital banking 2020
https://drive.google.com/file/d/1lckjesn0gs0kiOZID1aBubb4tiHvbzPE/view?usp=sharing


Forex Individual 2020

https://drive.google.com/file/d/1lf3o8SRqy2_aRJulq9qf2q0krHmFlKok/view?usp=sharing


Forex Operations 2020
https://drive.google.com/file/d/1lnPrVdXPVsc3sve8OwsjE87OEgsxsAVb/view?usp=sharing



Cyber Crime and fraud management 2020

https://drive.google.com/file/d/1m2y5bwuUa1vKkBjx5DjwH17dNf8BP-xu/view?usp=sharing


Information System for Bankers 2020
https://drive.google.com/file/d/1lt0r7cRzJHTmBXsmF9xvEYFzaaxHCxTI/view?usp=sharing


International Trade Finance  2020
https://drive.google.com/file/d/1lxS3FGgdzI5Q-rJFPufnVUSA69TpVjT3/view?usp=sharing


IT SECURITY 2020
https://drive.google.com/file/d/1ly9nfxTpucTPKB6kuV-mIod4pTc97ceg/view?usp=sharing


Micro finance 2020

https://drive.google.com/file/d/1lzMSuWctOJUrKnNP_FfRlQL9ngs1U6aS/view?usp=sharing

Risk In financial services 2020
https://drive.google.com/file/d/1m7eITlMDdKTnc1FU1sSIKJtP8IcrZrG1/view?usp=sharing


Certified Audit  Professionals:
https://drive.google.com/file/d/1m8aQcdD4qr7R4QzUEgiN1Paw_rWhKWsm/view?usp=sharing

https://drive.google.com/file/d/1zoloZKNR2-UsBGIf0gw1ErhD0F2Y9mHW/view?usp=sharing



Telegram:

https://t.me/joinchat/KP68xFdZGztM7iDAuS4ueg














Sunday, 27 October 2019

Bcsbi recollected questions on 26.10.2019

Bcsbi recollected questions on 26.10.2019


1) Reason for termination of Bank customer relationship
2) where we can not perform right of set-off
3) net worth formula:
Capital + reserve - accumulated loss and depreciation like option
4) once a bearer always a bearer meaning
5) bank display on their website list of unclaimed deposit account:
Name and account no
Name and address
Name, address and account no
6) not a feature of social media marketing
Sharing experience
Giving opinion
Passive participation
Exchange of information
7) if 5L to 25 L loan then processing time
8) Active listening
9) quality of good listener
10) find odd one mobile banking services modes
IVR / SMS/ USSD/ STK Like
11) find odd one, features of holder in due course

12) find odd one, good delivery of services
Speed/ concern / accuracy  like that
13) wrongly issue credit card and charge 100. What BO will fine
100 + double the amount charged

Sunday, 28 April 2019

All IIBF Certifications PDFs in single link Updated on April 2019

All IIBF Certifications PDFs in single link

Read corresponding  IIBF book 1st Macmillan / Taxmann.

These all materials are extra information to get knowledge.

All the best

Certified credit officer/Professionals
https://drive.google.com/file/d/1UuxDdXjdmPYiMa05SPgXQe1ZjuQ4e8bh/view?usp=sharing

MSME
https://drive.google.com/file/d/10zBkmliUC7170ZzgceaslAHeGXQd1-vF/view?usp=sharing

KYC AML:
https://drive.google.com/file/d/10mB6kpvV3CZ7UhUvXKnbFs2z_KUJu2IT/view?usp=sharing

BCSBI
https://drive.google.com/file/d/1Bdlk9P7in93ua_xusXgtwj0-USU3ALRV/view?usp=sharing

CAIIB ABM
https://drive.google.com/file/d/1NXM9K5pNJps-euhZR0TbV6Zz87zFK8gA/view?usp=sharing

CAIIB IT
https://drive.google.com/file/d/1Pj5vev_yk78BvAM6PTr-2wiRRXUDeiXH/view?usp=sharing

Certified Treasury Professionals:
https://drive.google.com/file/d/1Ojzmwijq9oqLoWWba0uWhzMzZwYdlYws/view?usp=sharing

Digital banking
https://drive.google.com/file/d/1EYj0XBI3-7_P9zq24WgPSFNkU6uJsEDz/view?usp=sharing

Forex Individual
https://drive.google.com/file/d/1jiyi1IiOI1W0r9u1aIFw0RH1U3jAOxNE/view?usp=sharing

Forex Operations
https://drive.google.com/file/d/1-ToWV33bJ4mKv20nNkQoLNw7z8bHwpuU/view?usp=sharing

Cyber Crime and fraud management
https://drive.google.com/file/d/16pwzqhxEBDYGq1SgUlXExhYXmWzCujmm/view?usp=sharing

Information System for Bankers
https://drive.google.com/file/d/1Xs8ywGhueRM4RToIRehfB5Od3YC0m7yM/view?usp=sharing

International Trade Finance
https://drive.google.com/file/d/11yfB3mpE51VPViNvOGcbDVIA3_i8r4wq/view?usp=sharing

IT SECURITY
https://drive.google.com/file/d/1plGml38MO1MBebPdTpC5pGEvh7rdqDfe/view?usp=sharing

Microfinace
https://drive.google.com/file/d/1mo-Pz-zoylEUKG21eKhRFJMcrbwv3RNb/view?usp=sharing

Risk In financial services
https://drive.google.com/file/d/1TdRYKQ34PGLtcnmnF83brpVHp2kEHUT9/view?usp=sharing

Certified Audit  Professionals:

https://drive.google.com/file/d/1gzaqFOz97-yNdL-COsYUkka0MTTaB9xF/view?usp=sharing








Sunday, 12 August 2018

All IIBF Certifications PDFs in single link

All IIBF Certifications PDFs in single link

Read corresponding  IIBF book 1st Macmillan / Taxmann.

These all materials are extra information to get knowledge.

All the best

Certified credit officer/Professionals
https://drive.google.com/file/d/1FplMEaDGqO901bQESuIMfmS0spej2p5B/view?usp=sharing

KYC AML
https://drive.google.com/file/d/1NhyU5b-q7SomdRD_kuyxwhO0lSVvlp8v/view?usp=sharing

MSME
https://drive.google.com/file/d/1pozMYe4F0moF-5dyAzhB_0BcaPIsqZYr/view?usp=sharing

BCSBI
https://drive.google.com/file/d/1vk4exeJW2PQM93gwDNsnvNGWj2uh7JMC/view?usp=sharing

Digital Banking
https://drive.google.com/file/d/1M5jr0a84pgqilJgJsBiZZe6FJBwDsuqi/view?usp=sharing

Foreign exchange Individual
https://drive.google.com/file/d/1jDQsTKSl54UrXC0gvBhiGv5V1tduk5Zj/view?usp=sharing

International Trade Finance
https://drive.google.com/file/d/1vYgdwbTVazkjv_2U7ppfAL2yfmsG295l/view?usp=sharing

Information system banker
https://drive.google.com/file/d/1yySCTA2aFwdeNDgTny9XlIB0x7IIG3SD/view?usp=sharing

IT security
https://drive.google.com/file/d/1XNLaHz4QNLCvHIH_MMuYjNqo7Cw7q2EY/view?usp=sharing

Prevention of cyber crime & fraud exam
https://drive.google.com/file/d/1GArx9JZAWOHH-fK8WvuEZSgqxjZgl_jG/view?usp=sharing

Certified Treasury Professionals
https://drive.google.com/file/d/1ZzUVI4CttHW_yNRO1DG4KSf9IAhZiCIm/view?usp=sharing

RISK in financial services
https://drive.google.com/file/d/134OS-POYOZaBLeEjFWLlAbhbFGKPWoPM/view?usp=sharing

Microfiance
https://drive.google.com/file/d/1bm27bcMA_NFUgdxbIJCJOlHLFinNA_rF/view?usp=sharing

CAIIB ABM 300 Case studies

https://drive.google.com/file/d/12voUk6-ubSI2PH0hKX6_trTf6T7wwdh2/view?usp=sharing

CAIIB  Elective IT pdf
https://drive.google.com/file/d/1x4RoW7L2Ub2VOFiAMVjjW7wV0aEtz6Gj/view?usp=sharing

FOREX OPERATIONS PDF

https://drive.google.com/file/d/19Qi4HjcLbca1X3P9ad_x3wESF1OOiqi7/view?usp=sharing

Certified Accounts and Audit pdf

https://drive.google.com/file/d/15hLGNIICS4p8IKUEsjAEPfmZJ-cm9lvO/view?usp=sharing

https://drive.google.com/file/d/1zoloZKNR2-UsBGIf0gw1ErhD0F2Y9mHW/view?usp=sharing





Wednesday, 18 July 2018

LOANS AND ADVANCES INCLUDING BALANCE SHEET ANALYSIS

LOANS AND ADVANCES INCLUDING BALANCE SHEET ANALYSIS

1. ˜Credit Rating Agencies in India are regulated by: RBI
2. ˜CRISIL stands for: Credit Rating Information Services of India Ltd.
3. ˜Deferred Payment Guarantee is : Guarantee issued
when payment by applicant of guarantee is to be made in installments over a period of time.
4. ˜If Break Even Point is high, it can be construed that the margin of safety is ____: Low.
5. ˜Long Term uses – 12; total Assets – 30; Long Term source 16; What is net working capital : 4
6. ˜On which one of the following assets, depreciation is applied on Straight line method: Computers.
7. ˜Projected Turnover is Rs.400 lacs, margin by promoter is Rs. 20 lacs. What is maximum bank
finance as per Annual Projected Turnover method: 80 lakhs.
8. ˜Rohit was a loanee of the branch and news has come that he has expired. On enquiry, it was
observed that he left some assets. Upto what extent the legal heirs are liable to the Bank? Legal heirs are
liable for the liabilities upto the assets inherited by them.
9. ˜The appraisal of Deferred Payment Guarantee is same as that of a) Demand Loan b) OD c) Term
Loan d) CC : Term Loan.
10. A cash credit account will be treated as NPA if the CC limit is not renewed within ___days from the
due date of renewal: 180 days.
11. A director of a bank wants to raise loan of Rs 10 lakh from his bank against Life Insurance Policy with
surrender value of more than Rs 15 lakh. What will be done?: Bank can sanction.
12. A firm is allowed a limit of Rs.1.40 lac at 30% margin. It wants to avail the limit fully. How much will
be the value of security : Rs.2 lac
13. A guarantee issued for a series of transactions is called: Continuing guarantee
14. A lady who has taken a demand loan against FD come to the branch and wants to add name of her
minor son, as joint a/c holder. What you will do?: Name can be added only after adjustment of the loan.
15. A letter of credit which is issued on request of the beneficiary in favour of his supplier: Back to Back

LC
16. A loan is given by the bank on hypothecation of stock to Mr. A. Bank receives seizure order from
State Govt. What should bank do?: Bank will first adjust its dues and surplus if any wilt be shared with
the Govt.
17. A loan was sanctioned against a vacant land. Subsequently a house was constructed at the site.
What security is available now to the bank? : Both
18. A minor was given loan. On attaining majority he acknowledges having taken loan and promises to
pay. Whether the loan can be recovered? : He can not ratify the contract. Hence recovery not possible.
19. A negotiating bank and issuing bank are allowed days each for scrutiny of documents drawn
under Letter of credit to ensure that documents are as per LC: 5 banking days each.
20. Age limit staff housing loan: 70 years;
21. An L/C is expiring on 10.05.2008. A commotion takes place in the area and bank could not open.
Under these circumstances can the LC be negotiated?: The L/C can not be negotiated because expiry date
of LC can not be extended if banks are closed for reasons beyond their control.
22. As per internal policy of certain banks, the net worth of a firm does not include: a. Paid up capital b.
Free Reserve c. Share Premium d. Equity received from Foreign Investor : Revaluation Reserves
23. Authorised capital is Rs.10 lac. Paid up capital Rs.6 lac. The loss of previous year is Rs.1 lac. Loss in
current year is Rs3 _ lac. The tangible net worth is : Rs.2 lac
24. Authorised capital= 10 lac, paid-up capital = 60%, loss during current year = 50000, loss last year =
2 lacs, what is the tangible net worth of the company? : 3.5 lac
25. Bailment of goods by a person to another person, to secure a loan is called : Pledge
26. Balance outstanding in a CC limit is Rs.9 lakh. Value of stock is Rs.5 lakhs. It is in doubtfUl for more
than two years as on 31 March 2012. What is the amount of provision to be made on 31-03-2013?: Rs.9
lakhs (100% of liability as account is doubtful for more than 3 years)
27. Balance Sheet of a firm indicates which of the following – Balance Sheet indicates what a firm
owes and what a firm owns as on a particular date.
28. Bank limit for working capital based on turn over method: 20% of the projected sales turnover
accepted by Banks
29. Banks are required to declare their financial results quarterly as per provisions of : SEBI
30. Banks are required to maintain -a margin of ___ for issuing Guarantee favouring stock exchange on
behalf of share Brokers.
31. Banks are required to obtain audited financial papers from non corporate borrowers for granting
working capital limit of: Rs.25 lakh &above
32. Banks provide term loans and deferred payment guarantee to finance capital assets like plant and
machinery. What is the difference between these two: Outlay of funds.
33. Benchmark Current Ratio under turn over method is: 1.25
34. Break Even Point: No profit no loss. ( TR-TC=Zero)
35. Calculate Debt Equity ratio – Debenture – Rs 200, capital 50; reserves – 80; P& L account credit
balance – Rs 20: 4: 3 ( 200 divided by 150).
36. Calculate Net working capital– Total assets 1000; Long Term liabilities 400; Fixed assets, Intangible
assets and Non current assets (i.e. long term uses) Rs 350; What is net working capital : 400- 350= Rs
50
37. Calculate Tangible Net Worth: Land and building: 200 Lacs; Capital:80000 intangible asset:15000:

Monday, 16 July 2018

LATEST RBI POLICY GUIDE LINES ON BASEL & RISK MANAGEMENT

Eligible Credit Rating Agencies- Rating of NBFC-FD by Infomerics Valuation and Rating Private Limited (IVRPL) As perMaster Direction
dated 25.08.16, the names of six approved Credit Rating Agencies and theirminimuminvestment grade credit ratings have been listed. RBI
decided on 14.07.17, that NBFCs can also use the ratings of Infomerics Valuation and Rating Private Limited for rating the fixed deposit
portfolios of NBFCs with IVR BBB as theminimuminvestment grade credit rating.
RiskManagement and Interbank Dealings- Reports to the Reserve Bank
In terms RBI circular dated July 05, 2016, the Head/Principal Office of AD Category-I banks are required to submit a statement in form BAL
giving details of their holdings of all foreign currencies on fortnightly basis through Online Returns Filing System(ORFS) within seven
calendar days fromthe close of the reporting period towhich it relates. RBI decided (on 10.08.17) that w.e.f. August 16, 2017 (i.e. for
the statement of first fortnight of August 2017), this statement may be submitted through the web portal at https:// bop.rbi.org.in
as per prescribed format. Head/Principal Office of AD Cat-I banks earlier required to submit a monthly statement of Nostro/Vostro
account balances are to discontinue this report.
Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure
Standard
In partial modification of extant guidelines, RBI decided (02.08.17) that Level 1 assets of banks would comprise of following. These
assets can be included in the stock of liquid assets without any limit as also without applying any haircut: i. Cash including cash
reserves in excess of required CRR.
(a). For banks incorporated in India,
 Reserves held with foreign Central Banks in excess of reserve requirement, where a foreign sovereign has been assigned a
0% risk weight as per rating by an international rating agency.
(Central bank’s reserves would include banks overnight deposits with central banks, and term deposits with the central banks that:
(i) are explicitly and contractually repayable on notice from the depositing bank; or (ii) that constitute a loan against which the bank
can borrow on a term or on an overnight basis but automatically renewable basis (only where the bank has existing deposit with the
relevant central bank). Other term deposits with central banks are not eligible for the stock of HQLA. However, if the term expires
within 30 days, the term deposits could be considered as an inflow).
 Reserves held with foreign Central Banks in excess of the reserve requirement, to the extent these balances cover the
bank’s stressed net cash outflows in that specific currency, in cases where a foreign sovereign has been assigned a non-0% risk
weight as per rating by an international rating agency, but a 0% risk weight has been assigned at national discretion under Basel II
Framework.
ii. Government securities in excess of the minimum SLR requirement.
iii. Within the mandatory SLR requirement, Government securities to the extent allowed by RBI, under Marginal Standing Facility
(MSF). (Government securities to the extent of 2 per cent of NDTL may be included i.e. currently allowed under marginal standing
facility (MSF).
iv. Marketable securities issued or guaranteed by foreign sovereigns satisfying all the following conditions:
(These securities will include only marketable securities which attract a 0% risk-weight in terms RBI Master Circular dated 01.07.13.
In cases where a foreign sovereign has been assigned a non-0% risk weight as per rating by an international rating agency, but a 0%
risk-weight has been assigned at national discretion under Basel II Framework, marketable securities issued or guaranteed by that
foreign sovereign within its domestic jurisdiction will be allowed to the extent those securities cover a bank’s stressed net cash
outflows in that specific foreign currency stemming from the bank’s operations in the jurisdiction where the bank’s liquidity risk is
being taken.)
(a) assigned a 0% risk weight under the Basel II standardized approach for credit risk;
(b) Traded in large, deep and active repo or cash markets characterised by a low level of concentration; and proven record as a
reliable source of liquidity in the markets (repo or sale) even during stressed conditions.
(c) not issued by a bank/FI/NBFC or any of its affiliated entities.
(d) Prudential Guidelines on Capital Adequacy andMarket Discipline- New Capital Adequacy Framework (NCAF) - Eligible Credit
Rating Agencies— INFOMERICS Valuation and Rating Pvt Ltd. (INFOMERICS)
(e) In terms exant guidelines, six domestic credit rating agencies viz. CARE, CRISIL, FITCH India,, ICRA/, Brickwork Ratings and

TREASURY PRODUCTS

TREASURY PRODUCTS
1) Which of the following currency is not fully convertible?
a) USD b) EURO c) INR d) GBP
2) What are the Spot Trades?
a) It is the process of settlement where payment and receipts of funds are settled in respective currencies.
b) The settlement takes place within 2 working days from the trade date.
c) Currency may be bought or sold with settlement on the same date i.e. To day (TOD)
d) The settlement can be on the -next day he. Tomorrow (TOM)
3) Which of the following is significant about spot trade?
a) All rates quoted on the screen are for spot trade unless otherwise mentioned
b) TOD and TOM rates are generally quoted at a discount to the spot rate.
c) TOD and TOM rates are less favourable to buyer d) All these
4) What is forward contract?
a) It is a contract for purchase and sale of currency at a future date.
b) The exchange rate for a future contract is quoted on the day of contract.
c) The contract between buyer and seller is called forward contract.
d) All the above
5) Which of the following is true regarding a forward contract?
a) Treasury may have forward contracts with customers or Banks as counterparties.
b) Customers cover currency risk through forward contract.
c) Treasury may cover its customer exposure by taking reverse position in Inter-Bank market.
d) All the above
6) The features of forward rates are:
a) They are not projected on the basis of exchange rate movement in the market
b) Forward rates are decided on the basis of interest rate differential of two currencies.
c) The interest rate differential is added to the spot rate for low interest yielding currency and deducted
from the spot rate for high interest yielding currency
d) All the above
7) Which of the following are True?
a) Forward rate reflects interest rate differential only in prefect markets.
b) Perfect markets are where currency is fully convertible and highly liquid.
c) When currency is not fully convertible the demand for forward contract influences
the forward exchange rate d) All these
8) The features of a swap are:
a) A combination of spot and forward transactions is called a swap.
b) Buying in the spot market and selling same amount in forward market or vice-versa is swap.
c) Swap is mainly used for funding requirements_ d) All these
9) A Bank may have foreign exchange surpluses from the following sources:
a) Profit from overseas Branch operations
b) Forex Borrowing in foreign domestic market
c) Foreign currency and convertible rupee deposits with branches
d) All the above

10) A Treasury may have surplus forex from the following sources:
a) Surpluses net of Bank's -lending in foreign currency
b) Floating funds on account of customer transactions
c) EEFC funds maintained in current account d) All these
11) The surplus forex can be invested by a Treasury in:
a) Inter-Bank loans b) Short term investments c) Nostro Account
d) Any or all of these
12) Which of the followings are the sources for short-term investments?
a) Treasury Bills issued by foreign governments
b) Commercial paper
c) Other debt instruments issued by multi lateral institutions
d) All the above
13) What is a Nostro Account?
a) This is a current account denominated in foreign currency maintained by a Bank with the correspondent Bank in the
home country of the currency.
b) Nostro Account does not attract any interest.
c) Many correspondent Banks provide automatic investment facility for funds held
overnight which earn nominal interest. d) All these
14)What is Money Market?
a) It is place for raising and deploying short term resources where maturity does not exceed one year.
b) Inter-Bank market is divided as call money and term money.
c) Call money market is also overnight market where borrowed funds are repaid on the next working day.
d) Notice money market is where funds are placed beyond overnight and upto 14 days.
15) The participants in call/notice money market are:
a) The major players are Banks and primary dealers.
b) Non-Banking financial companies can only lend the surplus funds upto specified limit_
c) NBFC can not participate in this market d) Both (a) and (c)
16) Which of the followings are the features to Treasury Bills?
a) The T-Bills are issued by the RBI on behalf of central govt. for pre-determined amount.
b) The interest is by way of discount.
c) The price is determined through an auction process d) All these
17) The maturity period of T-Bills is:
a) 91 days b) 364 days c) (a) and (b) both d) None of these
18) Which of the followings is relevant to T-Bills?
a) Each issue of 91 days T-Bill is for Rs_ 500 crore and auction is conducted weekly onWednesday.
b) Each issue of 364 days is for Rs. 1000 crore and it is auctioned fortnightly
c) The Banks park short term funds in T-Bills d) All these
19) The Benefits of T-Bills are:
a) It is Risk free investment
b) It yields interest higher than the call money market.
c) It is possible to trade T-Bill in secondary market d) All these
20) Which of the followings is correct regarding T-Bill?
a) It is in the Electronic form and held in SGL Account maintained by Banks with RBI.
b) Depository participants can also operate through SGL Account.
c) The settlement of T-Bills is through Clearing Corporation of India d) All these
21) If a T-Bill is of 91 days is priced at 99.26, what does it signify?
a) It will yield interest at 2.99%
b) This is known as implicit yield.
c) (a) and (b) both d) None of these
22) The_ features of the commercial paper are:
a) It is an unsecured money market instrument issued in the form of promissory note.
b) The highly rated corporate Borrowers can raise short term funds through this instrument.
c) It is an additional instrument to the investing community d) All these
23) -The time limit for issuing a CP is:
a) Minimum maturity 7 days b) Maximum maturity one year
c) (a) and (b) both d) None of these
24) The requirements for issuing a commercial paper are:

a) The company issuing CP should have minimum credit rating of P2.
b) Banks can invest in CP only if it is issued in D-mat form
c) The minimum amount of CP is Rs. 5 lac d) All these
25) Who issues guidelines for issue of CP?
a) RBI
b) Market practices prescribed by FIMMDA (Fixed Income and Money Market and Derivatives Association of India) c) (a)
and (b) both d) None of these
26) A company issuing CP must satisfy the conditions:
a) Tangible Net worth of the company should not be less than Rs. 4 crore
b) The company should be enjoying working capital limit with Bank/financial institution
c) The Borrowal Account should be classified as standard Asset d) All these
27) How does Tangible Net Worth is arrived at?
a) Capital b) Free Reserves c) (a) + (b) — Intangible Assets if any
d) None of these
28) Which of the following is relevant about commercial paper?
a) It is issued for discounted amount i.e. less than face value
b) The price is quoted for face value
c) It is negotiable instrument d) All these
29) Which of the following statements regarding commercial paper is
not correct?
a) CP is a substitute to working capital
b) Interest rates are at par with PLR
c) It should be compulsory in D-mat form
d) Purchase and sale of CP is effected through the depository participants
30) Banks prefer to invest in CP through Treasury because :
a) Credit Risk is relatively low.
b) Yield on CP is higher than inter-bank money market.
c) There is no liquidity risk d) All these
31) Which of the following- Credit Rating Agencies have been authorized by RBI for
Rating?
a) ICRA b) CRISIL c) CARE and FITCH Ratings India Ltd. d) All these
32) The provisions for issue of commercial paper are:
a) Maximum period for subscription to an issue of CP is two weeks from the date of opening of issue.
b) CPs can be issued on a single date or in parts on different dates.
c) The same issue of CP should have the same date of maturity d) All these
33) The process of issue a CP involves:
a) The Bank is appointed as issuing and paying agent.
b) The Bank would assess the requirement and the extent to which the CP issue is linked with credit limit.
c) The potential investors are given a copy of IPA certificates d) All these
34) The features of certificate of Deposit are:
a) It is a debt instrument issued-by Bank against deposit of funds
b) It is a negotiable instrument
c) It bears interest rate higher than regular deposits of the Bank. d) All these
35) The requirements of certificate of Deposit are:
a) Minimum amount of deposit is Rs. 1 lac
b)_ The maturity period may range from 7 days to one year
c) It is an additional source for investment to Banks and corporates d) All these
36) What is a Reverse Repo?
a) It is a contract to buy securities and then to sell them back at an agreed future date and price.
b) It provides opportunity for short term investments of surplus funds
c) (a) and (b) both d) None of these
37) What is Repo?
a) It is an instrument of borrowing funds for a short period.
b) It involves selling a security and simultaneously agreeing to repurchase it at a future date for a slightly higher price.
c) The price difference is called interest d) All these
38) The significance of Repo is:
a) It is a tool used by RBI for open market operations.

b) It affects liquidity in the system.
c) None of these d) Both (a) and (b)
39) The commercial Banks participate in Repo transactions because of:
a) To meet short fall of CRR --
b) To meet short fall in SLR
e) The interest on Repo is lower than call market d) All these
40) Repo transactions are regulated by:
a) RBI b) Securities Contracts Regulations Act c) (a) and (b) both d) None
41) Which of the following statements is correct?
a) Repo is a short term money market instrument
b) The Repo Rate and period is announced by RBI,c) (a) and (b) both d) None of these
42) What is the Repo Rate with effect from 16th Sept 2010?
a) 5% b) 5.25% C) 5.75% d) 6% e) None of these
43) What is the Reverse Repo Rate with effect from lSept 2010?
a) 4% b) 4.25% c) 4.75% d) 5% e) None of these
44) The process of Repo transaction is:
a) A Bank may sell securities to the counterparty with an agreement to repurchase the same securities after a certain
period at pre determined price.
b) The bank gets cash in exchange of securities and pays back the cash after a certain period and get back the securities.
c) The difference between sale price and repurchase price is interest d) All these
45) The advantage to the counterparty under a Repo transaction is:
a) It earns interest on secured [ending.
b) It holds securities which serves the purpose of meeting SLR requirements.
c) The value of securities is higher by a margin to cover price Risk. d) All these
46) Which of the following statements is correct? .
a) The margin maintained on Repo securities is called hair cut as principal amount exchanged against
securities is lower than the market value of securities
b) RBI uses Repo to control liquidity
c) Banks and primary dealers sell govt. securities to RBI and avail liquidity d) All these
47) Which of the following statements is not correct?
a) RBI uses Repo Transactions under liquidity adjustment facility
b) Liquidity is not affected through lending to Banks under a Repo Transaction.
c) Absorption of liquidity is done by accepting deposits from Banks.
d) Absorption of liquidity by accepting deposits from Banks is known as Reverse Repo.
48) Which of the following statements is correct?
a) RBI has commercial repo auctions on overnight basis.
b) Repo and Reverse Repo Rates have been pre-fixed.
c) RBI has full discretion to change the frequency of auction. d) All these
49) The process of Bill Re-discounting is:
a) Treasury will discount Bill of Exchange of short term nature which are already discounted with the banks.
b) Rediscounting is done at money market rates.
c) The rediscounting rates are negotiable between the lending Bank and borrowing Bank. d) All the above
50) The advantage to the lending Bank is:
a) The surplus funds are invested at term money rate
b) Credit Risk is low as lending Bank has recourse to the discounting Bank
c) (a) and (b) both d) None of these
51) The benefits to borrowing Bank is :
a) It is able to infuse liquidity from out of existing Assets
b) Its capital adequacy ratio is improved or rediscounted bills are added to Inter-Bank liability c) (a) and (b) both
d) All these
52) Which of the followings is significant regarding government securities?
a) They are issued by Public Debt Office of RBI.
b) State govts. Issue state development Bonds.
c) Govt. securities are sold through auction conducted by RBI d) All these
53) Which of the followings is correct?
a) Interest is paid on face value of the bond at coupon rate.
b) RBI arrives at a cut off price based on bids submitted by Banks and primary dealers.


c) The price may be higher or lower than the face value d) All these
54) Price movement of Bond depends on:
a) Demand of the Bond which depends on liquidity in the system.
b) The yield on Bond is different from coupon rate.
c) (a) and (b) both d) None of these
55) If 10 years G. sec. at 7.37 per cent is priced at 104.80, what would be the yield'
a) 6.67% b) 5.42% c) 6.15% d) None of these
56) The interest rates in the economy depends on:
a) Rate of inflation b) GDP growth c) Other economic indicators
d) A combination of all these
57) The variety of Bonds may include: a) Step up coupons b) Coupons linked to inflation c) Floating rate coupons
d) Any of these
58) What is STRIPS:
a) Separately registered interest and principal securities
b) Under this process principal and interest are treated as separate zero coupon securities c) (a) and (b) both
d) None of these
59) What is corporate debt paper?
a) It includes medium and long term bonds and debentures issued by corporates and financial institutions
b) Yield on Bonds is higher than the govt. securities
c) They are called non-SLR securities where banks can invest d) All these
60) Which of the following statements is not correct?
a) Tier-2 capital Bonds issued by Banks fall under the category of corporate debt paper.
b) Bonds issued by corporates are not that liquid_
c) The bonds are issued in D-mat form.
d) Bank Treasury finds an attractive investment in corporate debt paper.
61) Which of the following statements is correct regarding corporate debt paper?
a) Higher the credit risk higher is the yield.
b) Global ratings are necessary if the debt paper is issued in International market.
c) Treasury can invest FCNR deposit funds and other forex surpluses in global debt paper. d) All the above
62) Which of the followings is correct?
a) Debentures are issued by private companies.
b) Bonds mainly issued by public sector companies.
c) Government does not provide guaranter on PSU Bonds d) All these
63) The material difference between debentures and bonds is:
a) Debentures are governed by relevant provisions of company law.
b) Debentures are transferable on registration
c) Bonds are negotiable instrument governed by Law of Contract. d) All these
64) The Bond can be : a) Zero Coupon Bond b) Floating Rate Bond c) Deep Discount Bond
d) Any of these
65) Which of the followings is not correct?
a) Debenture and Bonds can be issued with redemption in instruments over a period.
b) They can be issued with a premium or redemption.
c) There are no Bonds with put and call option
d) Bonds secured by stocks or other collateral are called collaterised obligations
66) Which of the followings is relevant regarding issue of Bonds and debentures?
a) The holders have prior legal claim over the equity and preference stock holders.
b) The Trustee appointed by issuing company protects the rights of debenture holders.
c) The Trustee can initiate legal action against the company in case of any default.
d) All of the above
67) Companies i s suing unsecured debentures and bonds have to compl y wi th the
provision of :
a) Companies Acceptance of Deposit Rules 1975 b) SEBI
c) (a) and (b) both d) None of these
68) What is a convertible Bond?
a) It is a mix of Debt and Equity.
b) Bond holder has an option to convert debt into equity on a fixed date.


c) The conversion price is pre-determined d) All these
69) The advantages of convertible Bonds are:
a) If the stock price is higher than prefixed conversion price, the investor would convert debt into Equity.
b) Company will have no debt repayment
c) The Equity of the company will be strengthened d) All these
70) Which of the followings are derivative products treated on stock exchange?
a) Index features b) Index options c) Stock futures and options d) All these
71) Provisions to invest in Equities are:
a) Banks can invest in Equities upto 20% of their net owned funds
b) Stock prices are highly volatile
c) Banks prefer low risk investments d) All these
72) The provision on Fll investments are:
a) Foreign currency funds are converted into rupee for portfolio investors.
b) Rupee funds with profits are converted into foreign currency for repatriation
c) Flls are allowed to invest in debt market d) All these
73) What is External Commercial Borrowings?
a) Indian companies can borrow on global market through Bank loan or issue of debt paper.
b) The debt can be repaid by reconversion of rupee funds into foreign currency
c) (a) and. (b) both d) None of these
74) The guidelines for investment of foreign currency funds of Banks are?
a) FCNR deposits can be invested in overseas market and for domestic lending :n foreign currency.
b) Banks are permitted to borrow/invest in overseas market 50% of Tier-I Capital.
c) (a) and (b) both d) None of these
75) What is Export Earners Foreign Currency Account?
a) Exporters are allowed to hold 100% export proceeds in a Current Account. wtth
b) No interest is paid on such deposits
c) (a) and (b) both d) None of these
76) What is Gilts?
a) Securities issued by government or Treasuries.
b) They do not have any credit Risk, c) (a) and (b) both d) None of these
77) SGL Account is:
a) Subsidiary General Ledger
b) It is maintained by public debt office of RBI
c) Banks maintain exclusively government Securities Accounts d) All of these
78) Which of the followings is correct?
a) Counterparty is the other party to a Transaction
b) Yield is internal rate of return where interest is also reinvested at original coupon rate.
c) Foreign currency deposits are denominated in foreign currency d) All of these
79) The features of FCNR deposit are:
a) They are denominated either in USD, GBP, JPY or EURO, Can- Dollar and Aus Dollar.
b) The deposits are maintained by non-resident Indians.
c) Interest on FCNR deposits is regulated by RBI d) All of these
80) Broad money or M3 consists of :
a) Currency in circulation b) Demand and time deposits with Banks
c) Deposits of Banks and other deposits with RBI d) All of these
81) Monetary policy of RBI aims at:
a) Controlling rate of inflation b) Ensuring stability of financial market
c) Regulating money supply d) All of these
82) The tools in the hands of RBI for direct control of money supply are:
a) CRR b) SLR c) (a)-and (b) both d) None of these
83) CRR is calculated on net Demand and Time liabilities which contain:
a) Demand deposits and Time deposits
b) Overseas Borrowings
c) Foreign outward remittances and other demand and time liabilities d) All of these
84) The Demand deposits include:
a) Current and Savings Deposits b) Margin Money for Letter of Credits
c) Overdue Fixed Deposits d) All these
85) Other Demand and Time Liabilities include:
ayAccrued Interest b) Credit Balance in Suspense Account
c) Any other liability d) All these
86) In which of the following categories only 3% minimum CRR is required to be
maintained?
a) Net Inter-Bank call borrowing/deposits where maturity does not exceed 14 days,
b) Credit Balance in ACU (Asian Currency Unit) Accounts
c) Demand and Time liabilities in respect of off shore Banking units d) None of these
87) Banks need not maintain CRR on :
a) Paid up capital, reserves, retained profits, refinance from apex institutions.
b) Excess provision for Income tax .
c) Claims received from DICGC/ECGC d) All these
88) Which of the followings is correct?
a) CRR need not be maintained on Inter-Bank term deposits of original maturity upto one year
b) RBI does not pay interest on CRR Balance
c) The Demand and Time l iabil i ties as on the report ing Friday of second previous
fortnight will be basis for CRR calculation d) All these
89) SLR can be maintained in the form of following Assets:
a) Cash Balance in excess of CRR requirements
b) ,Gold at current market price
c) Approved securities valued as per RBI norms d) All these
90) What is Liquidity Adjustment Facility?
a) It is the mechanism whereby RBI lends funds to Banking sector through repo instrument
b) This is used to monitor day to day market liquidity
c) This is exclusively applicable to repo and reverse repo transactions with RBI
d) All these
91) The features of Negotiated Dealing System are:
a) This is a system where securities clearing against assured payment is handed by Clearing Corporation of India.
b) Physical delivery of cheques are not required.
c) All Inter-Bank Money Market deals are done through Negotiated Dealing System
d) All the above
92) The feature of Real Time Gross Settlement System are:
a) All Inter-Bank payments are settled instantly.
b) Banks' Accounts with all the Branch offices of RBI are also integrated.
c) Since it is instant payment system, Banks need to maintain adequate funds
throughout the day.
d) All the above
93) Which of the following is correct?
a) Asian currency unit is a mechanism for payment to/from members of Asian clearing union.
b) Off shore Banking units render special Banking services only to overseas customers.
c) SWIFT is a secure worldwide financial messaging system exclusive to Banks.
d) All the above
94) What is DVP?
a) Delivery vesus Payment system where one account is debited and another account is credit at the same time.
b) In case of securities purchase funding account is debited and securities account is credited.
c) This facilitates prompt settlement of security transactions. d) All these


1 C 2 A 3 D 4 D 5 D 6 D 7 D 8 D 9 D 10 D
11 D 12 D 13 A 14 A 15 A 16 D 17 C 18 D 19 D 20 D
21 C 22 D 23 C 24 D 25 A 26 D 27 C 28 D 29 B 30 D
31 D 32 D 33 D 34 D 35 D 36 C 37 D 38 D 39 D 40 C
41 C 42 D 43 D 44 D 45 D 46 D 47 B 48 D 49 D 50 C
51 C 52 D 53 D 54 A 55 A 56 D 57 D 58 C 59 D 60 B
61 D 62 D 63 D 64 D 65 C 66 D 67 C 68 B 69 D 70 D
71 D 72 D 73 C 74 D 75 C 76 C 77 D 78 D 79 D 80 D
81 D 82 C 83 D 84 D 85 D 86 D 87 D 88 D 89 D 90 D
91 D 92 D 93 D 94 D

TREASURY RISK MANAGMENT

TREASURY RISK MANAGMENT

1) Leverage means ability of a business concern:
a) To with stand pressures in the times of crisis
b) To meet its liabilities in time
c) To borrow or build up assets on the basis of given capital d) none of these
2) In case of banks, lev-erage is expressed by:
a) Return on Assets b) Net NPA ratio c) Capital adequacy ratio
d) Capital to outside liabilities e) None of these
3) Treasury deals are normally done over phone or over a dealing screen_ The deal
terms are-con-firmed in writing by
a) Front office b) back office c) middle office d) any of these
4) Delivery versus payment means one account is debited and another is credited:
a) on the same day b) by next day c) at the same time d) none of these
5) lh Treasury Operations, the term 'carry' means
a) Interest cost of funds locked in a trading position
b) Carrying forward the contract to next trading period
c) Carrying forward the settlement to next day d) none of these
6) "Marked to Market" means valuation of trading positions applying
a) Purchase price b) current market value
c) current market value or purchase price whichever is lower d) None of these
7) Mismatch refers to:
a) Difference in interest rates paid and received
b) Difference in sale and purchase price
c) Difference in duration of assets and liabilities d) all of these a) None of these
8) Which of the following is a reason for importance of Treasury risk management
a) Adverse market movements may result in instant losses
b) Treasury transactions are of high value needing relatively low capital
c) Large size of transactions done at the sole discretion of the Treasurer
d) Both (a) & (b) only e) All of these
9) High leverage means:
a) Very low capital requirement
b) Very high capital requirement
c) Very high profits compared to capital
d) Very high productivity e) None of these
10) Which of the following is/are not a conventional tool of management control on a
treasury function
a) Back office which checks all transactions of dealers
b) Exposure limits for counterparties avoiding concentration risk
c) Intra day and overnight ceiling on open positions and stop loss limits
d) Value at risk and duration techniques e) None of these
11) Which of the following is not a function of Back office of a treasury
a) Generating deals i.e. purchase and sale of foreign exchange, securities etc.
b) Settling the trade after verifying internal controls
c) Obtaining independent confirmation of deal from the counterparty
d) Verifying that rates / prices mentioned in the deal slip are conforming to the market
rates at the time of the deal e) None of these
12) Which of the following is responsible for ensuring compliance with various risk limits
imposed by the Management and RBI as well as accuracy and objectivity of the transaction?
a) front office b) back office c) middle office
d) both (a) & (b) only e) All of these
13) Middle office in a treasury is responsible for:
a) Validating deal wise information from accounting point of view
b) Overall risk management and MIS
c) Both (a) & (b) d) None of these
14) Default risk in Treasury means:
a) Failure of the borrowing bank in the call money market to repay the amount on due date to the lending bank
b) Possible failure of the counterparty to the transaction to deliver I settle their part of transaction

c) Both (a) & (b) d) None of these
15) The exposure limits for counterparties are fixed on the basis of counterparty's
a) net worth b) market reputation c) track record
d) size of treasury operations e) all of these
16) The Exposure limits for counterparties are:
a) Vary in relation to period of exposure
b) Remain same irrespective of period
c) Fixed only as per net worth irrespective of period d) none of these
17) In which of the following areas trading limits are not fixed by management?
a) limits on deal size b) limits on open position c) stop loss limits
d) all of these e) None of these
18) Open Position refers to:
a) Trading positions where the buy / sell positions are not matched
b) Trading positions where the securities are bought in the open market
c) Open market operations d) none of these
19) Limit on open positions are fixed because
a) There may be loss if there is adverse movement in rates
b) There is 'carry' cost
c) Both (a) & (b) d) None of these
20) Which of the following is incorrect regarding open position in forex?
a) Position limits are prescribed currency wise as also for aggregate position in Rupees
b) There are separate limits for 'day light' and 'over night' c) None of these


TREASURY RISK MANAGEMENT
1 C 2 C 3 B 4 C 5 A 6 B 7 C 8 E 9 A 10 D
11 A 12 D 13 B 14 C 15 E 16 A 17 E 18 A 19 C 20 C

DERIVATIVE PRODUCTS


1) Under the Treasury operations the derivatives are used:
a) To manage Risk as including ALM Risk.
b) To meet the requirements of corporate customers.
c) For taking trading position in derivative products d) All the above
2) The kinds of Derivatives are:
a) Cross currency derivatives b) Rupee derivatives
c) (a) and (b) both d) All these
3) The features of a Derivative are:
a) It does not have independent value.
b) The value of a Derivative is derived from an underlying market_
c) Derivatives are used in both the financial and commodity markets d) All the above
4) Financial market consists of:
a) Foreign Exchange b) Debt Instruments c) Equities d) All the above
5) Which of the followings are not derivatives?
a) Forward Contract b) Corporate Bonds c) Swaps d) Options
6) Forward contracts are used by:
a) Exporters b) Importers c) Banks d) All of these
7) Derivative is an instrument where:
a) Value is derived from spot prices in an underlying market.
b) Price depends upon future market conditions
e) (a) and (b) both d) None of these
8) A derivative product can be structured based on the following criteria:
a) Risk Appetite b) Size of Transactions
c) Maturity Requirements d) All of these
9) What is an over the counter product?

TREASURY & ASSET LIABILITY.MANAGEMENT MCQs

1 The significance of Treasury operations in Asset Liability management is:
a) It operates in financial markets directly.
b) Treasury is a link between core banking functions and market operations
c) Treasury identifies and monitors the market risk d) All of these
2_ How the Treasury operations are useful in minimizing Asset Liability mismatch?
a) Through uses of derivatives
b) Use of new products
c) Through Bridging the liquidity and rate sensitivity gaps d) All of these
3 Which of the following statements is correct?
a) Trading in securities is exposed to market risk
b) At times the Risks are compensatory in nature and help to minimize the mismatches.
c) Options can be economic only in marketable size d) All of these
4. Treasury operations also help in effective monitoring and implementation of Asset
Liability management process in view of the:
a) Credit instruments can be replaced by Treasury instruments
b) Treasury products are more liquid.
c) Treasury operations monitor exchange rate and interest rate movements
d) All of these
5. Which of the following statements is not correct regarding Treasury operations in
Asset Liability management process?
a) Derivatives can be widely used in Treasury operations
b) Derivatives increases liquidity risk
c) The capital requirement for derivative operations is small.
d) Derivatives replicate market Movements.
6. Asset Liability mismatches can be reduced through use of derivatives in Treasury
operations because:
a) Derivatives can be used to hedge high value transactions
b) It can also minimize aggregate risk in Asset liability mismatches
c) (a) and (b) both d) None of these
7 Suppose a Bank is fundingmedium term loan of 3 years with deposits having
average maturity of 3 months as short term deposits or borrowings are cheaper than
3 years deposits. what would be the consequences and what a bank should do?
a) Bank would resort to short term resources to increase the spread.
b) The (a) above will have liquidity risk
c) This will also have interest Risk since every time the deposits would be priced.
d) The Bank should swap 3 month interest rate into a fixed rate for 3 years.
8. Suppose a Bank prices the 3 month deposit at 91 day T-Bill + 1% and swap rate of
the loan yield T-Bill+3%. What is the impact?
a) Fixed interest of the loan is swapped into floating rate
b) Bank has a spread of 2%
c) The Risk is protected during the period of loan. d) All of these
9. Suppose a Bank borrows US dollars at 3% and lends in domestic market at 8.5%.
The Bank pays forward premium of 1.5% to cover exchange Risk. What is the overall impact?
a) The Bank earns a spread of 2% without any exchange Risk.
b) A bank through Treasury operations can supplement domestic liquidity.
c) The above process is known as arbitrage. d) All of these
10. A Bank under the Treasury operations can buy call options to protect foreign
currency obligations as under:
a) This will help the Bank to protect rupee value of foreign currency receipts and payments
b) The Bank will gain if the spot rate of call option on the exercise date is more favourable than the strike
price of the option.
c) (a) and (b) both d) none of the above
11. Which of the followings is relevant when interest rate is linked to the rate of

inflation?
a) Index linked Bonds b) Treasury Bonds
c) Corporate Debt Instruments d) All of these
12. The significance of index linked bonds is:
a) It provides protection against inflation rate rise.
b) It is inbuilt in the process.
c) (a) and (b) both d) None of these
13. Suppose a Bank- issues 7 year Bond with a put option at the end of 31-6 year. What
does it signify?
a) It is as good as 3 year investment
b) The investment becomes more liquid
c) (a) and (b) both d) None of these
14. The limitations of Derivatives are:
a) If interest rate on deposits and loans are not based on benchmar-k
rates interest rate swaps may not be that useful.
b) The product prices may not move in line with market rates.
c) The Treasury operations may not provide perfect hedge. d) All of these
15'. Which of the followings is correct?
a) Treasury operations are concerned with market risk
b) Treasury operations has no link with the credit risk
c) Credit risk in Treasury operations are contained by exposure limits
d) All the above
16. Why the corporate prefer to issue debt paper than to Bank credit?
a) The cost of debt paper is much lower
b) The procedure is easy
c) (a) and (b) both d) None of these
17. A Bank may prefer to invest in corporate Bonds because:
a) Bbnd is more liquid Asset
b) Bond has an easy exit
c) Bond can be sold at discount d) All of these
18. Which of the following is not credit substitute?
a) Commercial paper b) Mortgage loan
c) Corporate bond d) Certificate of Deposit
19. The difference between a Bond and loan is:
a) The loan has normally fixed rate of interest. Bond price is dependent on Market interest rate movements.
Bonds are more liquid
Yield to maturity value can be known easily in a bond d) All of these
What is securitization?
A process which converts conventional credit into tradable Treasury Assets.
Credi t receivabl es of the Bank can be conver ted into Bonds i .e. .pass through
certificates
These certificates can be traded in the market
The advantages of securitization for a Bank is:
It provides liquidity to the issuing Bank
The Bank capital does not get blocked
Securitization proceeds can be used for fresh lending
22. Which of the following loans cannot be securitized?
a) Long term loans b) Short term loans
c) Medium term loans d) Retail loans
23. Which of the followings is true?
a) Surplus funds with the banks can be invested in pass through certificates
b) This will be indirect expansion of credit portfolio
c) (a) and (b) both d) None of these
24. The features of credit derivatives are:
a) It segregates credit Risk from loan
b) The Risk is transferred from the owner of the Asset to another person for a fee.

c) The instrument is known as credit linked certificates d) All of these
25. The constituents of a credit Derivatives are:
a) Protection Buyer b) Protection Seller
c) Reference Asset d) All of these
26. The process of credit Derivative involves:
a) The protection seller guarantees payment of principal and interest or both of the Asset owned by the
protection Buyer in case of credit default.
b) The protection Buyer pays a premium to the protection Seller
c) (a) and (b) both d) None of these
27. The advantages of credit Derivatives are:
a) It helps the issuer to diversity the credit risk
b) The capital can be used more efficiently
c) Credit Derivative is a transferable instrument d) All of these
28. What is transfer pricing under Treasury operations?
a) It is the process of fixing the cost of resources and return on Assets of a Bank in rational manner.
b) The Treasury buys and sells deposits and loans of Bank. -
c) The price fixed by the treasury becomes the basis for assessing profitability of a Bank
d) All the above
29. The parameters for fixing price by a Treasury are:
a) Market interest rate
b) Cost of hedging market Risk
c) Cost of maintaining reserve assets of the Bank d) All of these
30. Which of the following statements is correct regarding transfer pricing under Treasury operations?
a) If Bank procures deposit at 7% but the Treasury buys at a lower cost, the difference being the cost would be borne by the
Bank.
b) If the Bank lends at higher rate and sells the loan to Treasury at lower rate, the Balance being risk premium
would be the income for the Bank.
c) (a) and (b) both d) None of these
31. An integrated Riskmanagement policy under Asset Liabilitymanagement should focus on: a) Riskmeasurement andmonitoring b) Risk
Neutralisation, c) Product pricing d) All of these
32. Liquidity policy survival prescribe: a) Minimum liquidity to be maintained b) Funding of Reserve Assets c) Exposure limit
to money market d) All of these
33. The derivative Policy should consist:
a) Capital Allocation b) Restrictions on Derivative Trading
c) Exposure limits d) All of these
34. The investment policy should contain:
a) Permissible investments b) SLR and non SLR investments
c) Private placement d) All of these
35. The investment policy need not contain:
a) Derivative Trading b) Trading in Securities and Repos
c) Valuation and Accounting policy d) Classification of Investments
36. The composite Risk policy under Treasury operations should include the following:
a) Norms for Merchant and Trading positions b) Securities Trading
c) Exposure limits d) All of these
37. Composite Risk policy should also contain the following:
a) Intra-day and overnight positions b) Stop loss limits
c) Valuation of Trading positions d) All of these
38. Transfer pricing policy shduld prescribe:
a) Spread to be retained by the Treasury
b) Segregation of Administrative and Hedging cost
c) Allocation of cost d) All of these
39. According to RBI, policy of Investment and Risk should be supplemented with:
a) Prevention of money laundering policy
b) Hedging policy for customer Risk_ c) (a) and (b) -d) None of these
40. Which of the following are essential requirements for formulation of policy
guidelines?

a) It should be approved by the Board
b) It should comply with the guidelines of RBI and SEBI
c) It should follow current market practices d) All of these
41. Which of the followings is correct?
a) All policies should be reviewed annually
b) A copy of the policy guidelines needs to be filed with RBI
c) (a) and (b) both d) None of above
42. A Run of the Bank signifies:
a) A situation where depositors lose confidence and start withdrawing their balances.
b) A Bank running in continuous loss
c) A Bank where non-performing Assets level is high. d) All of these
43. Liquefiable securities are:
a) Securities that can be readily sold in the secondary market.
b) Securities that have easy liquidity
c) Short term securities d) All of these
44. What is Sensitivity Ratio?
a) Extent of interest sensitive Assets
b).Ratio of interest rate sensitive Assets to interest rate sensitive Liabilities
c) -(a) and (b) both d) All of these
45. Risk appetite is:
a) The capacity and willingness to absorb losses on account of market Risk.
b) The extent of Risk involved in securities c) (a) & (b) d) All of these
46. Which of the followings is correct?
a) Special purpose vehicle is formed exclusively to handle securities paper on behalf of sponsoring Bank.
b) Hedging policy is a document which specifies extent of coverage of foreign currency obligations.
c) Self regulatory organizations formulate market related code of conduct
d) All of the above
47. Liquidity policy of a Bank should contain:
a) Contingent funding
b) Inter-Bank committed credit lines
c) (a) and (b) both d) All of these


Answers

1 D 2 D 3 D 4 D 5 B 6 C 7 D 8 D 9 D 10 C
11 A 12 C 13 C 14 D 15 D 16 A 17 D 18 B 19 D 20 D
21 D 22 B 23 C 24 D 25 D 26 C 27 D 28 D 29 D 30 C
31 C 32 D 33 D 34 D 35 D 36 D 37 D 38 D 39 C 40 D
41 C 42 A 43 A 44 B 45 A 46 B 47 C

Interest Rate Risk Management


There is complete deregulation of Interest rates on Fixed Deposits, Recurring Deposits, and SB
Deposits above Rs. 1.00 lac. Banks are also free to determine Interest rates on NRE Deposit
accounts. This has led to interest rate Volatility resulting into greater Interest Rate Risk.
Adverse movement of Interest rates has direct impact on NII as well as NIM. Market Interest
rate also has impact on Present Value of Bonds and Securities. 1% rise in market rate of return
will cause lesser valuation of securities. Also 1% fall in interest rate will cause higher valuation
of securities resulting into increase in Mark to Market Price.
Types of Interest Rate Risk
Following are various types of Interest Rate Risk:
1. Mismatch or Gap Risk
This is risk of gap between maturities of Assets and Liabilities. Sometimes, Long term
loans are funded by short term deposits. After maturity of deposits, these liabilities are
get repriced and Gap of Interest rates between Assets and Liabilities may become
narrowed thereby leading to reduction of profits.
2. Basis Risk
Change of Interest rates on Assets and Liabilities may change in different magnitudes
thus creating variation in Net Interest Income. It tries to explain what will be the %age
effect on Earnings due to increase or decrease in interest rates by 1bps.
3. Net Interest Position Risk
If the bank has more assets than the liabilities, 1% decrease in interest rate will result
into less earnings and more expenditure on account of interest. This will directly affect
NII and NIM.
4. Embedded Option Risk
Adverse movement of Interest Rate may result into pre-payment of CC/DL and TL. It
may also result into pre-mature withdrawal of TDs/RDs. This will also result into reduced
NII. This is called Embedded Risk.
5. Yield Curve Risk
Yield is Internal Rate of Return on Securities. Higher Interest Rate scenario will reduce
Yield and thereby reduction in the value of assets. Adverse movement of yield will
certainly affect NII (Net Interest Income).
6. Price Risk
In financial market, when assets are sold before maturity in order to meet liquidity
requirements, loss may occur due to lower selling price.
7. Re-investment Risk
It is uncertainty with regard to interest rate at which future cash flows could be reinvested.
Effects of Interest Rate Risk
Effect on Earnings.
Effect on Economic value of share
Embedded Losses

Liquidity Management


Banks are required to honour withdrawals from Deposits. Also the banks are supposed to
disburse loans in time. Liquidity is needed to meet both these requirements. In other words,
liquidity is the ability to accommodate decrease in liability as well as funding of increase in
assets.
Functions of Liquidity Management:
1. It defines market place of bank.
2. It enables banks to meet prior loan commitments.
3. It enables the banks to avoid unprofitable sale of assets.
4. It lowers size of default risk premium.
Liquidity Mismanage may lead to the following:
 It declines earnings.
 It increases NPAs.
 It results in downgrading of rating.
Factors affecting Liquidity
Liquidity is affected by the following:
1. Less profits leads to less liquidity
2. Rise in NPAs means less liquidity
3. Deposit concentration in Term Deposits may lead to less liquidity
4. More taxes means less liquidity.
Types of Liquidity Risks
1. Funding Risk: Decrease in deposits due of bad reputation or loss of confidence.
2. Time Risk:Instalments of loan are not forthcoming in time.
3. Call Risk: Non-fund based credit facilities converted into Fund based. Crystallization of
Contingent liabilities like LC/LG turning into Fund Based Loans.
4. Embedded Risk: Adverse movement of Interest Rate may result into pre-payment of
CC/DL and TL. It may also result into pre-mature withdrawal of TDs/RDs. This will also
result into reduced NII. This is called Embedded Risk.
How to manage Liquidity Risk?
1. Developing an organizational structure.
2. Setting of Tolerance level limits.
 Limit of cash flow mismatches for tomorrow, next week, next month or next year.
 Limit of Loan to Deposit Ratio
 Limit of Loan to Capital ratio.
Mismatch level in 1-14 days bucket and 15-88 days bucket should remain about 80% of cash
flow in the particular period. To manage liquidity and remain solvent by maintaining short term
gap up to 1 year should be around 15% .
Measurement of Liquidity Risks: Liquidity Risk can be measured in any of the two ways:
1. Stock Approach
2. Flow Approach

Provisioning related numericals

 Provisioning related numericals
Ex. 1
Account with Outstanding of Rs. 10.00 lac became Out of order on 22.1.11 and it became NPA
on 22.4.2011. The Value of Security at later stage is Rs. 7.00 lac. Calculate Provision as on
31.3.12.
Solution
It is a Sub-Standard Asset as on 31.3.2012.
Provision is 1000000*15/100 = 150000/-
Ex. 2
A loan account with outstanding of Rs. 10.00 lac and Value of Security Rs. 6.00 lac was Substandard
as on 30.3.2008. What will be provision as on 31.3.2012?
Solution
The account will be Doubtful (DI) on 30.3.2009, D2 on 30.9.2010, D3 on 30.3.2012. Provision
will as under:
Secured portion = 6.00*100/100 = 6.00 lac
Un-secured portion = 4.00*100/100 = 4.00 lac
Total Provision = 6+4 = 10.00 lac.
Ex. 3
A loan became Doubtful on 12.2.2009. The outstanding is 6.00 lac. What will be provision on
31.3.2012.
Solution
The Account will be categorized as Doubtful (D3) as on 12.2.2012. Provision is 100% of 6.00 lac
= 6.00 lac

lac
97
Ex. 4
D2 category account has outstanding--10.00 lac, DI/SI ----2.00 lac, Value of security ---6.00 lac
Solution
Un- Secured portion = 10-2-6 = 2.00 lac Provision = 2.00 * 100/100 = 2.00 lac
Secured portion = 6.00 * 40/100 = 2.40 lac
Total provision = 2.00 + 2.40 = 4.40 lac
Ex. 5
D2 Category loan is having outstanding 4.00 lac, Value of Security 1.50 lac and ECGC cover
50%. Calculate provision as on 31.3.2012.
Solution
Unsecured portion = 50% of (O/s – VS) = 50% (4.00 – 1.50) = 1.25 lac
Secured portion = 1.50 lac
Provision on Unsecured portion = 1.25*100/100 = 1.25 lac
Provision on Secured portion = 1.50*40/100 = 0.60 lac
Total provision = 1.25 +0.60 = 1.85 lac.
Ex. 6
A D2 category loan is having outstanding Rs. 6.00 lac. The Collateral Security is Rs. 3.00 lac
and Primary Security is Rs. 2.00 lac. There is also Guarantee of Rs. 10.00 lac. Calculate
provision.
Solution
Unsecured portion = O/s – Primary Security – Collateral = 6.00 – 2.00 -3.00 = 1.00 lac
Secured portion = 2.00 + 3.00 = 5.00 lac.
Provision on Unsecured portion = 1.00 *100/100 = 1.00 lac
Provision on Secured portion = 5.00*40/100 = 2.00 lac
Total provision = 1.00 + 2.00 = 3.00 lac.
Ex. 7
Advance portfolio of a bank is as under:
Total advances = 40000 crore, Gross NPAs = 9%, Net NPAs = 2%
Find out 1) Total Provision 2) Provisioning Coverage Ratio
Solution
NPAs = Total Advances *9/100 = 40000*9/100 = 3600 crore
Standard Assets = 40000-3600 = 36400 crore
Provision on Standard Assets = 36400*0.40% = 145.60 crore
Provision on NPAs = 9% - 2% = 7% = 40000*7/100 = 2800 crore
1) Total provision = 145.60 + 2800 = 2945.60 crore
Gross NPAs = 40000*9/100 = 3600 crore
Net NPAs = 40000*2/100 = 800 crore
2) Provision Coverage Ratio = Provision on NPAs / Gross NPAs = 2800/3600 = 77%.
Ex. 7 Account becomes doubtful on 12th Feb 2008. The Balance is Rs. 6 lac. Value of security is
3 lac. What will be the provision on 31.3.2011?
Solution
 It is D3 Type of account.
 Therefore, provision will be 100% i.e. 6 lac = 6.00 lac Ans.

Ex. 8 NPA o/s : Rs. 10 lac including suspended interest/Derecognized interest Rs. 2 lac.
Security value is Rs. 6 lac. It became NPA on 25th Feb 2008. What would be the provision on
31.3.2011.
 It is D2 category account
 4.40 LAC (10-2-6= 2x100%= 2 lac + 40% on 6 lac ie 2.40 lac = 4.40 lac) D2
Ex. 9 A/c became NPA on 2nd January 2008. Balance o/s is 10 lac including Derecognized
interest Rs. 2 lac and ECGC cover of 50%. Value of security is 4 lac. What will be provision on
31.3.2009.
 It is D1 category account.
 10 lac – 2 lac, DI – 4 lac Sec. = 4 lac
 ECGC Cover: 4 lac x 50% = 2 lac
Provision on Unsecured portion
 Unsecured: 4 lac – 2 lac = 2 lac x100% = 2.00 lac
Provision on Secured portion
 Secured: 4 lac x 25% = 1.00 lac
 Total Provision: 2 + 1 = 3.00 lac

Sunday, 15 July 2018

Treasury and ALM

Treasury and ALM:
ALM refers to risk management to avoid mismanagement between Assets and Liabilities. The
risk of Liquidity and Interest rates, if not controlled may result into negative spread and can
cause loss to bank. Therefore ALM manages two risks : 1. Liquidity Risk & 2. Interest Rate Risk.
Liquidity Risk and Interest Rate Risk
We borrow from Money market and invest in 5 year G-securities. If Bond prices come down, we
are not willing to sell the bond, but loan has to be repaid. This may lead to shortage of funds
which is called Liquidity Risk.
Liquidity Risk is translated into Interest Rate Risk when funds have to be arranged at higher
rate. Mismatch between Assets and Liabilities also lead to Interest Rate Risk.
Role of ALM to mitigate Liquidity Risk
Liquidity Gap arises when there is difference between souses and uses of funds. RBI has
prescribed Time bands to measure Liquidity Gaps. These are
1-14 days.
14-29 days
1M – 3M
ALM measures the gap between Uses and Sources between above said Time bands.
RBI has also prescribed limits of maximum negative mismatch as under:
Next Day -------5%
2-7 Days------10%
8-14 Days—-15%
15-28 Days--20%
ALM takes steps to meet shortfall as a contingent measure at a reasonable rate.
Interest rate Gap leads to erosion of NII (Net Interest Income) due to difference between
earnings and payments.
ALM has the following role to play:
 Treasury establishes a link between Core banking and market operations to manage
risks.
 Treasury earns profits by managing funds out of mismatches.
 Treasury hedges residual risk in Forex market.
 Treasury monitors exchange rates and interest rate movements in the market.
Use of Derivatives in ALM
Derivatives are used to hedge high value individual transactions.
For Example: Medium Term Loan of 3 Years is funded by Deposit of 3M because 3M deposit is
cheaper and NII is increased.
 Bank may swap 3M interest rate into fixed rate into Fixed rate for 3 years.Bank may also
swap Fixed interest rate on loan into floating rate linked to T-bill rate. If 3M deposit rate
is T+1% and 3Year interest rate on loan is T+3%, there will be NII@2%.

 Bank may arbitrage Forex. It can buy USD funds at cheaper rate (say 3%) and invest in
rupee loan at 6.5%. The spread can be 3.5%
Risks of Derivatives: Derivatives are not free from risks. Tworisks involved in Derivatives are:
1. Residual risk i.e. basis risk.
2. Embedded Option Risk :There are embedded options in certain bank products. E.g. FD
is paid premature or TL is pre-paid. It affects the ALM policy if pre-mature payments are
large.
Treasury and Credit Risk
There are chances of failure on the part of counter party to meet its obligations especially when
Treasury deals in:
1. Debt Market products such as CPs, Bonds, Debentures etc.
2. Securitization of Credit Receivables – when credit receivables are converted into Units
or Bonds which are called PTCs ( Pass-through certificate).
3. SPV –Special Purpose Vehicle enables the banks to securitize the Mortgage loans
Credit Derivatives
1. Credit Default Swaps
2. Total Returns Swap
3. Credit Linked Notes
Transfer Pricing
It is important function of ALM. It relates to:
 Fixing cost of recourses and return on Assets.
 ALM notionally buys and sells deposits and loans of the bank.
 Price is paid for buying deposits and price is received for selling loans. This is called
Transfer Pricing.
 The prices vary according to the tenure or maturity of deposits and loans.
 Deposits are bought by Treasury at a rate arrived at by adjusting hedging cost from rate
of deposit. If bank accepts deposits%7% and cost of hedging is 1%, the deposits will be
bought by Treasury @6%.
 Loans are sold to Treasury at transfer cost. For example, 10% loan may be notionally
sold to Treasury @7%. The balance is denoted as Risk premium.
 Treasury Division, after implementing the Transfer Pricing takes care of Liquidity Risk
and Interest rate risk.

Derivative Products Treasury management

Derivative Products Treasury management
Derivative Products
Derivatives don’t have independent value. Their value is derived from the underlying market.
The market may be financial market dealing in forex, bonds and equities as well as commodity
market dealing with underlying commodities like Gold, Silver etc.
Derivatives refer to Future Price based on Spot Market. Two types of Products are as under:
1. OTC Products
These are Over The Counter products which include Forward Contracts and Options.
These are offered by FIs. These derivatives offer contracts with date, amount of terms
fixed as per requirement of the client. Price is quoted by banks/FIs after adding margin.
Settlement is made by physical delivery. Counterparty Risk is always present.
2. Exchange Traded products
These include Futures traded on organized exchanges. Size of the contract is
standardized. Price is transparent. The exchanges collect margin based on Mark to
Market price. Physical delivery is not must. There is no counter party risk.
Types of Derivatives
1. Forward Contracts
2. Futures
3. Options
4. Interest Rate Swaps
5. Currency Swaps
Forward Contracts
It is a deal to buy or sell Shares, Commodity or Foreign Exchange at a contracted rate with
desired maturity. Forward rate is the interest rate differentiation of two currencies. If Interest
rate is high in a country, its currency will be cheaper.
Futures
It is Exchange traded product. The seller agrees to deliver a specified security, currency or
commodity on specified date at a fixed price. Currency Futures are traded in EURO, GBP, JPY,
CHF, AUD& CAD.
Forward Contract Futures
It is OTC (Over the Counter) Product It is Exchange traded product
It can be for any odd amount It is always for Standard amount
It can be for any Odd period It is always for Standard period
Delivery is essential Delivery is not must
Margin is not essential It is based on Margin requirement and
Marked to market

Credit management

Certified credit professionals::

       (Simple and nice read every one)

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 bottom-
line 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

Thursday, 12 July 2018

COMMITTEES ON ADVANCES & PRIORITY SECTOR



COMMITTEES ON ADVANCES & PRIORITY SECTOR

a. Committee on Wilful Default 2002 S S Kohli

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

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

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

e. Flow of Credit to Agriculture 2004 V S Vyas

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

g. Financial Inclusion 2006 C Rangarajan

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

i. Rural Credit and Microfinance 2005 H R Khan

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

k. Micro finance 2003 Vepa Kamesam

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

m. Lead Bank Scheme 2009 Usha Thorat

n. Micro Finance Institutions 2011 Y H Malegam

o. Institutional Credit to SSIs 1998 S L Kapoor

p. Institutional Credit to SSIs 1974 PR Nayak

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

r. SHG Credit Linkage Kalia Committee

MUDRA MSME



MUDRA BANK

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Objectives: The principal objectives of the MUDRA Bank are:

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

through regulation and inclusive participation.

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

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

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

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

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

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

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

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

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

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

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

businesses.

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

monitoring of distributed capital.

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

credit delivery system to small and micro businesses.

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

protection principles and methods of recovery.

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

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

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

Kishor and Tarun.

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

will be upto Rs 50,000.

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

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



Types of Credit Facilities

Types of Credit Facilities

1) Fund based lending
2) Non fund based lending

Fund based lending, where the lending bank commits the physical outflow of funds.
The various forms in which fund based lending may be made by banks.

The facilities like Overdrafts,Cash Credit A/c, Bills Finance, Demand Loans, Term Loans etc, wherein immediate flow of
funds available to borrowers, are called funds based facility. The non fund based facilities like issuance of letter of guarantee, letter of credit wherein banks get fee income and there is no immediate outfow of funds from bank.

Overdrafts: Overdraft means allowing the customer to draw cheques over and above credit balance in his account. Overdraft is normally allowed to Current Account
Customers and in exceptional case SB A/c holders are also allowed to overdraw their account. The high rate of interest is charged but only on daily debit balance. An
overdraft is repayable on demand. There are two types of overdraft prevalent in Banks i.e. (i) Temporary overdraft or clean overdraft (ii) Secured overdraft. Temporary
overdrafts are allowed purely on personal credit of the party and it is for party to meet some urgent commitments on rare occasions. Allowing a customer to draw against
his cheques sent in clearing also falls under this category. Secured overdraft is allowed up to a certain limit against some tangible security like bank deposits, LIC policies,
National Saving Certificates, shares and other similar assets. Secured overdraft is most popular with traders as lesser operating cost, simple application and document
formalities are involved in this facility.

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

TYPE OF CUSTOMERS


TYPE OF CUSTOMERS

In this Chapter, for the convenience of study, types of Borrowers have been classified as under:
1. Individual
2. Partnership firm.
3. Hindu Undivided Family
4. Companies
5. Statutory Corporations
6. Trusts and Co-op Societies
7. Limited liability Patnership
One of the essential elements of a contract is “capacity of the parties to Contract”.
The Bank while dealing with an individual should ensure that he is competent to enter into contract. An individual is not competent to contract and money lent to him cannot be recovered in the following circumstances:
a) If an individual is a minor:
A person is minor in the eyes of the law if has not attained the age of 18 years under Indian Majority Act and the age of 21 years, if he/she is a ward, under the Guardians and Wards Act. The money lent to a minor cannot be recovered, if the minor fails to repay. Exception to this is a contract with a minor for supply of necessaries to the minor. If a Bank lends money to a minor to meet expenses for purchasing necessaries of life, then bank can recover the money from the estate of the minor.
b) If an individual is not of sound mind:
According to the Contract Act, if a person is not of sound mind, then he is incompetent to enter into a contract. The Act says that a person at the time when he makes the contract, he is not capable of understanding it and of forming a rational judgment as to its effect upon his interests, will be considered that he is ‘not of sound mind’. Hence, a contract would be invalid if it is proved that the time of entering into contract, the person was not in sound state of mind and could not understand what he was doing and could not understand the implications of entering into the contract.
c) Disqualified persons:
If a person is disqualified by the law in respect of his capacity to contract, then the contract entered into by such a person cannot be enforced. For example, a person might have been declared as insolvent under the Insolvency law. As long as the person continues to be undischarged insolvent, he cannot enter into contract.
2. PARTNERSHIP FIRM
‘Partnership Firm’ is another entity with which a Banker deals with in the course of his business. Partnership firm is governed by Indian Partnership Act 1932. A partnership is the relation between persons who have agreed to share the profits of a business, carried on by all or any of them acting for all. The relationship between partners is governed by partnership deed which can be written or unwritten.
Legal Position of a partnership:
A partnership is not distinct from its partners. The liability is joint and several. It means that they responsible for the act of the partnership firm in their capacity as partner as well as individual. The Indian Partnership Act 1932, provides for registration of the partnership and it is necessary that a Banker dealing with partnership firm, should verify as to whether the firm is registered or not. This would help him to know all the names of the partners and their relationship.