Money laundering stages

Three Stages in the Money Laundering Cycle::



Money laundering often involves a complex series of transactions
that are usually difficult to separate. However, we generally
consider three phases of money laundering:
􀂄 Step One: Placement — The physical disposal of cash or
other assets derived from criminal activity.
During this initial phase, the money launderer introduces
the illegal proceeds into the financial system. Often, this is
accomplished by placing the funds into circulation through
financial institutions, casinos, shops and other businesses,
both domestic and international. This phase can involve
transactions such as:
􀂉 Breaking up large amounts of cash into smaller sums and
depositing them directly into a bank account.
􀂉 Transporting cash across borders to deposit in foreign
financial institutions, or to buy high-value goods — such as
artwork, antiques, and precious metals and stones — that
can then be resold for payment by check or bank transfer.

􀂄 Step Two: Layering — The separation of illicit proceeds from
their source by layers of financial transactions intended to
conceal the origin of the proceeds.
This second stage involves converting the proceeds of the
crime into another form and creating complex layers of
financial transactions to disguise the audit trail, source and
ownership of funds.
This phase can involve transactions such as:
􀂉 Sending wire transfers of funds from one account to
another, sometimes to or from other institutions or
jurisdictions.
􀂉 Converting deposited cash into monetary instruments (e.g.
traveler’s checks).
􀂉 Reselling high-value goods and prepaid access/stored
value products.
􀂉 Investing in real estate and legitimate businesses.
􀂉 Placing money in investments such as stocks, bonds or life
insurance

􀂉 Using shell companies or other structures whose primary
intended business purpose is to obscure the ownership of
assets.

􀂄 Step Three: Integration — Supplying apparent legitimacy to
illicit wealth through the re-entry of the funds into the
economy in what appears to be normal business or personal
transactions.
This stage entails using laundered proceeds in seemingly
normal transactions to create the perception of legitimacy. The
launderer, for instance, might choose to invest the funds in real
estate, financial ventures or luxury assets. By the integration
stage, it is exceedingly difficult to distinguish between legal and
illegal wealth. This stage provides a launderer the opportunity
to increase his wealth with the proceeds of crime. Integration
is generally difficult to spot unless there are great disparities
between a person’s or company’s legitimate employment,
business or investment ventures and a person’s wealth or a
company’s income or assets.

Difference between company and partnership

Partnership and Company are the most familiar terms for the people who are pursuing business education or commerce education. Besides being very familiar, many of us can’t able to correctly differentiate these two forms of business. This article presents you the top differences between Partnership Firms and Companies.

PARTNERSHIP

Indian Partnership Act, 1932 defines Partnership as ” Partnership is a relationship between two or more persons who have agreed to share the profits of a business carried on by all partners or any one partner acting for all”. The members of the Partnership firm are called as Partners. There are different types of partners such as Active partner, Sleeping partner, Nominal partner, Minor partner, Etc.

Partnership Frim is created by agreement between two or more people by registering the partnership firm with Registrar of Firms according to Indian Partnership Act, 1936.

Registration of a partnership firm is very simple process and Application for registration of firm must contain the following details

✔ Name of the firm

✔ Names of the partners and their addresses

✔ location where the business is carried on.

✔ Partnership tenure between the partners

✔ The main office of the firm, etc.

COMPANY

Indian Companies Act, 2013 defines Company as ” A Company formed and registered under this Companies Act or under any previous company law”. A company is defined easily as an association of two or more persons which is formed for doing business collectively and registered with Registrar of Companies according to Indian Companies Act, 2013.There are different types of companies like One Person Company, Private company and Public Company, etc.

To get registered with Registrar of Companies, the promoters are required to submit the copies of Articles of Association and Memorandum of Association which consists of various information relating to internal management and external management of the company.

The company exhibits certain special characteristics, such as

✔ It have a Separate Legal Entity

✔ It contains Common Seal under its name

✔ It has limited liability

✔ It acts as an artificial person, Etc.

COMPARISON

PARTNERSHIP COMPANY

The members of the Partnership firm are called as Partners. The members of the company are called as shareholders of a company.

 Enacted by

Partnership Form of business is governed by "The Indian Partnership Act, 1932." Company Form of business is governed by "The Indian Companies Act, 2013”.

 Number of Members

Partnership firm must have Minimum of 2 partners and maximum of 20 partners. A Company must have Minimum of 2 and maximum of 200 in the case of private company. Minimum 7 and maximum is unlimited number of members in case of public company

 Created by

Partnership Firm is Created by Contract between two or more people. Company Firm is Created by Law i.e created by incorporation of a company under company law.

 Regulation Authority

It is regulated by the Registrar of Firms which comes under State Government. It is regulated by the Registrar of Companies which comes under Central Government.

 Registration procedure

The registration of a Partnership firm is Not Mandatory. The registration of Company with Registrar of Companies is Mandatory.

 Documents Required

Partnership Deed(Agreement Document) is the mandatory document for creation of a Partnership Firm. Memorandum of Association(MoA) and Articles of Association(AoA) are the main documents to the incorporation of the company.

 Separate Legal Entity

Partnership firm is not a separate legal entity from partners. The Partners of the firm are collectively referred as a Partnership firm. A company is a separate legal entity, It is a separate entity from its members, directors, promoters, etc.

 Liability of Members

The partners have Unlimited Liability in all the matters relating to Partnership Firm. The Shareholders and promoters have Limited liability to Capital of the company.

 Accounts and Audit

Partnership Firm has to maintain accounts as per the conditions stated in partnership deed. A Company should maintain accounts and auditing of accounts by certified Chartered Accountant are Compulsory.

 Common Seal

A Common Seal is not required for Partnership Firm. A Common Seal in the form of a stamp is required for the company for legal and functional purposes.

 Management

Management of the activities of a Partnership Firm is usually done by the working partners. Management of the activities of a Company is done by Board of Directors.

 Change of Name

The name of the Partnership Firm can be changed easily by having a discussion between partners. The name of the company cannot be changed easily and a prior approval of Central Government is required to change the name.

CONCLUSION

The Indian Partnership Act, 1932 laid down certain rules and regulations on matters relating to Rights of partners, Liabilities of Partners, Duties of Partners, etc. Indian Companies Act, 2013 laid down various principles relating to the functioning of companies to protect the shareholders and investors of companies. Both Partnership and Company form of businesses is very prevalent in the world.

Companies and partnership act

COMPANIES & PARTNERSHIP ACT

1. A modification of charge under Section 125 of Companies Act, 1956, is registered by using which

Form Nos. Form Nos 8 & 13. The revised system for registration of charge with ROC is through

Electronic mode – MCA 21 (E-filing)

2.While granting advances to a company with charge created on securities which require registration

under Section 125, what is to be seen as a banker? As a banker, we should ensure that there is no

prior charge on the same securities by inspecting register of mortgages and charges at the office of

registrar of companies

3.Under Section 125 of Companies Act, a charge created by a joint stock company is required to be

registered with whom? With Registrar of Companies (ROC) under whose jurisdiction company’s

registered Office is located.

4. Which of the following charges is required to be registered with ROC under Section 125 of

Companies Act?

Charge on Plant & Machinery, hypothecation of stocks, furnitures and fixtures, stores, spares, EQM,

Registered Mortgage etc

5. M/S ABC Corporation Ltd borrowed from IOB on the security of plant and machinery by executing

loan papers on 22.10.08. The company borrowed from Canara Bank against the hypothecation of

same machinery by executing loan papers on 29/10/08. Canara Bank got their charge registered on

5.11.08 and IOB got their charge registered on 10.11.08. Who will get precedence in this case?

Charge of IOB will have precedence. Both the banks have registered their charge with ROC within the

stipulated time of 30 days, the date of execution of loan papers by IOB is earlier and hence IOB will

have the precedence.

6. The Board of Directors of a company can exercise powers to borrow money in excess of limit

specified in Section 293 (i) (d) provided - Such a resolution is passed in general body meeting of

share holders.

7. An advance to a limited Company does not require registration of charges with Registrar of

Companies if the advance is in the nature of Pledge (Effective possession is within the bank)

8. Execution of security documents by a Limited Co. should be - By affixing common seal only if

required by Articles of Association.

9. The effect of Non Registration of charge within the time limit is that Advance becomes an

unsecured advance.

10. Registration of the charge under Companies Act in the following case is not required- In case of

physical possession is delivered (IF NO COLLATERAL SECURITY OF STOCK, IMMOVABLE PROPERTY IS

TAKEN) In case of Hypothecation, Mortgage and book debts, registration is required.

11. The ceiling imposed by Companies Act, 1956 for a public Limited Company to borrow from banks

under Section 293 (1) (d) is Paid up capital + free reserves

12.The resolution of a company to borrow from a bank must be passed by whom? Resolution in a

Board Meeting

13. In case of private limited company loan document should be executed by - The delegated

authorities as per board of Directors.

14. A public limited company is sanctioned guarantee limits (performance guarantee) against

mortgage of land and building belonging to the company. As per lawyer‘s opinion instead of equitable

mortgage registered (simple) mortgage was put through; whether registration of charge is required?

Required. Charge is to be registered with the Registrar of Companies in case of EQM/Regd Mortgage

of company’s properties.

15. In the case of a company advance, what is the position of a secured creditor? Can stand outside

the winding up and satisfy his debt out of the property charged without proving his claim before

the liquidator

16. The winding up order of a company is effective from - Date of petition of winding up

17. Whether a secured creditor of a company can file a winding up petition despite the creditor

having security? YES.A Secured creditor of a Company can file a winding up petition despite the

Creditor having security.

18. In the case of a partnership firm, mandate may be revoked - By any Partner.

19. Partnership is to be registered with before advance is granted to customer - Registrar of Firms

20. If the partnership firm is not registered, what is the implication? The firm cannot sue others

legally

21. In case of a conflict in the operations condition of a firm‘s account, the provisions contained in

the following document will prevail- Partnership Letter to the bank

22. In the case of a mortgage transaction of a property standing in the name of the firm, the

mortgage papers have to be executed by All the partners of the firm (or by the partner who

has been specifically Authorized to execute mortgage papers by all the remaining

partners).

23. X and Y are authorised to sign cheque on behalf of the firm. A cheque dated 10 1 04 duly signed

by them is presented in clearing on 17 1 04. X expired on 14 1 04. Bank loses protection if paid

24. One of the partners of a firm has become insolvent. What should be done if a cheque drawn by

other partner is presented for payment? The cheque should be returned with the remark, “Refer to

drawer”

25. A HUF directly or indirectly cannot become partner of a firm because The firm is an association of

individuals. HUF is a floating body whose composition changes by births, deaths, marriages and

divorces. A HUF is not being “a legal person” cannot enter into an agreement of partnership. Hence

HUF cannot become partner of the firm.

26. Whether Branches are required to open current/TD accounts of partnership firms where one or

more of the partners are HUF - Cannot open CA/TD account.

27 What precautions branch is required to take in respect of partnership accounts already opened

where one or more of the partners are HUF. The branch should exercise caution in the transactions &

take Undertaking letter duly signed by all the co-parceners and Kartha.

28 Whether finance can be provided to Partnership firms where one or more of the partners are HUF

– No

29. Simple mortgage is to be registered with which office With Sub - Registrar of assurances under

whose jurisdiction the mortgaged property is situated

6 inspiring quotes by Sir Mokshagundam Visvesvaraya

An engineer is considered to be the one who creates the world which has never been. And for all those outstanding engineers, an Engineers Day is celebrated in India on September 15 every year as a tribute to India’s greatest engineer and Bharat Ratna, Mokshagundam Visvesvaraya. Born on 15 September 1861 in a Telugu speaking family, Sir Mokshagundam Visvesvaraya was an Indian engineer, scholar, statesman, and the 19th Diwan of Mysore. For his magnificent works as an Engineer,  he received India’s highest honour, the Bharat Ratna, in 1955. The intricate system of irrigation in the Deccan area, flood protection system in Hyderabad and KRS Dam across the Kauvery River in Karnataka are some of his renowned works. The great man is not just famous in the field of engineering but also for his quotes. Here are 6 famous quotes of Sir Mokshagundam Visvesvaraya on the occasion of Engineers Day.

#1 “Self-examination not moral or spiritual, but secular – that is, a survey and analysis of local conditions in India and a comparative study's of the same with those in other parts of the globe.”

#2 “Mental energy is wasted in caste disputes and village factions.”

#3 “It is better to work out than rust out.”

#4 “Self-examination not moral or spiritual, but secular – that is, a survey and analysis of local conditions in India and a comparative study of the same with those in other parts of the globe.”

#5 ” The way to build a nation is to build a good citizen. The majority of the citizens should be efficient, of good character and possess a reasonable high sense of duty.”

#6 ” Every man who has become great owes his achievement to incessant toil

Export import credit

EXPORT IMPORT CREDIT MCQs

1. Minimum andmaximum amount up to which the Gold Credit card can be issued to exporter is Rs

________ lac and Rs lac. : (a) 100,1000 (b) 50, 500 (c) 100, 5000

(d) 20,200 (e) None of these as it is based on anticipated turnover.**

2. Aspertheexchangecontrolregulations,thepaymentforexportsshouldingeneralberealizedwithina

periodof:(a) 12months fromdate of shipment** (b) 3months from date of shipment

(c) 6months fromthe date of shipment (d) 1month fromdate of shipment

(e) 45 days formdate of shipment

3. Units in a special economic zone are permitted to realise and repatriate to India the full export value of

goods or software within a period of......................................... from the date of shipment.

(a) 3months (b) 6months (c) 180 days (d) 360 days (e) none of these as there is no time limit*

4. In respectof shipmentsmade toIndianownedwarehouses abroad establishedwithpermissionof RBI,

export proceeds shouldbe realizedwithin:

(a) 6 months (b)3 months (c) 9 months (d)15 months* (e) 150 days

5. RBImonitorsoverdueexportbills-not realizedwithinthestipulatedtimeby calling for ahalf yearly

statement fromADs referredtoas : (a) BEF (b)XOS** (c) GTE-1 (d) ST-9 (e) ENC

6.Packing credit advances mean :

advances granted to industrial units for packing of manufactured goods for sale in Indiaadvances granted to eligible exporters for purchase/manufacture/processing/transporting/packing etc. of goods meant for export*

(c) advancesgrantedtoimporterstoenablethemtostoreandsubsequentlysellimportedgoodslocally

(d) any one or more of the above (e) none of the above.

7. To be eligible for packing credit advances the customer :

(a) should not be in the caution list of RBI or specific approval list of ECGC

(b) must be holding importer/exporter code number allotted byDGFT

(c) should be recognised export house (d) all above (e) both (a) and (b)**

8. Packing credit advances is normally allowed for :

(a) 90 days (b) 60 days (c) 360 days (d) 180 days (e) as per requirement of the exporter**

9. `Normal Transit Period ' in the context of export financemeans:

(a) the number of days the documents take to reach destination

(b) the gap between period taken by the ship and the documents to reach destination

(c) the number of days taken by a ship to complete a voyage

(d) the number of days fixed by FEDAI and is the average period normally involved from date of negotiation to credit to

NOSTRO account.**

(e) either (a)or (b)

10. For facilities grantedupto30.6.2010, rateof interestonpost shipment credit inrupeesupto180days in

respectofusancebills is :

(a) 12% (b) 15% (c) not exceeding BPLR

(d) not exceeding BPLR minus 2.5% (e) not exceeding BPLR plus 1.5%**

11. Refinance for export credit fromRBI is available for howmany days?

(a) 90 days . (b) 180 days** (c) 360 days (d) 270 days- (e) None of these

12. Refinance against eligible export finance is available from:

(a) RBI* (b) IDBI (c) ECGC (d) Exim Bank (e) None of these

13. On PCFC refinance is available to the extent of % of outstanding PCFC.

(a) 15% (b) 50% (c) 25% (d) Nil** (e) None of these

14. Forfacilitiesgrantedupto30.6.2010ConcessionalinterestrateonPostshipmentcreditinrupeesis

permittedupto:

(a) 180 days** (b) 90 days (c) 270 days (d) 360 days (e) None of these

15. Which of the following is not correct regarding Liberalised Remittance Scheme?

(a) Amount can be remitted for capital aswell as current account transactions

(b) Maximumamount that can be remitted in a financial year is restricted toUSD200,000

(c) Remittance for gift and donationwill bewithinUSD200,000 permitted under LRS

(d) Bank can allowadvance to a resident individual formaking remittance under this scheme**

(e) None of these

16_ For outward remittance formedical expenses, estimate fromthe doctor or hospital is required if the

remittance is more than USD : (a) 1 lac (b) 5 lac (c) 10 Lac (d) none of these as it is required in all cases

17. What is themaximumamount of inwardremittance that can bedone by a resident individual?

(a) USD 1 Lac (b) USD 5 lac (c) USD 10 Lac (d) None as there is no limit

*

18. How much amount can be released for remittance abroad for education on declaration basis and withou estimate

from educational institution?

(a) USD 1 Lac** (b) USD 5 lac (c) USD 10 Lac (d) None as there is no limit

19.Which of the following is true?

(a) If a bank has oversold position, Bankwill gain if the rate of foreign currency rises.

(b) If a bank has oversold position, Bankwill gain if the rate of foreign currency declines**

(c) If a bank has oversold position, Bankwill lose if the rate of foreign currency declines

(d) If a bank has overbought position, Bankwill gain if the rate of foreign currency declines

(e) None of these

20. ADsmay allowadvance remittance for import of goodswithout any ceiling.However, if the amount of

advance remittance exceedsUSD50,00,000 or its equivalent it ismandatory to obtain-

(a) unconditional irrevocable stand byUC of an international bank of repute situated outside India

(b) guarantee froman international bank of repute situated outside India(c) guarantee of anADinIndia, if such guaranteeis issuedagainst counter guarantee of aninternational

bankof reputesituatedoutside India

(d) any one of the above (e) either (a) or (b) only***

21. BEF statement containingdetailsof remittance exceedingUSD1,00,000where evidence of import is

not furnishedwithin6months fromdateof remittance is submittedby ADs toRBIon:

(a) monthlybasisby 10thof thefollowingmonth

(b) quarterlybasisby 15thof themonthfollowing closeofquarter

(c) half yearly basis forMarch/ September by 15th of succeedingmonth

(d) half yearly basis as of June/ December by 15th of succeedingmonth **(e) none of these

22. Crystallisation of import bill under UCmeans:

(a) bill is scrutinisedwhether it is as perUC terms or not

(b) it is ensured that currency of IJC and insurance is the same or not

(c) converting bill amount into Indian rupees and deciding customer's liability on due date in case of usance**

bill and on 10th day from date of receipt in case of demand bills.

(d) none of the above as the concept is gonewith the termination of PSCFC

23. ApplicationformakingpaymenttowardsimportsintoIndiahastobemadetoauthoriseddealersby

importersin:(a) ENC (b) R-3 (c) Form A-1 *(d) Form A-4 (e) none of the above

24. Advance remittance for import of goods into India is to be allowed after obtaining guarantee froman

international bank of repute situated outside India or guarantee of an AD in India against counter-guarantee of an

international bank when amount of advance remittance exceeds:

(a) US $ 10,000 (b) US $ 25,000 (c) US $5,000 (d) US $ 15,000 (e) US $ 50,00,000***

25. How much advance remittance is allowed for import of services without guarantee of a reputed

international bank?

(a) USD 1 Lac (b) USD 5 lac **(c) USD 10 Lac (d) None as there is no limit

26. Which of the following types of Bill of Lading is not acceptable by a bank under LC?

(a) On Board (b) Clean (c) Charter Party** (d) AN of these (e) None of these

27. Interest Subvention is available on rupee export credit at the rate of 2% for loan up to Rs

but

interest rate after subvention should not be less than 7%.

(a) Rs 3 lac (b) Rs 5 lakh (c) Rs 10 lakh (d) Rs 100 lakh (e) None of these**

-28. Interest rate charged by RBI on export refinance to banks is at the rate of :

(a) Bank Rate (b) Repo Rate** (c) Reverse Repo Rate (d) Base Rate (e) None of these

29. Export Refinance is provided by RBI at the rate of __________ % of eligible outstanding export credit?

(a) 15% **(b) 25% (c) 50% (d) 100% (e) None of these

30. R Return is submitted to RBI onwhich of the following dates of themonth?

(a) 7th and 2151 (b) 15th & last day **(c) 10th, 20th and last day (d) None of these

31.Overdue import demand bills and usance bills are crystalised onwhich dates?

(a)10thday&duedate **(b)15thdayand30thday (c)30thdayand60thday(d)10thdayand60thday(e)Noneofthese

132. Which of the following is incorrect regarding export declaration forms?

(a) GR formis usedfor declaration of exports other than by postwhere customoffice not linked to EDI

(b) ExportDeclaration formis not required to be submitted for exports up toUSD25000.

(c) Softex formis used for declaration of export of software in physical or electronic form.**

(d) None of these (e) All of these

33.. Presently rate of interest on pre-shipment credit in forex (PCFC) up to 180 days is not exceeding:

(a) 200 basis points above LIBOR ***(b) 100 basis points above LIBOR

(c) 150 basis points above LIBOR (d) 50 points above LIBOR (e) 350 basis points below LIBOR

34. As per current guidelines of RBI, for loans sanctioned up to 30.6.2010, rate of interest on pre-shipment credit in rupees up to

270 days should not exceed :

(a) Bank Rate plus 2.5% (b) BPLR plus 1.5% (c) BPLR minus 2.5%**

(d) Bank Rate minus 2.5% (e) lower of (a) and (b)

35. As per the exchange control regulations, the payment for exports should in general be realized within a period of:

(a) 12 months from date of shipment** (b) 360 days from date of packing of goods

(c) 180 days from the date of shipment (d) 270 days from date of shipment

(e) 180 days from the date of receipt of consignment by the buyer in foreign country

36. Which of the following is/are not true with regard to features of Gold Card Scheme for exporters:

(a) Only exporters whose accounts have been 'Standard' continuously for 3 years are eligible

(b) Gold Card holderswill be given preference is granting packing credit in foreign currency (PCFC)

(c) Time normfor disposal of fresh applications for credit under the schemewill be 25 days

(d) Gold Card for exporters will be issued for a period of 5 years (e) none of these**

EXPORTFINANCE

Case- STUDY

An exporter approaches the popular bank for pre-shipment loanwith estimated sales ofRs.100 lakh. The bank

sanctions a limit ofRs.50 lakh,with followingmargins: Pre-shipment loan on FOB value—25%; ForeignDemandBill -

10%; Foreign usance bilis—20%.

The firmgets an order forUSD50,000 (CIF) toAustralia.On 1.1.2011when theUSD/INRratewasRs.43.50 perUSD,

the firmapproached theBank for releasing pre-shipment loan (PCL),which is released.

On 31.3.2011, the firmsubmitted export documents, drawn on sight basis forUSD45,000 as full and final shipment.

The bank purchased the documents atRs.43.85, adjusted thePCL outstanding and credited the balance amount to the

firm's account, after recovering interest forNormalTransit Period (NTP). The documents were realized on

30.4.2011 after deduction of foreign bank charges of USD 450. The bank adjusted the outstanding post

shipment advance. against the bill. Bank charged interest for pre-shipment loan@7%up to 90 days and,@8%

over 90 days up to 180 days. For Post shipment credit, theBank charged interest@7%for demand bills and@7.5%

for usance (D/A) documents up to 90 days and@8.50%thereafter and on all over dues, interest@10%.

01 What is the amount that the Bank can allow as PCL to the exporter against the given export order,

considering the profit margin of 10% and insurance and freight cost of 12%?

a) Rs.2200000 b) Rs.1650000 c) R6.1485000 d) Rs.1291950

02What is the amount of post shipment advance that can be allowed by the Bank under foreign bills

purchased, for the bill submitted by the exporter?

a) Rs.19,80,000 b) Rs.17,75,925 c) Rs.19,73,250 d) Rs.21,92,500

03 What will be the period for which the Bank charges concessional interest on DP bills, from date of

purchase of the bill?

a) 90 days b) 25 days c) 31 days d) Up to date of realization

04 in the above case, when should the bill be crystallized (latest date), if the bill remains unrealized for

over two months, from the date of purchase-(ignore holidays)?

a) On 30.4.2011 b) On 24.4.2011 c) On 24.5.2011 d) On 31.5.2011

05 What rate of interest will be applicable for charging interest on the export bill at the time of realization,

for the days beyond Normal Due Date (NDD)?

a) 8% b) 7% c) 7.5% d) 10%

Ans. 1-d 2-c 3-b 4-c 5-d Explanations:

1. FOB value =

CIF Value i.e. 50000x43.5 = 2175000

Deduct Insurance & freight 12% of 2175000 = 261000

Balance = 1914000

Deduct profit margin 10% of 1914000 =191400

Balance = 1722600

Less Margin 25% = 430650

PCL = 1291950

2. 45000 x43.85=1973250

3. Concessional• rate will be charged for normal transit period of 25 days and there after overdue

interest will be charged.

4. Crystallisation will be done when the bill becomes overdue after 25 days of normal transit period. Date of

overdue will be 25.4.2011. if bill remains overdue, it will be crystalised within 30 days i.e. up to 24.5.2011.

5. Rate of interest will be 10%as the overdue interest is stated as 10%in the question.

Financial needs of trade

FINANCIAL NEEDS OF TRADE & SERVICES::

Working Capital:

A trader’s need for working capital mainly arises in the following areas:

— for purchase of stocks & advance payment
— for holding stock in trade
— for extending credit on sales

a) Purchase of stocks :

Traders dealing in certain commodities like fertilisers, steel and
timber etc. are required to tender Bank Guarantees or open Letters of Credit in favour
of the supplier. In such cases, they could be sanctioned Inland LC ( Demand / Usance)
and Bank Guarantee facilities stipulating suitable margins. It should, however, be borne
in mind that the liabilities under such limits may devolve upon the bank and hence
should be reckoned on par with the fund based limits for assessing the credit risk. Care
should also be taken to look into the levels of stocks financed by way of BG/LC facility
while assessing further fund based limits viz., cash credit facility against such stocks to
the firm. Cash Credit (Clean) or Overdraft (Clean) facility can be considered for
wholesale traders dealing in perishable goods such as vegetables etc., and for making
advance payments subject to bank’s usual terms and conditions governing such
advances.

b) Stock holding: Most of the trading concerns dealing in Fast Moving Consumer Goods
(FMCGs) and white goods such as refrigerators, washing machines or television sets,and textile goods etc., perforce hold a high level of stocks of varying designs, colours
and sizes. This is warranted to cater to the customer preferences with reference to
quality, price and models of these goods.
The preferred mode of financing the requirement for stock holding would be by
sanctioning Cash Credit facility against hypothecation of stocks. While assessing the
need for financing the stock holding level, it is essential to look into the market credit
enjoyed by the firm as traders generally enjoy considerable amount of credit on their
purchases.

c) Receivables : The sales of the trader and that of the services provider fall into three
major categories.
i) sales on credit terms— Book Debts
ii) sales on cash against delivery— on collection basis
iii) sales against documents of title to goods
Activities falling under the services sector e.g., advertising agencies generally do not have the
necessity to hold high levels of stocks/consumables. However, to a large extent, their funds
would be blocked in the receivables. Hence, it is essential that the receivables be financed by
way of cash credit against Book Debts.

Demand Drafts purchased limit may be the usual method of lending for those who effect sales
against obtention of post-dated cheques drawn on upcountry branches.
Receivable related finance takes the form of discounting of bills of exchange, supply bill finance,
overdraft against book debts.

Current affairs on 12.09.2019

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*Economic Times*

📝 HDFC Bank doubles mid-corporate loan book to over Rs 90,000 crore in 3 years

📝 CBDT launches one-time facility for compounding of income tax offences

📝 DRDO test-fires indigenous anti-tank missile

📝 NPCI clears GST sops for UPI QR code payments

📝 India's fuel demand rises 2.8% y/y in August, at 9-month low

📝 ONGC to invest Rs 13,000 crore in Assam to drill over 220 wells

📝 JSW Steel reports 13% drop in crude steel production in August 2019

*Business Standard*

📝 Ruias set to win back control of Mahan Power as ArcelorMittal bid falters

📝 Rating for Srei Infra Finance downgraded for debentures from AA to A+

📝 PE investors make a beeline for start-ups to generate higher returns

📝 BSNL's revival bet depends on monetising real estate worth Rs 75,000 crore

📝 Cadila Healthcare recovers on India, emerging market sales forecast

📝 Blackstone to invest Rs 15 bn in Allcargo unit to build warehouses in India

📝 Apple eyes top slot in premium smartphone market during festive sales

📝 Anil Ambani-led Reliance Nippon Offer for sale gets oversubscribed

📝 New fund offering of Sundaram Equity Fund garners Rs 358 crore

📝 India hopes to tap $1-billion of jewellery export opportunity to US

📝 Saudi Aramco gives nine banks top roles to lead world's biggest IPO: Report

*Financial Express*

📝 Adani Power gets relief for Lohara block cancellation

📝 MG Motor to spend Rs 2,000 crore on capex product development

📝 Honda Cars India’s FY19 profit doubles on one-time tax gain of Rs 860 crore

📝 MSMEs running out of refinancing options as NBFs freeze LAP: Moody’s

📝 SBI approves divestment of 3.5 pct stake in SBI Life via OFS; to raise Rs 2,695 crore

📝 CAI lowers export and import estimates for current session

📝 Amazon strengthens delivery ahead of festive season; doubles presence of partner network

*Mint*

📝 Azim Premji, group entities offload ₹7,300 crore shares in buyback

📝 Ford Motor may sell Gujarat factory in emerging market strategy shift

📝 Chiratae eyes first close of $150 million for latest India-focused fund

📝 Apollo Hospitals' promoters to sell stake worth ₹725 cr to pare debt

📝 Strides Pharma buys 70% stake in Switzerland’s Fairmed Healthcare

📝 PNB, UBI and OBC form working groups to oversee merger process

📝 Warburg Pincus exits ICICI Lombard; sells remaining 2.7% stake for $194.5 mn

📝 Number of undernourished people rose by 45% in seven years: FAO

📝 WPP, InMobi partner to co-create marketing products with mobile-first approach

📝 12 entities express interest to acquire Canara Bank’s stake in Can Fin Homes.

CISA

CISA (Certified Information Systems Auditor)- IT Certification Course.

The Benefits of CISA: With a CISA designation, there's no need to question your credentials. You've a CISA, so your credentials are understood.

CISA Impacts Your Career & Your Organization:
Enterprises demand IS audit professionals that possess the Knowledge & Expertise to help then identify critical issues & customize practices to support trust in & value from information systems.
The Skills & Practices that CISA promotes & evaluates are the building blocks of success in the field. Possessing the CISA demonstrates proficiency & is the basis for measurement in the profession.

CISA Certification:
- Confirms your Knowledge & Experience.
- Quantifies & Markets you expertise.
- Demonstrates that you have gained & maintained the level of Knowledge required to meet the dynamic challenges of Modern Enterpr- Demonstrates that you have gained & maintained the level of Knowledge required to meet the dynamic challenges of Modern Enterprise.
- Is globally recognized as the mark of excellence for IS Audit professional.
- Combines the achievement of passing a comprehensive exam with recognition of Work & Educational Experience, providing you with credibility in the marketplace.
- Increase you value to your organization.
- Gives you a competitive advantage over peers when seeking job growth.
- Helps you achieve a High Professional standard through ISACA's requirements for continuing Education & Conduct.

Why Employers Hire CISA:
With a growing demand for Individuals Possessing IS Audit, Control & Security Skills, CISA has become a preferred certification program by Individuals & Organizations around the WORLD.
CISA EMPLOYEES:
- Are Highly qualified, Experienced professionals.
- Provide the enterprise with a certification for IT assurance that's recognized by Multinational Clients, Lending Credibility to the enterprise.
- Are Excellent indicators of proficiency in technology controls.
- Demonstrate competence in 5 domains, including Standards & Practices; Organization & Management; Processes; Integrity, Confidentiality & Availability; & Software Development, Acquisition & Maintenance.
- Demonstrate a commitment to providing the enterprise with trust in & value from your information systems.
- Maintain ongoing professional development for successful on-the-job performance.

ANSI Accredited Certification Program PERSONAL CERTIFICATION:
CISA, CISM, CGEIT & CRISC Approved.
The ANSI (American National Standart Institure) has accredited the CISA certification program under ISO/IEC 17024:2012, General Requirements for Bodies Operating Certification Systems of Persons. ANSI a private, Non-Profit Organization, Accredits other organizations to serve as 3rd Party Product, System & Personnel Certifiers. ISACA is proud to be recognized with this International Standard of Performance..

Basel-I, Basel-II and Basel-III:
These were a set of international banking regulations put forth by the Basel Committee on Bank Supervision,(BCBS) which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk. Banks that operate internationally are required to maintain a minimum amount (8%) of capital based on a percent of risk-weighted assets. The first accord on capital standards was Basel I. It was issued in 1988 and focused mainly on credit risk by creating a bank asset classification system. One size fits all-Risk weight same for all types of assets:
The banks were to maintain capital (Tier 1 and Tier 2) equal to at least 8% of its risk-weighted assets. For example, if a bank has risk-weighted assets of $100 million, it is required to maintain capital of at least $8 million.
Initially, there was only credit risk and later on market risk was included.
Basel II: Capital standard to further strengthen soundness and stability of international banking system. More emphasis was on operational risk. The definition of regulatory capital remains same but the measurement of risk has been modified for credit risk. Operational risk is given due importance.
Three Pillars under Basel-II:-
i) Minimum Capital Requirement
Capital requirement (called capital charge) is calculated for credit, market and operational risk.
a) Credit Risk – standardized approach based on type of borrower and credit rating.
b) Operational Risk – Basic indicator approach – 15% of average positive annual gross income for 3 years.
c) Market risk – Standard Duration Method.
To migrate to;
i) Credit risk – Internal Risk Based – 31.03.2014
ii) Operational Risk – Standardized approach - 30.09.2010
Advanced measurement - 31.03.2014
iii) Market risk – Internal Model approach – 31.03.2011.
ii) Supervisory Review - To ensure that banks have adequate capital to support all the risk in their business and encourage them to develop and use better risk management techniques in monitoring and managing their risk. The banks to develop internal risk capital assessment and set capital targets commensurate with bank‘s risk profile/ control environment.
iii) Market Discipline: To complement minimum capital requirement and supervisory review through disclosure and transparency – 8% international requirement and 9% as per RBI.

Basel-III is a global regulatory standard on bank capital adequacy, stress testing and liquidity risk agreed upon by the members of the BCBS in 2010-11. Basel III was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. For instance, the change in the calculation of loan risk in Basel II which some consider a causal factor in the credit bubble prior to the 2007-08 collapse:
In Basel II one of the principal factors of financial risk management was outsourced to companies that were not subject to supervision: credit rating agencies. Ratings of creditworthiness and of bonds, and various other financial instruments were conducted without supervision by official agencies, leading to AAA ratings on mortgage-backed securities, credit default swaps and other instruments that proved in practice to be extremely bad credit risks.
Moreover, bankruptcy in the financial sector in the West due to
i) loose lending standards, ii) poor underwriting of mortgages, iii) unbridled speculation, iv) gross asset liability mismatches and v) inadequate liquidity led to the collapse of even institutions considered ‗too big to fail‘.
The OECD estimates that the implementation of Basel III will decrease annual GDP growth by 0.05 to 0.15 percentage point.
Outside the banking industry itself, criticism was muted. Bank directors would be required to know market liquidity conditions for major asset holdings, to strengthen accountability for any major losses.
Basel III will require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% of Tier I capital (up from 4% in Basel II) of risk-weighted assets (RWA). Basel III also introduces additional capital buffers, (i) a mandatory capital conservation buffer of 2.5% and (ii) a discretionary countercyclical buffer, which allows national regulators to require up to another 2.5% of capital during periods of high credit growth. In addition, Basel III introduces a minimum 3% leverage ratio and two required liquidity ratios-Liquidity Coverage Ratio requires a bank to hold sufficient high-quality liquid assets to cover its total net cash outflows over 30 days; the Net Stable Funding Ratio requires the available amount of stable funding to exceed the required amount of stable funding over a one-year period of extended stress.
With the single most agenda of never to repeat a crisis of 2008, the BCBS put forward norms aimed at strengthening the balance sheet of banks as under:
 Enhancing the quantum of common equity
 Improving the quality of capital base
 Creation of capital buffers to absorb shocks-2.5% during high growth

 Improving liquidity of assets-LCR and NSFR
 Optimising leverage through leverage ratio
 Creating more space for regulatory supervision under Pillar-II of Basel-II
 Bringing further transparency and market discipline under Pillar-III of Basel-II
• Minimum 4.5% in common equity (as against the current 3.6%) by March 31, 2015.
• create a capital conservation buffer (consisting of common equity) of 2.5% by March 31, 2018.
• maintain countercyclical buffer of 2.5% of RWA
• minimum overall capital adequacy of 11.5% (against the current 9%) by March 31, 2018
• a leverage ratio of 4.5%.
• Banks allowed to add interim profits (subject to conditions) for computation of core capital adequacy
Impact of Basel-III on banks in India
1. Capital Adequacy: The transition to Basel-III would be easier for Indian banks due to our strict regulatory standards.
According to Crisil, the average equity capital ratio and overall capital adequacy ratio of Indian banks are between 9% to 14%, well above the regulatory norm.
2. Cost of lending: Stricter capital requirements lead to lower Return on Equity. Moreover, as capital costs increase, loans tend to be more expensive. In order to offset this, banks would have to reduce deposit rates or augment non-interest income. Still, Basel-III norms give out the message that Indian banks will have to explore ways to conserve capital.
3. Leverage: RBI has set the leverage ratio at 4.5%, higher than the Basel-III norm of 3%.This is to regulate banks having higher trading book and off balance sheet derivative positions. However, for Indian banks, the derivative transactions are not very large and the pressure on maintaining the required leverage ratio would be lower.
4. Liquidity norms: The Basel-IIII guidelines require banks to hold enough unencumbered liquid assets to cover expected net outflows during a 30 day stress period. Since we already maintain 21.50% of NDTL under SLR and another 4.00% under CRR, the burden from LCR stipulation will depend on how much of CRR and SLR can be set off against SLR. Here also Indian banks are better placed.

How to transfer LIC policy to another branch .. useful for bankers

How to transfer LIC policy to another branch
I recently transferred my LIC policy from Chennai branch to my home branch.

Through this post, i'll share how you can transfer your policy from existing Servicing branch to your native (home) branch.

Note 1: If you are currently not residing in your Servicing branch city / area, you don't need to go in person to get the branch transfer done.

Note 2: Before i did the transfer of my LIC policy, i checked online and most of the posts has mentioned that LIC policy holders can transfer policy online by sending an email to the Branch Manager. This is not true as no LIC branch do transfer of policy online by just receiving email.

I checked with LIC Customer Care and their Mumbai Headoffice branch and found out that LIC do not allow policy transfers online through emails. This may result in fraud so LIC needs signature verification which cannot be done online in email, so they do not allow users to ask for branch transfer online by sending email to Servicing Branch Manager. They need an hand written application with your signature on it to authenticate the request for branch transfer.

Procedure to transfer the LIC Policy to another branch:
You need to write an application to the Servicing branch that you want to transfer your LIC policy from Servicing branch to your Native or currently location's branch.
You need to attach an ID and Address Proof along with the application.
ID proof can be Pan Card, Passport etc.
Address proof can be Driving License, Passport etc.
Mumbai Headoffice asked me to not atatch Aadhar Card as it's still not recognized for identification. So i used Pan card and Driving license.
Note: Please make sure you self attest application, ID and Address proof. It's very necessary to do so.
You can mention the reason for branch transfer in your application.
Please mention the Policy Name and all the Policy Number(s) clearly in the application to do the transfer
Please mention the Branch Name, Code and Address of the branch where you want to get the transfer done clearly in your application. Failing to do so, might result in application rejection.
You can send the application along with ID / Address proof docs via speed post / courier or in person by visiting the Servicing Branch.

I sent by speed cost because it makes it easy for me to track the post using the EMS number.

Note 3: Please make sure you mention the Branch Name, Code and Address (along with Pincode) where your policy needs to be transferred clearly in the application.

You can get branch code from this link: Branch Locator

You can login into your LIC account to check your Servicing branch and get its address. Servicing branch's address is also mentioned on the original LIC policy given to the user.

This transfer generally takes place in a week's time. You will get SMS once the policy is transferred. You can also login into your LIC login and check under "Policy Status". Current Servicing branch name is always mentioned at the bottom of each policy status.

Bill of exchange

Bill of Exchange

Definition: Bill of Exchange, can be understood as a written negotiable instrument, that carries an unconditional order to pay a specified sum of money to a designated person or the holder of the instrument, as directed in the instrument by the maker. The bill of exchange is either payable on demand, or after a specified term

 a business transaction, when the goods are sold on credit to the buyer, the seller can make the bill and send it to the buyer for acceptance, which contains the details such as name and address of the seller and buyer, amount of bill, maturity date, signature, and so forth.

Features of Bill of Exchange

An instrument which a creditor draws upon his debtor.

It carries an absolute order to pay a specified sum.

The sum is payable to the person whose name is mentioned in the bill or to any other person, or the order of the drawer, or to the bearer of the instrument.

It requires to be stamped, duly signed by the maker and accepted by the drawee.

It contains the date by which the sum should be paid to the creditor.

Drawer: The person who makes the bill, or who gives the order to pay a certain sum of money, is the drawer of the instrument.

Drawee: The person who accepts the bill of exchange, or who is directed to pay a certain sum, is called drawee.

Payee: The person receiving payment is called the payee, who can be a designated person or the drawer himself.

Now, apart from the parties mentioned above, there are some other parties to a bill of exchange, described as under:

Drawee, in case of need: If in any bill of exchange, a person’s name is mentioned in addition to the original drawee, who can be resorted for payment. Then, that person will be called as drawee.

Holder: The holder of the bill of exchange, is the person who possesses the bill and who has the right to recover the amount from the parties.

Acceptor: The person who accepts the bill is called acceptor. Usually, a debtor or drawee is the acceptor. However, it can be accepted by some other person also, on behalf of the debtor/drawee.

Endorser: If the holder of the bill, endorses it to another person, then the person will be called as the endorser.

Endorsee: The person to whom the bill of exchange is endorsed, is ca

lled as an endorsee.

CAIIB-BFM (TOPIC: FOREIGN EXCHANGE MARKET)

FOREX as defined in FEMA means Foreign Currency & Includes:
1.All Deposits, Credits, Balance Payable in any Foreign Currency & Drafts, Travelers Cheques, Letters of Credit & Billes of Exchange Expressed/Drawn in Indian Currency & Payable in Foreign Currency.
2.Any Instruments Payable at the option of the Drawee/Holder, thereof/any other Party thereto, either in Indian Currency/Foreign Currency/Party in 1 & Party in tie other.
In short term FOREX means the process of converting 1 National Currency into another National Currency & transferring Money. In such conversions, the Foreign Currency is always treated as a Commodity & the Home Currency as the medium of purchasing Power.

FOREX MARKET & ITS PARTICIPANTS:
Banks & Customers who've to Buy/Sell FOREX. Inter-Bank dealings where Sale & Purchase Business is transacted between the Bank themselves within the Country. Dealings between Domestic & Foreign Banks.

TYPES OF FOREX TRANSACTIONS:
-Inter-Bank Transaction: Sale/Purchase of FX between Banks & Financial Institutions (Market Participants).
-Merchant Transaction: Sale/Purchase transaction with the Customers are called Merchant Transaction.

FACTORS AFFECTING EXCHANGE RATES: Exchange Rates in the Market are the outcome of the combined effect of a Multiple of Factors. They can be classified as Fundamental, Technical & Speculative Factors.
The Factors are:
- BOP: Surplus BOP in a Courtry strengthens its Currency.
- Economic Growth Rate: High Growth Rate fuels Imports & weakens the Local Currency.
- Fiscal Policy: An expansionary Policy, normally leads to a Higher Economic Growth which in turn fuels Imports.
- Monetary Policy: Central Banks determine monetary measures to Influence & Control Interest & Money Supply.
- Interest Rates: Domestic Interest Rates if High, attracts overseas capital (FDI, FII) leading to an excess supply of Foreign Currencies resulting into appreciation of Domestic Currency in short term. However if High Interest Rates continue for a long term, Economy will slow down, weakening the Currency.
- Political Issues: without Political Stability there can be no Economic Stability (detrimental to the Value of Currenc- Political Issues: without Political Stability there can be no Economic Stability (detrimental to the Value of Currency).
- Technical Reasons in Exchange Rate Determination: Govt. controls which determine the Inflow & Outflow of Capital are considered Technical Reasons.
- Speculation Major Factor in Exchange Rate Determination: Speculative trading is a Reality in FOREX Markets. Its estimated that the speculative trade to daily FOREX turnover is above 90%.

CORRESPONDENTS OF A/C'S: Banks dealing in International Trade & FOREX maintain A/c's in various Foreign Countries for the purposes of settlements. They also enter in into drawing arrangements such as Overnight/Regular Overdrafts Limits, agency arrangements for International Remittances collection of Cheques/Bills etc. The International Banks involved are termed as Foreign Correspondents & the concept of providing such services is called as Correspondent Banking. In a Correspondent Banking relation its not always necessary that an A/c relationship should exist. Some of the services can be rendered without an A/c. However for arrangements like Cheque Clearngog, OD Arrangements A/c's are CORRESPONDENTS OF A/C'S: Banks dealing in International Trade & FOREX maintain A/c's in various Foreign Countries for the purposes of settlements. They also enter in into drawing arrangements such as Overnight/Regular Overdrafts Limits, agency arrangements for International Remittances collection of Cheques/Bills etc. The International Banks involved are termed as Foreign Correspondents & the concept of providing such services is called as Correspondent Banking. In a Correspondent Banking relation its not always necessary that an A/c relationship should exist. Some of the services can be rendered without an A/c. However for arrangements like Cheque Clearngog, OD Arrangements A/c's are needed.
The A/c's when maintained by Banks in Correspondent Relationship are classified as follows:
1. NOSTRO ACCOUNTS: NOSTRO A/c's means OUR A/C WITH YOU. Its a Foreign Currency A/c maintained by a Bank in domestic country with a Bank in Foreign Country.
2. VOSTRO ACCOUNTS: VOSTRO A/c's means YOUR A/C WITH US. Its an A/c of a Foreign Bank being maintained in Our Country & with Our Bank. When VOSTRO A/c's are opened, KYC norms are compulsory in India. VOSTRO A/c's are to be operated in line with RBI Guidelines.
3. LORO ACCOUNTS: LORO A/c's means THEIR A/C WITH THEN. This's an A/c of a 3rd Bank being maintained by another/our Bank.
4. MIRROR ACCOUNTS: These are Dummy A/c's maintained by Banks to know actual position of their A/c's with the Foreign Correspondent Banks. We may call it a Pass-Book of Our A/c's maintained with the Correspondents...

By Madam Poornima Kulkarni

Expected Questions from Money Market & Capital Market:

1.TB (TREASURY BILLS): Treasury Bills are categorized as Money Market instruments,issued when the Govt need Money for a shorter period. It has maximum maturity of 364days & Presently issued in 3 maturities. Namely 91,182 & 364. These are 0 coupon securities & pay no interest. Rather, they are issued bu a discount (at a reduced amt) & redeemed (given back money) at the face value at maturity.
For Eg: a 91day Treasury Bill of ₹.100 (face value) may be issued at say ₹.98.20, i.e. at a discount say ₹.1.80 & would be redeemed at the face value of ₹.100.
2.CP (COMMERCIAL PAPER): Its a short term Money Market Instrument is issued at a discount (at a reduced amt) & redeemed at the value at maturity. Its issued in the form of promissory note or in a dematterialised form. Big Corporate,Primary Dealers & FI's are eligible to issue CP. The maturity periode of each CP is 7-365days from the date of issue. CP can be issued denominations of ₹.5 Lakh or Multiples thereof. Only a schedule Bank can act as an issuing & paying agent (IPA) for issuance of CP.
3.DEMATERIALISATION: Dematerialisation is a process by which the paper certificates of an investor are taken back by the Company/Registrar & actually destroyed & an equivalent No. of Securities are credited in electronic holdings of that investor.
Storage of Dematerialised Shares in Depository is the body which is responsible for storing & maintaining investor's securities in demat/electronic formal. In India there are 2 depositories i.e. 1.NSDL 2.CDSL.

4.DEMAT A/C: Demat is short name of Dematerialized A/c. If 1 has to save Money/Cheque Payments, the He/She needs to open a Bank A/c. Similarly 1 needs to open a Demat A/c if He/She wants to similar to a Bank A/c wherein the actual Money is being replaced by shares. In order to open a Demat A/c, 1 needs to approach the DP (Depository Participant).
In India, a Demat A/c is type of Banking A/c that dematerialise paper based physical stock shares. This A/c used to avoid holding of physical shares, the shares are bought as well as sold through a stock broker. In this case the advantage is that 1 doesn't need any physical evidence for possessing these shares. All the things are taken care of by DP.
5.DEPOSITORY PARTICIPANT: DP is the Market Intermediary through which investors can avail the Depository Services. DP provides FS & includes organizations like Banks, Brokers, Custodians & FIs.
6.SENSEX & NIFTY: SENSEX is the short term for the words SENSITIVE INDEX & is associate the Bombay Stock Exchange (BSE). The SENSEX was 1st formed on 01.01.1986 & used the Market Capitalization of 30 most traded stocks of BSE. Where as NSE has 50 most traded stocks of NSE-SENSEX is the Index of BSE.
NIFTY is Index of NSE. both will show daily trading marks. SENSEX & NIFTY both are an INDEX, an Index is basically an indicator it indicates whether most of stocks have gone up/gone down.

7.SEBI & IPO: SEBI is the regulator for the Securities Market in India. Originally setup by the GOI in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by CB Bhave.
IPO is Initial Public Offering. This's the 1st offering of shares to general public from a company wishes to list on the Stock Exchanges.
8.FII & FDI: FII (Foreign Institutional Investor) used to denote an investor, mostly in the form of an institution. An Institution established outside India which proposes to invest in Indian Market, in other words buying Indian stocks. FIIs generally buy in large volumes which has an impact on stock markets. Institutional Investors includes Pension Fund,Mutual Fund,Insurance Companies,Banks,Etc.
-FDI (Foreign Direct Investment) occurer with purchase of 'Physical Assets/Significant Amt of ownership (stock) of a company in another country in order to gain a measure of management control' (or) a Foreign Company having a stake in Indian Company.
9.DISINVESTMENT: The Selling the Govt stake in public sector undertakings.

10.MUTUAL FUND: Mutual Fund are investment companies that Pool Money from investors at large & offer to sell/buy back its shares on a continuous basis & use the capital thus raised to invest in securities of different companies. the Mutual Fund will have a fund merger that trades the Pooled Money on regular basis. the Net Proceeds/Losses are then typically distributed to investors annually. A company that invests its clients Pooled Fund into securities that match its declared. Assets Management Companies provide investors with more diversification & investing options than they would have by themselves. Mutual Funds,Hedge Funds & Pension Plans are all run by Asset Management Companies. These Companies earn income by charging service fees to their clients.

(to be continued)..
11. NABARD
12. DERIVATIVE....

GLOSSARY OF ECONOMIC TERMS (ALPHABET WISE: LETTER-D).

DATA LIMITATIONS: In stabilization policy, refers to 2 scenarios:
1. Quantitative factual information or data that is only available after the event (E.g. unemployment figures for last month).
2. The raw information that is adjusted for seasonal variations or changes in prices; therefore, data may not accurately measure the activity.
DAY TRADE: Also known as a ‘daylight trade.’ The purchase and sale or the short sale and cover of the same security in a margin account on the same day.
DEBIT CARD: A card that resembles a credit card but which debits a transaction account (checking account) with the transfers occurring contemporaneously with the customer’s purchases. A debit card may be machine readable, allowing for the activation of an automated teller machine or other automated payments equipment.
DEFAULT: Failure to meet the terms of a credit agreement.
DEFICIT: The amount each year by which government spending is greater than government income.

DEMAND DEPOSIT: A deposit that may be withdrawn at any time without prior written notice to the depository institution. A checking account is the most common form of demand deposit.

DEPOSIT CEILING RATES OF INTEREST: Maximum interest rates that can be paid on savings and time deposits at federally insured commercial banks, mutual savings banks, savings and loan associations, and credit unions. Ceilings on credit union deposits are established by the Depository Institutions Deregulation Committee (DIDC). By law, deposit interest rate ceilings were phased out over a six-year period, ending in 1986 under the oversight of the DIDC.
DEPOSITORY INSTITUTION: A financial institution that obtains its funds mainly through deposits from the public. This includes commercial banks, savings and loan associations, savings banks, and credit unions. Although historically they have specialized in certain types of credit, the powers of nonbank depository institutions have been broadened in recent years. For example, NOW accounts, credit union share drafts, and other services similar to checking accounts may be offered by thrift institutions.
DEPOSITORY INSTITUTIONS DEREGULATION COMMITTEE (DIDC): The Committee responsible for the orderly phase-out over a six-year period of interest rate ceilings on time and savings accounts at depository institutions. Voting members of the DIDC are the Secretary of the Treasury and the chairmen of the Federal Reserve Board, Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, and National Credit Union Administration Board. The Comptroller of the Currency serves as a non-voting member.
DEPRECIATION: See currency depreciation.
DIRECT DEPOSIT: A method of payment which electronically credits your checking or savings account.

DIRTY FLOAT: A type of floating exchange rate that is not completely freely floating because central banks intervene from time to time to alter the rate from its free-market level. It is still a floating rate because it has not been pegged at a predetermined par value.
DISCOUNT PAYMENT: The difference between the face value and the price paid for a security.
DISCOUNT RATE: Interest rate at which an eligible depository institution may borrow funds, typically for a short period, directly from a Federal Reserve Bank. The law requires that the board of directors of each Reserve Bank establish the discount rate every fourteen days subject to the approval of the Board of Governors.
DISCOUNT WINDOW: Figurative expression referring to the Federal Reserve’s facility for extending credit directly to eligible depository institutions (those with transaction accounts or nonpersonal time deposits).
DURABLE MERCHANDISE: Goods that have a relatively lengthy life (Television Sets, Radios, etc)..

LIST OF FINANCIAL TERMS (ALPHABET WISE: LETTER-A).

ACCEPTANCE: The drawee's acknowledgement of the LIABILITY on a BILL OF EXCHANGE, in writing on the instrument itself. A bill may also bear the co-acceptance by a bank, which is a guarantee to honour the instrument in the event of default by the drawee.
ACCOMMODATION BILL: A Bill of Exchange without any consideration, or quid pro quo. In this case, a person signs a bill & makes himself liable, without receiving any value in return, such as, an advantage or a benefit. The purpose of accepting such a bill is to accommodate the drawer who is temporarily in need of funds. The acceptance enhances the LIQUIDITY of the instrument, which can be discounted by the drawer with a bank.

ACCURAL BASIS: A method of accounting that recognizes revenues & expenses as they accrue, even though cash would not have been received or paid during the accrual period.
ADR: An acronym for American Depository Receipt. It is an instrument traded at U.S. exchanges representing a fixed number of shares of a foreign company that is traded in the foreign country. By trading in ADRs, U.S. investors manage to avoid some of the problems of dealing in foreign securities markets. The ADR route enables companies to raise funds in the U.S. financial markets, provided they meet the stringent regulatory norms for disclosure & accounting.

ALLOTMENT: The acceptance of an application subscribing to the shares or other securities of a company. Such allotment establishes the contractual relationship that underlies an investment through public subscription.
AMORTIZATION: The reduction f an amount at regular intervals over a certain time period. This term is used to refer to the reduction of debt by regular payment of loan installments during the life of a loan. It is also used to described the accounting process of writing off an intangible ASSET.
ANNUAL REPORT: A yearly publication that contains particulars relating to the operating data of a company & which is published and distributed by the company to its share-holders, as per the requirement of the Companies Act. The important contents are the profit & loss statement and the BALANCE SHEET. These statements show a company's performance in terms of sales & earnings during a financial year, and also its year-end financial position in terms of ASSETS & LIABILITIES. It also contains the directors' report, a notice to the shareholders about the proposed business agenda of the annual general meeting & the auditor's report.

ARBITRAGE: Simultaneous purchase and sale transactions in a security or a commodity, undertaken in different markets to profit from price differences. For example, an arbitrageur may find that the share of The Tata Iron and Steel Company (TISCO) is trading at a lower price, at the Vadodara Stock Exchange compared to the exchange at Bombay. Hence, he may simultaneously purchase TISCO stock in Vadodara at, say Rs.250, and sell in Bombay at a higher price, say Rs.256, making a profit of Rs.6 per share less expenses.
ASSET MANAGEMENT COMPANY (AMC): A company set up for floating and managing schemes of a MUTUAL FUND. An AMC earns fees by acting as the PORTFOLIO manager of a fund. The AMC is appointed by the Board of Trustees, which oversees its activities. Thus, a mutual fund is generally established as a trust by a SPONSOR, which could be a registered company, bank or FINANCIAL INSTITUTION. Also, a custodian & a registrar are appointed to ensure safe keeping of the fund's securities & to deal with investors' applications, correspondence, etc.

AT-THE-MONEY: The term relates to trading in listed OPTIONS. An option is said to be trading 'At-the-Money' when the STRIKING PRICE and the market price of the underlying share are equal (See Options as well as Appendix-II).
ANGEL INVESTOR: These are high worth individuals who provide seed capital for start-ups in return for a minority share in business. They are also known as Business Angel or simply Angel. They can also be a group of individuals who pool their savings or funds to invest in start-ups. Angels come into picture when the business idea is in its inception stage. Business ideas that do not get much respect from banking sector can approach Angels. Angels also invest in an idea that has potential to get market's attention. Usually bank's risk appetite is lesser than Angels. Also they charge a little lower than banks. They do not invest in huge in a single project rather in a multi-portfolio to balance out their losses..

SOME OTHER BANKING RELEVANT ACTS:
1. NI (Negotiable Instruments) Act, 1881
2. Bankers Books Evidence Act, 1891
3. State Bank of India (SBI) Act, 1955
4. Companies Act, 1956/Companies Act, 2013
5. Securities Contact (Regulation) Act, 1956
6. State Bank of India (SBI)-(Subsidiary Banks) Act, 1959
7. Deposit Insurance & Credit Guarantee Corporation Act, 1961
8. Banking Companies (Acquisition & Transfer of Undertaking) Act, 1970
9. National Bank for Agriculture & Rural Development (NABARD), Act 1981
10. National Housing Bank Act, 1987
11. Recovery of Debts Due to Banks & Financial Institution Act, 1993
12. Competition Act, 2002
13. Indian Coinage Act, 2011: Governs Currency & Coins
14. Banking Secrecy Act
15. Industrial Development Bank (Transfer of Undertaking &  Repeal) Act, 1993..

Economic terms

GLOSSARY OF ECONOMIC TERMS (ALPHABET WISE: LETTER-C).

CALIFORNIA ECONOMIC DEVELOPMENT LENDING INITIATIVE (CEDLI): This is a statewide community development corporation that provides financing to serve a range of community economics development needs, including small businesses, non-profit lenders & community real estate projects.
CAPACITY UTILIZATION RATE: The % of the economy’s total plant & equipment that is currently in production. Usually a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion.

CAPITAL MARKET: The market in which corporate equity & longer-term debt securities (those maturing in more than one year) are issued & traded.
CAPITAL MARKET RATES: See long-term interest rates.
CASH MANAGEMENT BILLS (CMB): Very short maturity bills that the Treasury sells on an irregular basis to bridge low points in the Treasury’s cash balance.
CASH METHOD OF ACCOUNTING: A system, used especially in computing income tax, in which income is not credited until it is actually or constructively received & expenses are not charged until they have been paid; to be distinguished from the accrual method, in which income is credited when the legal right to the income occurs & expenses are charged when the legal liability becomes enforceable.
CEASE-&-DESIST ORDER: An order issued after notice & opportunity for hearing, requiring a depository institution, a holding company, or a depository institution official to terminate unlawful, unsafe, or unsound banking practices. Cease-&-desist orders are issued by the appropriate federal regulatory agencies under the Financial Institutions Supervisory Act & can be enforced directly by the courts.

CENTRAL BANK: The principal monetary authority of a nation, a central bank performs several key functions, including issuing currency & regulating the supply of credit in the economy. The Federal Reserve is the central bank of the United States.
CENTRAL BANK INTERVENTION: The buying or selling of currency, foreign or domestic, by central banks, in order to influence market conditions or exchange rate movements.
CERTIFICATE OF DEPOSIT (CD): A form of time deposit at a bank or savings institution which cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs of $100,000 or more are often in negotiable form, meaning they can be sold or transferred among holders before maturity.
CHECK CLEARING: The movement of checks from the banks or other depository institutions where they are deposited back to those on which they are written & funds movement in the opposite direction. This process results in credits to accounts at the institutions of deposit & corresponding debits to accounts at the paying institutions. The Federal Reserve participates in check clearing through its nationwide facilities, though many checks are cleared by private sector arrangement.
CLEARING HOUSE: An institution where mutual claims are settled between accounts of member depository institutions. Clearinghouses among banks have traditionally been organized for check-clearing purposes, but more recently have cleared other types of settlements, including electronic fund transfers.

CLEARINGHOUSE INTERBANK PAYMENTS SYSTEM (CHIPS): An automated clearing system used primarily for international payments. This system is owned & operated by the New York Clearinghouse banks & engages Fedwire for settlement.
CLOSED-END CREDIT: An agreement in which advanced credit, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate & automobile loans are closed-end agreements.
COLLATERAL: Property that is offered to secure a loan or other credit & that becomes subject to seizure on default (Also called security).
COMMERCIAL BANK: Bank that offers a broad range of deposit accounts, including checking, savings & time deposits & extends loans to individuals & businesses. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which generally are involved in arranging for the sale of corporate or municipal securities.
COMMODITY PRICES: An index of commodities (such as oil & steel) traded in worldwide markets.

COMMUNITY REINVESTMENT ACT (CRA): Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing & other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe & sound operations.
COMMUNITY REINVESTMENT ACT STATEMENT: A description available for public inspection at each bank office indicating, on a map, the communities served by that office & the types of credit the bank is prepared to extend within the communities served.
COMPETITIVE BIDDERS: One of two categories of bidders on Treasury securities: competitive & noncompetitive. Competitive bidders are usually financial institutions.
COMPTROLLER OF THE CURRENCY: See Office of the Comptroller of the Currency.
CONSORTIUM: A grouping of corporations to fulfill a combined objective or project that usually requires interbusiness cooperation & sharing of the goods.

CONSUMER ADVISORY COUNCIL (CAC): A statutory body established by Congress in 1976. The Council, with 30 members who represent a broad range of consumer & creditor interests, advises the Federal Reserve Board on the exercise of its responsibilities under the Consumer Credit Protection Act & on other matters on which the Federal Reserve Board seeks its advice.
CONSUMER PRICE INDEX (CPI): A measurement of the cost of living determined by the Bureau of Labor Statistics.
CONTRACTIONARY FISCAL POLICY: A policy to decrease governmental spending and/or an increase in taxes.
CONTRACTIONARY MONETARY POLICY: A policy to restrict the growth of money & credit in the economy.
CONTEMPORANEOUS RESERVE ACCOUNTING: An accounting method that allows member banks of the Federal Reserve a one-day lag when calculating their required reserves & reserves held as vault cash. Except for the one-day lag, Assets & Liabilities used in calculating reserves & required reserves are those of the same week.

CORRESPONDENT BANK: A bank that accepts deposits of & performs banking services for other depository institutions.
COSIGNER: A term referring to a person, other than the principle borrower, who signs for a loan. The cosigner(s) assumes equal liability for the loan.
CREDIT: The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.
CREDIT CARD: Any card, plate, or coupon book that may be used repeatedly to borrow money or buy goods & services on credit.
CREDIT SCORING SYSTEM: A statistical system used to determine whether or not to grant credit by assigning numerical scores to various characteristics related to credit worthiness.

CREDIT UNION: Financial cooperative organization of individuals who have a common bond, such as a place of employment, residence, or membership in a labor union. Credit unions accept deposits from members, pay interest (in the form of dividends) on the deposits out of earnings & use their funds mainly to provide consumer installment loans to members.
CREDIT HISTORY: A record of how a person has borrowed & repaid debt.
CREDIT WORTHINESS: A creditor’s measure of a consumer’s past & future ability & willingness to repay debts.
CURRENCY APPRECIATION: An increase in the value of one currency relative to another currency. Appreciation occurs when, because of a change in exchange rates, a unit of one currency buys more units of another currency.
CURRENCY DEPRECIATION: A decline in the value of one currency relative to another currency. Depreciation occurs when, because of a change in exchange rates, a unit of one currency buys fewer units of another currency.

CURRENCY DEVALUATION: A deliberate downward adjustment in the official exchange rate established, or pegged, by a government against a specified standard, such as another currency or gold.
CURRENCY REVALUATION: A deliberate upward adjustment in the official exchange rate established, or pegged, by a Govt against a specified standard, such as another currency or gold.
CURRENCY UNION: A group of countries that agree to peg their exchange rates & to coordinate their monetary policies so as to avoid the need for currency reallignments.
CURRENT ACCOUNT BALANCE: The difference between the nation’s total exports of goods, services, and transfers & its total imports of them. Current account balance calculations exclude transactions in financial Assets & Liabilities.
CYCLICAL UNEMPLOYMENT: Unemployment caused by a low level of aggregate demand associated with recession in the business cycle..

Caiib abm

CAIIB-ABM (TOPIC: GDP CONCEPTS)

1. GDP(Gross Domestic Product): Its the total Market Value of all the final goods & services produced within the territorial boundary of a Country, using domestic resources during a given period of time, usually 1Year.
2. Gross National Income at Market Price = GDP at Market Price+Taxes less subsidies on Production & Imports (Net receivable from aboard + Compensation of Employees net receivable from aboard)+Rosesty Income (Net receivable from aboard).
3. GNP(Gross National Product)=GDP+Total Capital gains from Investment (-) Income earned by Foreign Nationals domestically.
4. According to the National Income Accounting there are 3 ways to comple GDP:
- Expenditure Wise
- Income Wise
- Product Wishe.

5. Expenditure Wise Method:
GDP=Consumption+Gross Investment+Govt. Rememeing + (Exports-Imports)
GDP = C+I+G(X-M)
- Consumption: This included Personal Expenditures pertaining to done, households.
- Gross Investment: Business Investment as capital which includes construction of a new time, purchase of Machinery & Equipments for a Factory, purchase of Software, expenditure on New houses. Buying Goods & Services but investments on Financial Products is not included as it falls.
- Govt. Spending: Its the sum of Govt. Expenditures of Final Goods & Services.
- Exports-Imports: Exports includes all Goods & Services produced for overseas consumptions & Imports includes any Goods or Services imported for consumption & it should be deducted to prevent from calculation Foreign Supply as domestic supply.

6. Income Approach: GDP from the income is the sum of the following Major Components:
- Compensation of Employees: It represents wages, salaries & other employee supplements.
- Property Income: It constitutes corporate profits, proprietors income, Interest & Rents.
- Production Taxes & Depreciation on Capital.

7. GDP at Market Price measures the value of output Market Prices after adjusting for the effect of Indirect Taxes & Subsides on the prices.
8. Market Price is the economic price for which a Good or Service is offered in the Market Place.
9. GDP at factor cost = GDP at Market Price-(Indirect taxes - Subsidies).
10. Product Approach in India getting GDP product wise colonis to 8 sectors.
11. Real GDP/GDP at Constant Price: It means the value of today's output at yesterday price.
Real GDP is calculated by tracking the volume/quantity of production after removing the influence of changing prices or inflation.

12. Normal GDP/GDP at Current Prices: It represents the total Money Value of Final Goods & Services produced in a given year.
Where the Values are expressed in terms of the Market Prices of each year.
13. Factors of Production are: Land, Labour, Capital & Entrepreneur..

Beneficial ownership

Beneficial ownership:::( Most important knowledge point view)

When a bank/FI identifies a customer for opening an account, it should identify the beneficial owner(s)
and take all reasonable steps in terms of Rule 9(3) of the PML Rules to verify his identity, as per
guidelines provided below:

(a) Where the client is a company, the beneficial owner is the natural person(s), who, whether
acting alone or together, or through one or more juridical person, has/have a controllingownership interest or who exercises control through other means.
Explanation- For the purpose of this sub-clause-
1. “Controlling ownership interest” means ownership of/entitlement to more than 25 per cent of
the shares or capital or profits of the company.
2. “Control” shall include the right to appoint majority of the directors or to control the
management or policy decisions including by virtue of their shareholding or management
rights or shareholders agreements or voting agreements.
(b) Where the client is a partnership firm, the beneficial owner is the natural person(s), who,
whether acting alone or together, or through one or more juridical person, has/have ownership
of/entitlement to more than 15 per cent of capital or profits of the partnership.
(c) Where the client is an unincorporated association or body of individuals, the beneficial
owner is the natural person(s), who, whether acting alone or together, or through one or more
juridical person, has/have ownership of/entitlement to more than 15 per cent of the property or
capital or profits of the unincorporated association or body of individuals.
(d) Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the
relevant natural person who holds the position of senior managing official.
(e) Where the client is a trust, the identification of beneficial owner(s) shall include identification of
the author of the trust, the trustee, the beneficiaries with 15% or more interest in the trust and
any other natural person
exercising ultimate effective control over the trust through a chain of control or ownership.
(f) Where the client or the owner of the controlling interest is a company listed on a stock
exchange, or is a subsidiary of such a company, it is not necessary to identify and verify the
identity of any shareholder or beneficial owner of such companies.
There exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the
customer identification procedures. In such cases, banks/FIs should determine whether the
customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so,
banks/FIs should insist on satisfactory evidence of the identity of the intermediaries and of the
persons on whose behalf they are acting, as also obtain details of the nature of the trust or other
arrangements in place. The different categories of beneficiaries should be identified as defined
above. In the case of a 'foundation', steps should be taken to verify the founder managers/ directors
and the beneficiaries, if defined.