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.

NRI facilities

Facilities for Non-resident Indians (NRIs)

Purpose

v) To hedge the exchange rate risk on the market value of investment made under the

portfolio scheme in accordance with provisions of FERA, 1973 or under notifications issued

there under or in accordance with provisions of FEMA, 1999. For access to ETCD market, see para. 4 below. vi) To hedge the exchange rate risk on the amount of dividend due on shares held in Indian

companies. vii) To hedge the exchange rate risk on the amounts held in FCNR (B) deposits. viii) To hedge the exchange rate risk on balances held in NRE account. Products

ix) Forward foreign exchange contracts with rupee as one of the currencies, and foreign currency-

INR options. x) Additionally, for balances in FCNR (B) accounts – Cross currency (not involving the rupee)

forward contracts to convert the balances in one foreign currency to other foreign currencies in

which FCNR (B) deposits are permitted to be maintained. (c)Terms

9 and conditions for Non-Resident Indians (NRIs) participating in the Exchange

Traded Currency Derivatives (ETCD)

i. NRIs shall designate an AD Cat-I bank for the purpose of monitoring and reporting their combined

positions in the OTC and ETCD segment

(an)NRIs may take positions in the currency futures / exchange traded options market to hedge the

currency risk on the market value of their permissible (under FEMA, 1999) Rupee investments in

debt and equity and dividend due and balances held in NRE accounts. (ao)The exchange/ clearing corporation will provide details of all transactions of the NRI to the

designated bank. (ap)The designated bank will consolidate the positions of the NRI on the exchanges as well as the

OTC derivative contracts booked with them and with other AD banks. The designated bank shall

monitor the aggregate positions and ensure the existence of underlying Rupee currency risk and

bring transgressions, if any, to the notice of RBI / SEBI. (aq)The onus of ensuring the existence of the underlying exposure shall rest with the NRI

concerned. If the magnitude of exposure through the hedge transactions exceeds the magnitude of

underlying exposure, the concerned NRI shall be liable to such penal action as may be taken by

Reserve Bank of India under the Foreign Exchange Management Act (FEMA), 1999.

Memory Techniques

Memory Techniques
Every aspirants/student aspires for good memory to succeed in the exams. Since our present exam system is based on
reproducing from memory what is read earlier, having a good memory is certainly desirable. As stated earlier, 'I don't have
a good memory' is a common grievance and complaint from aspirants/student s. Surely, genes and hereditary factors have
something to do with the natural memory of a person; however, you will be surprised to know that good memory can easily be cultivated by adopting a few, well-proven, scientific memory techniques, known as Mnemonics.
What are Mnemonics?
Mnemonics are creative aids to memory.You may observe that, generally, committing to memory or recalling from memory
involves:
1. Repetition, or
2. Association, or
3. Picturization, or
4. Combination of the above
Committing to memory by repetition is a well known technique. This is, in fact, the method used by us all, while learning
nursery rhymes.
Association involves associating the thing to be remembered with any one of the senses such as sight, word, smell, taste,
or touch. Association can also be related to a person, incident or situation. You can also associate the thing to be
remembered with any of the human feelings such as love, hate, affection, fear, shame, surprise, wonder, peace, anger etc.
Color, humor, drama, exaggeration etc. also can be associated effectively with items to be remembered.
Picturization involves connecting the thing to be remembered with a mental picture, which is unique. That means: recalling the
mental picture will instantly bring to your mind the thing to be remembered. Many times, a combination of all the above
methods is employed to device a good memory technique.

How to be successful?

How to be successful?
To achieve success you should:

 Dream a 'big dream': Yes, you should dream... and, dream 'big. Don't be ashamed to dream big. All
great achievers started with their 'big dreams. But, your dream must be very strong and not just a
'day dream with no foundation of a strong will. Remember: to dream is far better than to sleep, since a
dreamer flies in the sky whereas a man in deep sleep remains firmly on bed only.

 Visualize strongly: Yes, believe in your dream, which only means believe in yourself. Visualize
very strongly yourself winning or going to the stage and receiving the 'trophy. Strongly visualized
desires have a strange way of getting materialized and become a reality.

 Motivate yourself: Strong motivation is the fuel to take you to your destination. Be self
motivated. Strong motivation gives you an undiminished energy, enthusiasm, drive and vision
required to achieve success.

 Put appropriate, intelligent efforts: Yes, you should have necessary 'tools' to execute any job
efficiently. Here, as a aspirants/student , you should put necessary, intelligent efforts to enhance
your skills in listening, reading, revising, writing the exams etc.

 Relax, and be calm: Have a peaceful composure. Let your mind be calm, collected, sharp and
receptive. Nothing much is achieved by a person whose mind is confused. As said earlier, mind is
only a tool; but, keep it clean and sharp to use it efficiently and achieve maximum results.

 Trust in God: Realize that there is a Power superior to man, which controls the universe. Once
you know that you have put in your sincere and best efforts towards achieving the goal, surrender
yourself to that Power and be at peace. It is well said: 'God helps those who help themselves!:
So, success is sure to follow.

TT and Bill rates

TT Rates and Bill Rates

Following 4 types of buying and selling rates are important:
1. TT Buying rate
2. Bill Buying rate
3. TT Selling rate
4. Bill Selling rate
In Interbank market, exchange rate is quoted up to 4 decimals in multiples of 0.0025. e.g.
1USD=53.5625/5650
For customers the exchange rate is quoted in two decimal places i.e. Rupees and paisa. e.g. 1
USD =Rs. 55.54.
Amount being paid or received will be rounded off to nearest Rupee.

TT Buying Rate
It is required to calculate when our Nostro account is already credited or
being credited without delay e.g. Receipt of DD, MT, TT or collection of
Foreign bills. This rate is used for cancellation of Forward Sales Contract.
Calculation
Spot Rate – Exchange Margin
Bill Buying Rate Bill Buying rate is applied when bank gives INR to the customer before
receipt of Foreign Exchange in the Nostro account i.e. Nostro account is
credited after the purchase transaction. In such cases.
Examples are:
 Export Bills Purchased/Discounted/Negotiated.
 Cheques/DDs purchased by the bank.
Calculation
Spot Rate + Forward Premium (or deduct forward discount) – Exchange
margin.
TT Selling Rate Any sale transaction where no delay is involved is quoted at TT selling rate.
It is desired in issue of TT, MT or Draft. It is also desired in crystallization of
Export bills and Cancellation of Forward purchase contract.
Calculation
Spot Rate + Exchange Margin
Bill Selling Rate It is applied where handling of documents is involved e.g. Payment against
Import transactions:
Calculation
Spot Rate + Exchange Margin for TT selling + Exchange margin for Bill
Selling

Kyc aml

KYC AML::

1. KYC, AML & CFT guidelines are issued under act.
a) KYC Act b) PMLA 2002 c) BR Act d) NI Act
2. FATF (Financial Action Task Force on Money Laundering) also known as GAFI
(Groupe d'action financiere) has its head quarters at
a) New Delhi b) London c) Paris d) Geneva
3. Section 12 of PMLA places the following obligations on the Bank except
a) Maintaining a record of prescribed transactions & preserving records there of.
b) Furnishing information of prescribed transactions to the specified authority.
c) Verifying and maintaining records of the identity of its clients and identifying the
beneficial owners, if any, of such clients
d) None of the above
4. Under KYC/AML/CFT/Fraud prevention measures, observance of KYC compliance and
fraud prevention day is observed on..
a) 1st August b) 5th August
c) 1st September d) 5th September
5. The Anti Money Laundering Cell of the Bank has been established at
a) Jaipur b) Nagpur c) Bhubaneswar d) New Delhi
6. In case the PoS transaction amount is Rs. and above, the merchant is required
to obtain the copy of PAN in case of domestic card transaction.
a) 20000 b) 150000 c) 100000 d) 50000
7. Smurfing, Layering and Integration are three types of
a) Money laundering Activity b) Money tracking Activity
c) Source tracking Activity d) User tracking Activity
8. The Software used for generation of Suspicious Transactions Report is known as:
a) E-KYC b) AMLOCK c) E-BANCS d) E-AML
9. Which of the following is the key element of KYC/AML/CFT?
a) Customer Identification & Acceptance
b) Customer Identification & Transaction Monitoring
c) Customer Acceptance, Customer Identification, Risk Categorization & Monitoring
of transaction
d) Customer Acceptance & Risk Management

10. "Controlling ownership interest" means ownership of or entitlement to more than
percent of shares or capital or profits of a company.
a) 50 b) 10 c) 15 d) 25
11. Which is not one of the documents from the "Officially Valid Documents" list prescribed by
the RBI.
a) Post office ID b0 PAN Card c) DL d) Adhaar
12. Facilities/Restrictions in 'Small account' includes
a) the aggregate of all credits in a financial year does not exceed rupees one lakh
b) the aggregate of all withdrawals and transfers in a month does not exceed rupees
ten thousand
c) the balance at any point of time does not exceed rupees fifty thousand
d) All the above
13. For Low risk customers, Customer Identification data should be updated once in
years.
a) 3 b) 4 c) 10 d) 8
14. Branches may open bank account in favor of foreign students studying in
India.
a) SB b) NRO c) CA d) NRE
15. As per the Simplified KYC guidelines, the current limits for balance in Small Deposit
Accounts should not exceed
a) Rs.20,000 b) Rs.50,000 c) Rs.1,00,000 d) Rs.2,00,000
16. Counterfeit Currency Reports should be submitted to: -
a) LHO KYC Deptt b) Controlling Office
c) FIU-IND d) None of the above
17. Politically exposed persons are:
a) Individuals who are or have been entrusted with prominent public function in a
foreign country
b) MLAs and MPs
c) Individuals related to a political party
d) All the above
18. Cash Transaction Reports (CTRs) are required to be compiled by branches and submitted
to Controllers for onward transmission to FIU-IND at intervals.
a) Weekly b) Fortnightly c) Monthly d) Bimonthly
19. Cash withdrawals and deposits for Rs. lacs and above in deposit, cash credit
and overdraft accounts to be recorded in a separate register and reported to controlling
office every month.
a) 5 b) 10 c) 15 d) 20

1. (b) 2. (c) 3. (d) 4. (a) 5. (a) 6. (d) 7. (a) 8. (b) 9. (c) 10. (d)
11. (a) 12. (d) 13. (c) 14. (b) 15. (b) 16. (c) 17. (a) 18. (c) 19. (b)

Ratio

Ratio Analysis
Financial statements: The statement which provides us the financial position of a
Balance Sheet are called “Finance Statements”, which includes – Trading Account (in
case of Manufacturing concerns), Profit & Loss Account, Balance Sheet, Cash Flow
Statement and Funds Flow Statement. The analysis of Balance Sheet is a process of
bringing down the difficult matter into a simple and easily understandable one. To
have a clear understanding of the financial position of the Business concern, at least
three years financial statements are to be ascertained. They provide us treasure of
information. Balance Sheet of a business concern shows the strength of the concern
on a given date but not reveal the current state of affairs of the concerns. Balance
Sheet is having certain limitations, because it does not disclose the critical factors,
such as Managerial Efficiency, Technical competence, Marketing capabilities and
Competition in the market.
Ratio means a comparison of two items which are having cause and relationship.
Ratios can be expressed in percentage or in number of times. Depending upon the
nature, the ratios are broadly classified in to four categories viz., Liquidity Ratios,
Leverage Or Solvency Ratios, Activity Ratios and Profitability Ratios.
1. LIQUIDITY RATIOS: These Ratios helps to find out the ability of the business
concern to pay the short term liability of its liquidity. Any adverse position in liquidity
leads to sudden fall of the unit.
i) Current Ratio: Current Ratio denotes the capacity of the business concern to
meet its current obligation out of the total value of the Current Assets. Current Ratio
= Current Assets / Current Liabilities. Term Loan installments falling due for payment
in next 12 months are to be taken as Term Liability for the purpose of calculation of
Current Ratio /MPBF. Inter-corporate deposits are to be treated as Non-Current
Assets. Ideal Current Ratio is 2:1. Acceptable Ratio as per our Loan Policy
guidelines is 1.33:1 for the limits enjoying above `6.00 crores and 1.15:1 for the
business concerns availing limits of below `6.00 crores. Any deviation below the
required ratio requires ratification of Higher Authority.
ii) Quick Ratio Or Acid Test Ratio: This ratio is a comparison of Quick Assets to
Current Liabilities. Quick Assets mean the assets which have instant liquidity of the
business concern. Though the Inventory and Prepaid expenses are part of Current
Assets, it may be difficult to sell and realize the inventory. Hence, Inventory and
Prepaid expenses are to be excluded for arriving the Quick Asset Ratio.
Current Assets – (Inventory+Prepaid Exp) Quick
Ratio or Acid Test Ratio = ----------------------------------------------
Current Liabilities
Ideal Quick Ratio is 1:1. Current Ratio is always to be read along with Quick Ratio. A
fall in the Quick Ratio in comparison to the Current Ratio indicates high inventory
holdings.
2. LEVERAGE AND SOLVENCY RATIOS: These Ratios helps to find out the Long
Term Financial stability of the business concern
i)Debt Equity Ratio: Long Term Debt / Equity – Here, Equity refers Tangible Net
worth. The Ideal ratio is 2:1 and the higher may also be considered as safe.
ii) Debt Service Coverage Ratio: It helps to know the capacity of the firm to
repay the Long Term Loan Instalment and Interest. Ideal DSCR is 2:1. The higher
the DSCR, we may fix the lower repayment period. However, banks may also

consider DSCR 1.20:1 where fixed income generation is assured, such as Rent
Receivables etc.
Net Profit After Tax + Depreciation +Int. on TL
DSCR = -------------------------------------------------------------
Int. on TL + Instalment on TL
iii) Fixed Assets Coverage Ratio (FACR): This ratio indicates the extent of Fixed
assets met out of long term borrowed funds. Ideal Ratio is 2:1
Net Block
FACR = --------------------------- (Net Block means Total Assets– Depreciation)
Long Term Debt
iv) Interest Coverage Ratio:
EBIDT
Interest Coverage Ratio = ---------------
Interest
Where EBIDT is Earning Before Interest, Depreciation and Tax. This ratio indicates
the interest servicing capacity of the unit. Higher the ratio has probability of nonservicing
of interest and hence avoidance of slippage of asset.
3. ACTIVITY RATIOS:
i) Inventory Turnover Ratio: Inventory constitutes raw material, work in process,
finished goods etc. The ratio is arrived by dividing Inventory by average monthly Net
sales to arrive at inventory levels in number of months. Lower the ratio, the faster
the movement of inventories and Higher the ratio slower the movement of
inventories. It also indicates the time taken to replenish the inventories. Separate
parameters are laid down for fabrication units & seasonal industries (maintaining
peak level inventories as at March) where operating cycle is longer compared to
other businesses and others.
Inventory x (RM+WIP+FG) x 12 (OR ) Cost of Goods Sold
Net Sales = Average Stock ((Opening Stock+Closing stock)/2)
ii) Debtors Velocity Ratio: Debtors
------------ x period
Credit sales
Lower the collection period indicates efficiency in realization of receivables and viceversa.
iii) Creditors Velocity Ratio: Trade Creditors
---------------------- x period
Credit Purchase
Higher velocity denotes that the company is enjoying credit from its suppliers and it
has bearing on Maximum Permissible Bank Finance (MPBF)
iv) Assets Turnover Ratio:
Net Sales
ASSET TURNOVER RATIO=-----------------------------
Total Operating Assets
Total Operating Assets= Total Assets – Intangible Assets. Higher the ratio indicates
favorable situation of optimum utilization of all the fixed assets.
4. PROFITABILITY RATIOS:
i) Gross Profit Ratio -> Gross Profit/Net Sales*100 – Gross Profit Ratio
indicates the manufacturing efficiency and Pricing policy of the concern. Higher
percentage indicates higher sales volume, better pricing of the product or lesser cost
of production

ii) Net Profit Ratio: Net Profit After Tax
----------------------------------- X 100
Net Sales
A decline trend is a pointer to some unhealthy development unless the company had
made usurious profits in the past and has consciously decided to reduce its profits by
lowering the prices of its product.
iii) Return on Equity: Net Profit After Tax
----------------------------------- X 100
Tangible Networth
Working Capital Assessment
i) Turnover Method: (for WC limits up to & inclusive of `6.00 Crore)
A. Accepted Projected Sales Turnover
B. 25% of Sales Turnover
C. Margin @ 5 % of Sales Turnover
D. Actual NWC available as per latest Audited Balance Sheet
E. B-C
F. B-D
G. M.P.B.F = E or F, whichever is less.
ii) Inventory Method – For WC limits up to & inclusive of `6.00 Crore
A. Total Current Assets
B. Current Liabilities (other than Bank Borrowings)
C. Working Capital Gap = A – B
D. Margin @ 13% of Projected Current Assets
E. Actual NWC available as per latest Audited Balance Sheet
F. C-D
G. C-E
H. M.P.B.F = F or G, whichever is less.
Maximum Working Capital credit limit up to which Turn Over method can be
extended is `6 Crores. Where the limits of above `6.00 Crore, the margin is to be
taken as 25% projected current assets. If actual NWC is less than required
margin, the borrower has to bring in the short fall.
The minimum acceptable Current Ratio for working capital credit facility up to `6
crore & above `6 crore is 1.15 & 1.33 respectively.
Maximum acceptable level of Total Debt- Equity Ratio is 4.
Maximum permissible Gearing Ratio while assessing the eligibility for nonfunded
limits is 10.
Standard average DSCR specified for all Term Loans is 1.50 to 2.00. However,
in case of assured source of income, it can be taken as 1.20. Lower DSCR can be
accepted for Rural Godowns

Moody's CICC

Moody's CICC:: Details

Level 1:

1 The Commercial Credit
Landscape in india

1 Overview of the commercial credit landscape in India
2 Role of RBI and legal due diligence
3 Types of credit facilities offered for commercial borrowers

2 Fundamentals of Credit
Risk, Credit Rating and
Appraisal Process
4 Understanding credit risk
5 Credit assessment framework and underwriting
6 Understanding credit ratings

3 Accounting Issues in
Financial Statements
for Bankers
7 Introduction to accrual accounting
8 Asset conversion cycle
9 Capital investment cycle
10 Operating cycle
11 Assets and liabilities
12 Financial reporting, Indian accounting standards and disclosure standards
13 Identifying creative accounting issues

4 Credit Analysis
Framework – Business
Risk Assessment
14 Credit analysis framework - business risk
15 Assessing business environment
16 Assessing industry status
17 Assessing competition
18 Assessing company vulnerability
5 Credit Analysis
Framework – Management
Risk Assessment
19 Credit analysis framework - management and owner risk
20 Management integrity
21 Management skill and execution
22 Management scope
6 Credit Analysis
Framework – Financial
Risk Assessment
23 Credit analysis framework - financial risk analysis
24 Businesses and their borrowing needs
25 Profitability ratios
26 Activity ratios
27 Capital spending, gearing, and debt coverage
28 Cash flow analysis
29 Projections, sensitivity analysis and credit risk assessment
7 Credit Analysis
Framework - Assessing
Fund-Based and Non-
Fund Based Credits
30 Assessment of working capital facilities
31 Assessment of term loan for capital investment
32 Assessment of quasi credit/non-funded facilities
8 Credit Analysis
Framework – Structure,
Securities and Risk
Mitigation Assessment
33 Group structure consideration
34 Facility structuring and documentation
35 Security and guarantees
36 Covenants and risk triggers
9 Credit Decision,
Pricing and Effective
Credit Monitoring
37 Credit decision and pricing
38 Credit administration/documentation
39 Effective credit monitoring processes
10 Commercial Banking,
Problem Credit and
NPA Management
40 Early detection signals and impairment management practices
41 Impairment grading and regulatory reporting and classification procedures
42 Recovery management process and institutional approach for recovery resolution - JLF/CDR

LEVEL 2 Skills Application Course
Level 2 comprises practical application of concepts covered in Level 1, using real-life case studies and lending scenarios.
The interactive simulations are aimed at strengthening job performance by providing candidates with realistic lending
decisions they would expect to encounter in their day-to-day jobs.
CASE STUDY SCENARIOS WILL BE USED TO BUILD THE FOLLOWING CAPABILITIES:
» Undertake an effective business risk analysis and credit assessment.
» Analyse and interpret financial statements and assess
overall financial risk (including use of CMA formats).
» Assess long-term capital expansion related term loan
requirements, using applicable assessment methodologies
and tools (CMA), and propose appropriate structure
that ensures adequate debt servicing capacity.
» Undertake proactive loan monitoring and early
alert reviews to avoid problem loans.
Certification Exam
» It is a two-hour in-person exam. A pass score
of 50% is required to earn the certification.
Conduct management risk assessment.
» Assess working capital requirements, using applicable
assessment methodologies (including MPBF) and propose
the right credit facilities based on borrower risk.
» Propose superior risk mitigation/protection through evaluating
the collateral/security controls and effective loan covenants.

The combination of both Level 1 and Level 2 courses supports the overall development and
continuous improvement of credit skills relevant to the market. Upon completion of Level 2,
the candidate will be eligible to register for the certification exam.

Basel committee

BASEL COMMITTEE ::
The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervisory matters. Its objective is to enhance understanding of key supervisory issues and improve the quality ofbanking supervision worldwide. It seeks to do so by exchanging information on national supervisory issues,
approaches and techniques, with a view to promoting common understanding. The Committees Secretariat is
located at the Bank for International Settlements (BIS) in Basel, Switzerland.
FEATURES OF BASEL II NORMS
Basel II Norms are considered as the reformed & refined form of Basel I Accord. The Basel II Norms primarily
stress on 3 factors, viz. Capital Adequacy, Supervisory Review and Market discipline. The Basel Committee
calls these factors as the Three Pillars to manage risks.

PILLAR I: CAPITAL ADEQUACY REQUIREMENTS

Under the Basel II Norms, banks should maintain a minimum capital adequacy requirement of 8% of risk as-
sets. For India, the Reserve Bank of India has mandated maintaining of 9% minimum capital adequacy re-
quirement. This requirement is popularly called as Capital Adequacy Ratio (CAR) or Capital to Risk Weighted
Assets Ratio (CRAR).

PILLAR II: SUPERVISORY REVIEW

Banks majorly encounter with 3 Risks, viz. Credit, Operational & Market Risks. Basel II Norms under this Pillar
wants to ensure that not only banks have adequate capital to support all the risks, but also to encourage them
to develop and use better risk management techniques in monitoring and managing their risks.

 The process has four key principles:

• Banks should have a process for assessing their overall capital adequacy in relation to their risk profile
and a strategy for monitoring their capital levels.
• Supervisors should review and evaluate bank‟s internal capital adequacy assessment and strategies,
as well as their ability to monitor and ensure their compliance with regulatory capital ratios.
• Supervisors should expect banks to operate above the minimum regulatory capital ratios and should
have the ability to require banks to hold capital in excess of the minimum.
• Supervisors should seek to intervene at an early stage to prevent capital from falling below minimum
level and should require rapid remedial action if capital is not mentioned or restored.
•
PILLAR III: MARKET DISCIPLINE:

Market discipline imposes banks to conduct their banking business in a safe, sound and effective manner.
Mandatory disclosure requirements on capital, risk exposure (semiannually or more frequently, if appropriate
are required to be made so that market participants can assess a bank‟s capital adequacy. Qualitative disclo-
sures such as risk management objectives and policies, definitions etc. may be also published.

BASEL III

The Reserve Bank released, guidelines outlining proposed implementation of Basel III capital regulation in
India. These guidelines are in response to the comprehensive reform package entitled
“Basel III: A global regulatory framework for more resilient banks and banking systems” of the Basel Commit-
tee on Banking Supervision (BCBS) issued in December 2010.
The major highlights of the draft guidelines are:

MINIMUM CAPITAL REQUIREMENTS

• Common Equity Tier 1 (CET1) capital must be at least 5.5% of risk-weighted
assets (RWAs);
• Tier 1 capital must be at least 7% of RWAs; and
Total capital must be at
least 9% of RWAs.

CAPITAL CONSERVATION BUFFER
The capital conservation buffer in the form of Common Equity of 2.5% of RWAs. A such minimum Cap-
ital Adequacy ratio for banks will be 11.5% after full application of the capital conservation buffer by 31
March 2018.

Fatf recommendation

THE FATF RECOMMENDATIONS::  Total 40

A – AML/CFT POLICIES AND COORDINATION

1 - Assessing risks & applying a risk-based approach *
2  - National cooperation and coordination

B – MONEY LAUNDERING AND CONFISCATION

3  Money laundering offence *
4 Confiscation and provisional measures *

C – TERRORIST FINANCING AND FINANCING OF PROLIFERATION

5 Terrorist financing offence *
6 Targeted financial sanctions related to terrorism & terrorist financing *
7 Targeted financial sanctions related to proliferation *
8  Non-profit organisations *

D – PREVENTIVE MEASURES

9 Financial institution secrecy laws
Customer due diligence and record keeping
10  Customer due diligence *
11  Record keeping
Additional measures for specific customers and activities
12  Politically exposed persons *
13  Correspondent banking *
14 Money or value transfer services *
15 New technologies
16  Wire transfers *

Reliance, Controls and Financial Groups

17  Reliance on third parties *
18  Internal controls and foreign branches and subsidiaries *
19  Higher-risk countries *
Reporting of suspicious transactions
20  Reporting of suspicious transactions *
21 Tipping-off and confidentiality

Designated non-financial Businesses and Professions (DNFBPs)

22  DNFBPs: Customer due diligence *
23 DNFBPs: Other measures *

THE FATF RECOMMENDATIONS
INTERNATIONAL STANDARDS ON COMBATING MONEY LAUNDERING AND THE FINANCING OF TERRORISM & PROLIFERATION
 2012 OECD/FATF 5

E – TRANSPARENCY AND BENEFICIAL OWNERSHIP
OF LEGAL PERSONS AND ARRANGEMENTS

24  Transparency and beneficial ownership of legal persons *
25 Transparency and beneficial ownership of legal arrangements *

F – POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES
Regulation and Supervision

26 Regulation and supervision of financial institutions *
27  Powers of supervisors
28  Regulation and supervision of DNFBPs
Operational and Law Enforcement
29 Financial intelligence units *
30 Responsibilities of law enforcement and investigative authorities *
31 Powers of law enforcement and investigative authorities
32  Cash couriers *
General Requirements
33  Statistics
34  Guidance and feedback

Sanctions

35  Sanctions

G – INTERNATIONAL COOPERATION

36 International instruments
37  Mutual legal assistance
38 Mutual legal assistance: freezing and confiscation *
39  Extradition
40 Other forms of international cooperation

CAIIB elective selection

CAIIB Elective selection

1 Corporate Banking

Aspirants working in Corporate Banking section should take this paper. Also persons working in new Private Sector Banks are also recommended to take this paper.

Difficulty: Moderate Tough

2 Retail Banking Universal paper for CAIIB aspirants. Many bankers are feeling that this is the easiest subject to pass. Because most of the concepts in this subject are already familiar to us. So it is easy to study and understand the concepts. Recommended for bankers who wants to clear the exam with the motive of increment and promotion.

Difficulty: Comparatively easier than all papers but question can also be made tough.

3 Rural Banking People who are working in the RRB and want to purse their career in RRB must take this as there elective. Also bankers who has strong desire to serve the rural regions and will be working more than one year in rural areas can also take this subject. If you know about agriculture and its related government schemes related to it, then appear for this paper.

Difficulty: Tough

4 International Banking This is an important sector/department of the commercial banks. So persons who has strong desire to work in International Banking Division should prefer this paper as their elective. Banker’s working in Forex Branches also recommended for this elective. For bankers who wants to have vertical growth in their banking career can also take this paper.

Difficulty: Toughest of all but good for banking career.

5 Co-Operative Banking Must for persons working in cooperative banks. Others please stay away from this paper.

Difficulty: Moderate

6 Financial Advising Persons who has good knowledge in finance or has finance degree must take this paper. Can be taken by persons who want to clear CAIIB for increment and promotion because of easy to understand concepts.

Difficulty: Tougher than retail banking but easier than all.

7 Human Resources Management Must for persons completed MBA in HRM. Others please stay away.

Difficulty: Moderate for MBA in HRM and Tough for others.

8 Information Technology Techies and persons having computer knowledge should take this paper. Others stay away from it. Nowadays importance of IT oriented products are increasing day-by-day.

EASY: Easy for techies. Slightly tough for others.

9 Risk Management This is an important and specialized sector/department of the commercial banks. So persons who has strong desire to work and persons working in Risk Management should take this paper as their optional

Difficulty: Slightly easier than International Banking paper and tougher than all.

10 Central Banking If your want to know about RBI then take this subject.

Difficulty: Tougher than Retail Banking paper and easier than all. If you want to clear CAIIB only for increment you can try. But you should have decent economics knowledge.1

11 Treasury Management This is an important and specialized sector/department of the commercial banks. So persons who has strong desire to work and persons working in Treasury should take this paper as their optional

Difficulty: Slightly easier than International Banking paper and tougher than all.

Working capital

CONCEPT OF WORKING CAPITAL :

                       Working Capital is defined as the excess of current assets over current liabilities. It is the same as net current
assets. It represents the investment of a company's funds in assets which are expected to be realised within a relatively short period of time. It is not
an investment in an asset with a long life but, as the name implies, represents funds which are continually in use and are turned over many times in a
year. It is capital used to finance production, to support levels of stock and to provide credit for customers. The three main current assets are stock,
debtors and cash. They can be funded by short-term finance, i.e. current liabilities, or by medium and long-term finance in case of permanent
current assets or core current assets.
Components of Working Capital :The firm's Working Capital may be viewed as being comprised of two components:
1. Permanent working capital: These funds represent the current assets required on a continuing basis over the entire year. it represents the
amount of cash, receivables and inventory maintained as a minimum, to carry on operations at any time, as a safety measure.
2.Variable working capital: These funds represent additional assets required at different times during the operating year. Added inventory must
be maintained to support the peak selling periods. Receivables increase and must be financed following periods of high sales. Extra cash may be
needed to pay for increased supplies preceding high activity.
Working Capital Cycle :Working Capital cycle is the length of time that elapses between the company's outlay on raw materials, Wages and other
expenditures and the inflow.of cash from the sale of the goods. The length of the cycle depends upon(I) stock of raw material required to be held.
(ii) The work in process which depends on the process involved in manufacturing or processing the raw material.
(iii) Credit required to be provided to the purchasers.
Longer the working capital cycle, the more is the working capital requirement i.e. need for maintaining the current assets.
Working capital & Net working Capital Working capital (or gross working capital) refers to the amount of total current assets.
Liquid surplus or net working capital refers to the surplus of long term sources over long term uses as per RBI prescription (also
calculated by banks as difference between current assets and current liabilities). It is desirable, that the net working capital
should be positive which would signify liquidity and availability of. Adequate working funds. If in a particular case, the net working
capital is negative, the difference will be called the working capital deficit.
The working capital can also be classified as:
a Permanent working capital which is minimum amount of current assets necessary for carrying out operations for a
period.
b Fluctuating working capital : Additional assets required at different times during an operating period due to cyclic factors.
c Seasonal working capital means requirement for additional current assets due to seasonal nature of the industry.
d Adhoc working capital : Additional funds for meeting the needs arising out of special circumstances e.g. execution of special order,
delay in receipt of payment of receivables.
e Working capital term loan : A long term loan given to meet the working capital margin needs of a borrower. The concept was
introduced by. Tandon Committee.
f Working capital gap = total current assets less other current liabilities. It is financed by net working capital and bank finance for
working capital (called MPBF).
SUMMARY - WORKING CAPITAL TERMS
Particulars Classification
Working capital Current assets such as cash, stocks, book-debts, other current assets
Net capital working Current assets — current liabilities OR Long term sources — long term uses
Working gap capital Current assets — current liabilities (other than bank borrowing — i.e. OCL)
Working limits capital Bank facilities needed to purchase current assets. These facilities are cash credit,
overdraft, bills purchase/discounting, pre-shipment or post-shipment loans etc.
Factors which determine the working capital The following factors determine the overall working capital levels of the
industrial units: Policies for production, Manufacturing process, Credit Policy of the unit, Pace of turnover , Seasonality
Process for assessment of working capital requirements Generally there are three methods followed by banks for assessing working
capital of a firm i.e. (i) traditional method suggested under Tandon Committee, (ii) turnover method suggested by Nayak Committee
and (iii) cash budget method followed in case of seasonal industries.
Methods of Assessing Bank Finance
Holding Norms based Method of Assessment of Bank Finance Various steps used in the
process include following
(a) Deciding on the level of turnover: : in case of existing units, past performance can help in ascertaining projected turnover. In
case of new enterprise, it is based on production capacity, proposed market share, availability of raw materials, industry norms etc.
(b) Assessment of Gross working capital: This is sum total of various components of working capital
(i) inventory: For assessment of stock levels of raw material, work in process and finished goods, information like lead
time, minimum order quantity, location and number of suppliers, percentage of imported material, manufacturing process etc are
considered. Industry norms may be helpful in this regard.
(ii) Receivables/bills: it can be assessed easily. It is governed by market practice relating to a particular business.
(iii) Other Current assets: A reasonable estimate of other current assets like cash level, advance to suppliers, advance tax
payment etc is calculated. Sources of Meeting Working Capital Requirement
(i) Own sources: This represents available net working capital. Further, as the estimate of limits is based on the projected balance sheet at the
end of the current accounting year, some internal accruals are also taken into account. Bank may stipulate additional NWC if available NWC and
anticipated internal accruals are not enough to maintain desired current ratio.
(ii) Suppliers's credit based on market practice
(iii) Other current liabilities like salary payable, advance from customers etc.
(iv) Bank Finance
Cash Budget Method
In any economic activity there will be outflows to meet the expenses of production and inflows from the sale of output. Any firm requires
working capital from the bank to meet the gap between these inflows and outflows. Therefore, under this method, cash flows are projected on
monthly or quarterly basis to ascertain the deficit. Bank finance will be equal to cash deficit. This method is used while financing seasonal
industries like tea, sugar, service oriented industries like software, Non banking finance companies, construction contracts.
Turnover Method:
 This method was suggested by Nayak Committee. This method is to be applied in the case of working capital limits up to Rs 5 crore in the case of
Small Manufacturing enterprises and up to Rs 2 crore in other cases. This method is simple in nature. According to this method, working capital
requirement is equal to 25% of the accepted projected annual sales; bank finance is 20% of the projected annual sales or 80% of the
working capital requirements and margin is 5% of the projected annual sales or 20% of the working capital requirements. For
example, if the current sales are Rs 400 lac, projected growth is 25%, then projected annual sale will be Rs 500 lac. Accordingly, working
capital requirement will be Rs 125 lac, bank finance Rs 100 lac and borrower's margin Rs 25 lac. However, actual drawing power will be allowed as per
security available. if net working capital available with the borrower (i.e. borrower's margin) is more than 5% of the projected annual sale, the limits
can be adjusted accordingly.
The requirement as per this method is minimum assuming working capital cycle of the unit at 3 months. If working capital cycle is more, Bank may
consider higher requirement depending on the business of the borrower.
Turnover Method (Nayak Committee) It is used where the aggregate fund-based working capital credit limits are upto Rs. 500 lac from the
banking system. Working capital : Minimum 25% of the projected turnover (or 3 months's sale).
Working capital limits : Minimum of 20% of projected annual turnover after satisfying about reasonableness of the projected annual turnover.
Borrowers' margin : 5% of projected turnover. If it is higher than 5%, the bank limits can be fixed at a lower level than 20%.
The margin proportionately increases with increase in period of operating cycle (ratio of margin to bank finance should be 1:4.
Calculation of working capital
Estimated sale turnover (projected sale) Rs.80 lac
Minimum Working Capital @ 25% estimated sales (which represents 03 months' sales) Rs.20 lac
Contribution of borrower @ 5% Rs.4 lac
Minimum Bank credit for working capital @ 20% of projected sales Rs.16 lac
Traditional method
As per traditional method (Tandon Committee), the level of working capital is determined both by the length of the
operating cycle and the size of the sales. The method is applicable to working capital limits above Rs.5 lac. In a circular dated
04.11.97, RBI withdrew the mandatory application of this method and allowed banks to use their own method.
The total of anticipated level of current assets calculated on the basis of estimated sales and by applying the norms for inventory and
receivables, is the level of working capital. The amount of bank limit, can be determined as under :
a: Assess the level of net working capital
(surplus of long term sources over long term uses) available, which normally should not be less than 25% of total current assets.
Work out bank finance to be sanctioned being gap of total current assets less NWC and other current liabilities.

Re collected question IT SECURITY 25/08/2019

Re collected question IT SECURITY 25/08/2019

Salami technique
Trapdoors
Bit glass
Tread , vulnerability & tread vector
3 basic principle of
Information
Natting
Bank role in environmental security
Difference between cryptography& ..
Unit test & white box text
Azure cloud belongs to which company - Microsoft
COBIT
Clouds
CISO reporting
CISO responsibility
Root kit
Backup in banks
RBI role other than as a regular
Multiplexer
Switch
ATM jackpotting
Perimeter access
Use of library in software
Excluded  Events in RTI ACT
Vsat
VIOP eve dropping
Checker maker in banks
Scavenger
Port no 23
SOX
27001&27002
Middle man attack
DMZ
SINGLE POINT OF FAILURE
SQL
RTO& rpo
Hot warm cold site
PGP
Mac & IP address
Digital forensics
Escrow arrangements
Blade server
Load balancing
RFID & bar coding
Metal detectors
IPS & ids
More questions on physical movements of hardware

These r the topics from which questions were asked . For 1 & 2 mark questions , options r quite confusing and need a double thought before answering.

Cleared IT SECURITY with 57 marks .. its 5 th certifications in a row AML KYC, Bcdsi, msme , Prevention cybercrime.
Next trying for CAIIB

Thanks Srinivas sir ,,

ADR and GDR

Depository Receipts like ADR, GDR..

ADRs –American Depository Receipts
American Depository Receipts are Receipts or Certificates issued by US
Bank representing specified number of shares of non-US Companies. Defined as under:
These are issued in capital market of USA alone. These represent securities of companies of other countries.
These securities are traded in US market. The US Bank is depository in this case. ADR is the evidence of ownership of the underlying shares. Unsponsored ADRs
It is the arrangement initiated by US brokers. US Depository banks create
such ADRs. The depository has to Register ADRs with SEC (Security
Exchange Commission). Sponsored ADRs
Issuing Company initiates the process. It promotes the company‟s ADRs in
the USA. It chooses single Depository bank. Registration with SEC is not
compulsory. However, unregistered ADRs are not listed in US exchanges. GDRs – Global Depository Receipts
Global Depository Receipt is a Dollar denominated instrument with
following features:
1. Traded in Stock exchanges of Europe. 2. Represents shares of other countries. 3. Depository bank in Europe acquires these shares and issues
“Receipts” to investors. 4. GDRs do-not carry voting rights. 5. Dividend is paid in local currency and there is no exchange risk for
the issuing company. 6. Issuing Co. collects proceeds in foreign currency which can be used
locally for meeting Foreign exchange requirements of Import. 7. GDRS are normally listed on “Luxembourg Exchange “ and traded
in OTC market London and private placement in USA. 8. It can be converted in underlying shares.
IDRs – Indian Deposits Receipts
Indian Depository Receipts are traded in local exchanges and represent
security of Overseas Companies. CDF (Currency Declaration Form)
CDF is required to be submitted by the person on his arrival to India at the
Airport to the custom Authorities in the following cases:
1. If aggregate of Foreign Exchange including foreign currency/TCs
exceeds USD 10000 or its equivalent. 2. If aggregate value of currency notes (cash portion) exceeds USD
5000 or its equivalent. Form A1 and
Form A2
Form A1 is meant for remittance abroad to settle imports obligations. It is
not required if value of imports is up to USD 5000. Form A2 is meant for remittance abroad on account of any purpose other
than Imports. It is not required if remittance is up to USD 25000. LIBOR Rate London Interbank Offering rate is the rate fixed at 11 am (London time) at
which top 16 banks in London offer to lend funds in interbank markets.

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