Risk management important article

Risk Management ::( Very important content read everyone)

The growing sophistication in banking operations, online electronic banking,

improvements in information technology etc, have led to increased diversity and

complexity of risks being encountered by banks. These risks can be broadly grouped

into Credit Risk, Market Risk and Operational Risk. These risks are

interdependent and events that affect one area of risk can have ramifications for a

range of other risk categories.

Basel-I Accord: It was introduced in the year 2002-03, which covered capital

requirements for Credit Risk. The Accord prescribed CRAR of 8%, however, RBI

stipulated 9% CRAR. Subsequently, Banks were advised to maintain capital charge

for Market Risk also.

Basel-II New Capital Accord: Under this, banks have to maintain capital for Credit

Risk, Market Risk and Operational Risk w.e.f 31.03.2007. The New Capital Accord

rests on three pillars viz., Minimum Capital Requirements, Supervisory Review

Process & Market Discipline. The implementation of the capital charge for various risk

categories are Credit Risk, Market Risk and Operational Risk. Analysis of the bank’s

CRAR under should be reported to the Board at quarterly intervals.

Internal Ratings Based (IRB) Approach: Under this approach, banks must

categorise the exposures into broad classes of assets as Corporate, Sovereign, Bank,

Retail and Equity. The risk components include the measures of the Probability of

Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) and Effective

Maturity (M). There are two variants i.e Foundation IRB (FIRB) and Advanced IRB.

Under FIRB, banks have to provide their own estimates of PD and to rely on

supervisory estimates for other risk components (like LGD, EAD) while under

Advanced IRB; banks have to provide their own estimates of all the risk components.

It is based on the measures of Expected Losses (EL) and Unexpected Losses (UL).

Expected Losses are to be taken care of by way of pricing and provisioning while the

risk weight function produces the capital requirements for Unexpected Losses.

Market Risk: It is a risk pertaining to the interest rate related instruments and

equities in the Trading Book i.e AFS (Available For Sale) and HFT (Held for Trading)

positions and Foreign Exchange Risk throughout the bank (both banking & trading

books). There are two approaches for measuring market risk viz., Standardized

Duration Approach & Internal Models Approach.

Operational Risk: Banks have to maintain capital charge for operational risk under

the new framework and the approaches suggested for calculation of the same are –

Basic Indicator Approach and The Standardized Approach. Under the first approach,

banks must hold capital equal to 15% of the previous three years average positive

gross annual income as a point of entry for capital calculation. The second approach

suggests dividing the bank’s business into eight lines and separate weights are

assigned to each segment. The total capital charge is calculated as the three year

average of the simple summation of the regulatory capital charges across each of the

business lines in each year.

Advanced Measurement Approach (AMA): Under this, the regulatory capital

requirement will equal the risk measure generated by the bank’s internal operational

risk measurement system using certain quantitative and qualitative criteria. Tracking

of internal loss event data is essential for adopting this approach. When a bank first

moves to AMA, a three-year historical loss data window is acceptable.

Pillar 2 – Internal Capital Adequacy Assessment Process (ICAAP): Under this,

the regulator is cast with the responsibility of ensuring that banks maintain sufficient

capital to meet all the risks and operate above the minimum regulatory capital

ratios. RBI also has to ensure that the banks maintain adequate capital to withstandthe risks such as Interest Rate Risk in Banking Book, Business Cycles Risk, and

Credit Concentration Risk etc. For Interest Rate Risk in Banking Book, the regulator

may ensure that the banks are holding sufficient capital to withstand a standardized

Interest Rate shock of 2%. Banks whose capital funds would decline by 20% when

the shock is applied are treated as ‘Outlier Banks’. The assessment is reviewed at

quarterly intervals.

Pillar 3 – Disclosure Requirements: It is aimed to encourage market discipline by

developing a set of disclosure requirements which will allow market participants to

assess the key pieces of information on the capital, risk exposures, risk assessment

processes and hence the capital adequacy of the institution. Banks may make their

annual disclosures both in their Annual Reports as well as their respective websites.

Banks with capital funds of `500 crore or more, and their significant bank

subsidiaries, must disclose their Tier-I Capital, Total Capital, total required capital

and Tier-I ratio and total capital adequacy ratio, on a quarterly basis on their

respective websites. The disclosures are broadly classified into Quantitative and

Qualitative disclosures and classified into the following areas:

Area Coverage

Capital Capital structure & Capital adequacy

Risk Exposures &

Assessments

Qualitative disclosures for Credit, Market, Operational,

Banking Book interest rate risk, equity risk etc.

Credit Risk General disclosures for all banks.

Disclosures for Standardised & IRB approaches.

Credit Risk Mitigation Disclosures for Standardised and IRB approaches.

Securitisation Disclosures for Standardised and IRB approaches.

Market Risk Disclosures for the Standardised & Internal Models

Approaches.

Operational Risk The approach followed for capital assessment.

Equities Disclosures for banking book positions

Interest Rate Risk in

the Banking Book

(IRRBB)

Nature of IRRBB with key assumptions. The increase /

decrease in earnings / economic value for upward /

downward rate shocks.

The Basel-II norms are much better than Basel-I since it covers operational risk.

However, risks such as Reputation Risk, Systemic Risk and Strategic Risk (the risk of

losses or reduced earnings due to failures in implementing strategy) are not covered

and exposing the banks to financial shocks. As per Basel all corporate loans attracts

8 percent capital allocation where as it is in the range of 1 to 30 percent in case of

individuals depending on the estimated risk. Further, group loans attract very low

internal capital charge and the bank has a strong incentive to undertake regulatory

capital arbitrage to structure the risk position to lower regulatory risk category.

Regulatory capital arbitrage acts as a safety valve for attenuating the adverse effects

of those regulatory capital requirements that activity’s underlying economic risk.

Absence of such arbitrage, a regulatory capital requirement that is inappropriately

high for the economic risk of a particular activity could cause a bank to exit that

relatively low-risk business by preventing the bank from earning an acceptable rate

of return on its capital.

Nominally high regulatory capital ratios can be used to mask the true level of

insolvency probability. For example – Bank maintains 12% capital as per the norms

risk analysis calls for 15% capital. In a regulatory sense the bank is well capitalized

but it is to be treated as undercapitalized from risk perspective.

Basel-III is a comprehensive set of reform measures developed to strengthen the

regulation, supervision and risk management of the banking sector. The new

standards will considerably strengthen the reserve requirements, both by increasing

the reserve ratios and by tightening the definition of what constitutes capital. The

new norms will be made effective in a phased manner from 1st July 2013 and

implemented fully by 31st March 2019 and banks should maintain minimum 5.5% in

common equity (as against 3.6% now) by 31st March 2015 and create a Capital

Conservation Buffer (CCB) of 2.5% by 31st March 2019. Further, banks should

maintain a minimum overall capital adequacy of 11.5% by 31st March 2019 and

supplement risk based capital ratios by maintaining a leverage ratio of 4.5%. These

measures will ensure well capitalization of banks to manage all kinds of risks besides

to bring in more clarity by clearly defining different kinds of capital.

Counter Cyclical Capital Buffer (CCCB): The objective of CCCB is twofold viz., it

requires banks to build up a buffer of capital in good times which may be used to

maintain flow of credit to the real sector in difficult times and also to achieve the

broader macro-prudential goal of restricting the banking sector from indiscriminate

lending in the periods of excess credit growth that have often been associated with

the building up of system-wide risk. It may be maintained in the form of Common

Equity Tier-1 capital or other fully loss absorbing capital only and the amount of the

CCCB may vary from 0 to 2.5% of total risk weighted assets of the banks. RBI

intends banks to have a sustainable funding structure. This would reduce the

possibility of banks’ liquidity position eroding due to disruptions in their regular

sources of funding thus increasing the risk of failure leading to broader systemic

stress. The Basel committee on banking supervision framed two ratios viz., Liquidity

Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) as part of global

regulatory standards on liquidity to be implemented from 1st January 2018.

i) Liquidity Coverage Ratio (LCR): In order to promote short-term resilience of

the liquidity risk profile of banks, RBI has introduced LCR in a phased manner,

starting with a minimum requirement of 60% from 1st January 2015, and reaching a

maximum of 100% by 1st January 2019. The LCR will ensure that banks have an

adequate stock of unencumbered high-quality liquid assets that can be converted

easily and immediately in private markets into cash to meet their liquidity needs for

a 30-calendar day liquidity stress scenario.

 ii) Net Stable Funding Ratio (NSFR): The ratio seeks to ensure that banks

maintain stable source of funding with respect to the profile of their assets (loans

and investments) and off-balance sheet activities such as extending asset

management and brokerage services to the clients. The NSFR should be 100% on an

ongoing basis. It limits over reliance on short-term wholesale funding, encourages

better assessment of funding risks across all assets and off-balance sheet items and

promotes funding stability.

Tier – I capital consists of Paid up Equity Capital + Free Reserves + Balance in

Share Premium Account + Capital Reserves (surplus) arising out of sale proceeds of

assets but not created by revaluation of assets MINUS Accumulated loss + Book

value of Intangible Assets + Equity Investment in Subsidiaries+ Innovative Perpetual

Debt instruments.

Tier – II consists of Cumulative perpetual preferential shares & other Hybrid debt

capital instruments + Revaluation reserves + General Provisions + Loss Reserves

(up to maximum 1.25% of weighted risk assets) + Undisclosed Reserves +

Subordinated Debt + Upper Tier-II instruments. Subordinated Debts are unsecured

and subordinated to the claims of all the creditors. To be eligible for Tier-II capital

the instruments should be fully paid, free from restrictive clauses and should not be

redeemable at the instance of holder or without the consent of the Bank supervisory

authorities. Subordinated debt usually carries a fixed maturity and they will have to

be limited to 50% of Tier-I capital.

However, due to the stress on account of rollover of demonetization and GST, the

implementation of Basel-III norms may slightly be delayed and the regulator likely to

inform the timeframe shortly.

Economic Capital (EC) is a measure of risk expressed in terms of capital. A bank

may, for instance, wonder what level of capital is needed in order to remain solvent

at a certain level of confidence and time horizon. In other words, EC may be

considered as the amount of risk capital from the banks’ perspective; therefore,

it differs from Regulatory Capital (RC) requirement measures. It primarily aims to

support business decisions, while RC aims to set minimum capital requirements

against all risks in a bank under a range of regulatory rules and guidance. So far, EC

is rather a bank-specific or internal measure of available capital and there is no

common domestic or global definition of EC. The estimates of EC can be covered by

elements of Tier-1, 2 & 3, or definitions used by rating agencies and/or other types

of capital, such as planned earning, unrealized profit or implicit government

guarantee. EC is highly relevant because it can provide key answers to specific

business decisions or for evaluating the different business units of a bank.

Dynamic Provisioning: At present, banks generally make two types of provisions

viz., general provisions on standard assets and specific provisions on non-performing

assets (NPAs). The present provisioning framework does not have countercyclical or

cycle smoothening elements. Though the RBI has been following a policy of

countercyclical variation of standard asset provisioning rates, the methodology has

been largely based on current available data and judgment, rather than on an

analysis of credit cycles and loss history. Since the level of NPAs varies through the

economic cycle, the resultant level of specific provisions also behaves cyclically.

Consequently, lower provisioning during upturns, and higher provisioning during

downturns have pro-cyclical effect on the real economy. However, few banks have

started making floating provisions without any predetermined rules; many banks are

away from the concept which has become difficult for inter-bank comparison. In the

above backdrop, RBI introduced dynamic provisioning framework for Indian banks to

address pro-cyclicality of capital and provisioning to meet the international

standards. Recently, RBI has allowed banks to recognize some of their assets like

real estate, foreign currency and deferred tax, reducing the extra capital needs of

state-owned banks by 15 per cent. The move is aimed to align the regulatory capital

of banks with the Basel-III standards.

Leverage Ratio: It is the tier-1 capital divided by the sum of on-balance sheet

exposures, derivative exposures, securities financing transaction exposures and off-

balance sheet items. This ratio is calibrated to act as a credible supplementary

measure to the risk based capital requirements with the objective to constrain the

build-up of leverage in the banking sector to avert destabilizing deleveraging

processes for the sound financial economy and to reinforce the risk based

requirements with a simple, non-risk based “backstop” measure. The desirable

exposure should be within 25 times of tier-1 capital.

Banks in India need substantial capital funds in the ensuing years mainly to fund the

credit growth which is likely to grow at around 15% to 20% p.a. and banks are

required to set aside a portion of capital for the said purpose. Banks also need

additional capital to write off bad loans as well as to meet the operational risks on

account of weaker implementation of systems and procedures. More importantly, the

implementation of Basel-III norms warrants pumping of substantial capital funds.

Raising these funds, though, will require several steps, apart from legislative

changes as Public Sector Banks can not dilute its equity below 51%. Attracting

private capital warrants minimum governance and structural reforms. It is also

proposed to create an independent Bank Holding Company to invite private capital

without diluting the equity to address the issue.

Risk management

Risk management ::

Risk management is the process of identifying, assessing and controlling threats to an organization's capital and earnings. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters. IT security threats and data-related risks, and the risk management strategies to alleviate them, have become a top priority for digitized companies. As a result, a risk management plan increasingly includes companies' processes for identifying and controlling threats to its digital assets, including proprietary corporate data, a customer's personally identifiable information and intellectual property

Risk management standards

Since the early 2000s, several industry and government bodies have expanded regulatory compliance rules that scrutinize companies' risk management plans, policies and procedures. In an increasing number of industries, boards of directors are required to review and report on the adequacy of enterprise risk management processes. As a result, risk analysis, internal audits and other means of risk assessment have become major components of business strategy.

Risk management standards have been developed by several organizations, including the National Institute of Standards and Technology and the ISO. These standards are designed to help organizations identify specific threats, assess unique vulnerabilities to determine their risk, identify ways to reduce these risks and then implement risk reduction efforts according to organizational strategy.

The ISO 31000 principles, for example, provide frameworks for risk management process improvements that can be used by companies, regardless of the organization's size or target sector. The ISO 31000 is designed to "increase the likelihood of achieving objectives, improve the identification of opportunities and threats, and effectively allocate and use resources for risk treatment," according to the ISO website. Although ISO 31000 cannot be used for certification purposes, it can help provide guidance for internal or external risk audit, and it allows organizations to compare their risk management practices with the internationally recognized benchmarks.

The ISO recommended the following target areas, or principles, should be part of the overall risk management process:

The process should create value for the organization.

It should be an integral part of the overall organizational process.

It should factor into the company's overall decision-making process.

It must explicitly address any uncertainty.

It should be systematic and structured.

It should be based on the best available information.

It should be tailored to the project.

It must take into account human factors, including potential errors.

It should be transparent and all-inclusive.

It should be adaptable to change.

It should be continuously monitored and improved upon.

The ISO standards and others like it have been developed worldwide to help organizations systematically implement risk management best practices. The ultimate goal for these standards is to establish common frameworks and processes to effectively implement risk management strategies.

These standards are often recognized by international regulatory bodies, or by target industry groups. They are also regularly supplemented and updated to reflect rapidly changing sources of business risk. Although following these standards is usually voluntary, adherence may be required by industry regulators or through business contracts.

Risk management strategies and processes

All risk management plans follow the same steps that combine to make up the overall risk management process:

Risk identification. The company identifies and defines potential risks that may negatively influence a specific company process or project.

Risk analysis. Once specific types of risk are identified, the company then determines the odds of it occurring, as well as its consequences. The goal of the analysis is to further understand each specific instance of risk, and how it could influence the company's projects and objectives.

Risk assessment and evaluation. The risk is then further evaluated after determining the risk's overall likelihood of occurrence combined with its overall consequence. The company can then make decisions on whether the risk is acceptable and whether the company is willing to take it on based on its risk appetite.

Risk mitigation. During this step, companies assess their highest-ranked risks and develop a plan to alleviate them using specific risk controls. These plans include risk mitigation processes, risk prevention tactics and contingency plans in the event the risk comes to fruition.

Risk monitoring. Part of the mitigation plan includes following up on both the risks and the overall plan to continuously monitor and track new and existing risks. The overall risk management process should also be reviewed and updated accordingly.

Risk management approaches

After the company's specific risks are identified and the risk management process has been implemented, there are several different strategies companies can take in regard to different types of risk:

Risk avoidance. While the complete elimination of all risk is rarely possible, a risk avoidance strategy is designed to deflect as many threats as possible in order to avoid the costly and disruptive consequences of a damaging event.

Risk reduction. Companies are sometimes able to reduce the amount of effect certain risks can have on company processes. This is achieved by adjusting certain aspects of an overall project plan or company process, or by reducing its scope.

Risk sharing. Sometimes, the consequences of a risk is shared, or distributed among several of the project's participants or business departments. The risk could also be shared with a third party, such as a vendor or business partner.

Risk retaining. Sometimes, companies decide a risk is worth it from a business standpoint, and decide to retain the risk and deal with any potential fallout. Companies will often retain a certain level of risk a project's anticipated profit is greater than the costs of its potential risk.

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Treasury management

Treasury Management ::
 (Read nice article)
Banks not only lend money to customers but also invest in securities such as Bonds and
Debentures of Government as well as Corporates. These instruments are easily tradable
in the capital and money market. The tradability of securities makes investments an
attractive option for banks for deployment of their funds. Further, banks buy securities
not only to trade but also to hold them till maturity to take advantage of the attractive
returns with relatively lower risk. Banks are allowed to invest in shares of companies.
However, the volumes are low due to associated high risk besides regulatory restrictions.
The investment portfolio of the banks broadly divided into three groups viz.,
Trading Book – Securities purchased with the intention of selling them within 90 days
are held in the trading book. Trading opportunities arise in the market on account of
fluctuation in interest rates and arbitrage opportunities.
Available for Sale (AFS) – Securities which are bought with the intention of selling
them but not necessarily within 90 days is considered to be AFS securities. They are also
part of the trading portfolio of the bank but only the time frame is different. Both the
trading and AFS securities have to be “Marked to Market” every quarter while finalization
of quarterly results.
Held to Maturity (HTM) – These securities are meant to be held till their date of
maturity and the purpose investing in them is to earn reasonable steady income. These
securities are carried in the books at cost or purchase price till maturity. Hence, HTM
securities need not be “Marked to Market” as the bank is certain of receiving the
maturity value on the specified date. Banks are not allowed to shift securities freely from
trading and AFS to the HTM book as this may lead to overstating of profit figures.
However, banks can opt for shifting only once in a year to adjust their overall portfolio.
Banks are permitted to exceed the limit of 25% of total investments under HTM category
provided (a) the excess comprises of only of SLR securities and (b) the total SLR
securities held in the HTM category is not more than 23% by March 2014.
Call Money Markets: Call and notice money market refers to the market for short term
funds ranging from overnight funds to funds for a maximum tenor of 14 days. Under Call
money market, funds are transacted on overnight basis where as in case of notice
money market; funds are transacted for the period of 2 days to 14 days.
Coupon Rate: It is a rate at which interest is paid, and is usually represented as a
percentage of the par value of a bond. It refers to the periodic interest payments that
are made by the borrower (who is also the issuer of the bond) to the lender (the
subscriber of the bond) and the coupons are stated upfront either directly specifying the
number (e.g.8%) or indirectly tying with a benchmark rate (e.g. MIBOR+0.5%).
Zero Coupon Bond / Deep Discount Bond: The bond is issued at a discount to its
face value, at which it will be redeemed. When such a bond is issued for a very long
tenor, the issue price is at a steep discount to the redemption value. The effective
interest earned by the buyer is the difference between the face value and the discounted
price at which the bond is bought. The essential feature of this type of bonds is the
absence of intermittent cash flows.
Commercial Paper (CP): It is a short-term instrument to enable non-banking
companies to borrow short-term funds through liquid money market instruments. CPs is
therefore part of the working capital limits as set by the maximum permissible bank
finance (MPBF). CP issues are regulated by RBI Guidelines issued from time to time
stipulating term, eligibility, limits and amount and method of issuance. CP can be issued
for maturities between a minimum of 7 days and a maximum up to one year from the
date of issue. The maturity date of the CP should not go beyond the date up to which the
credit rating of the issuer is valid. CP can be issued in denominations of `5 lakh and
multiples thereof. It is mandatory that CPs should be rated by credit rating agencies. In
a bid to make CPs attractive, the RBI has allowed issuers to buyback these instruments
through the secondary market before maturity. It attracts stamp duty.
Certificates of Deposits (CDs): It is a negotiable money market instrument and
issued in dematerialized form or as a Usance Promissory Note, for funds, deposited at a
bank or other eligible financial institutions to raise short-term resources within the
umbrella limit fixed by RBI. CDs may be issued at a discount on face value. CDs differ
from term deposit as they involve the creation of paper, and hence have the facility for
transfer and multiple ownerships before maturity. Banks use the CDs for borrowing
during a credit pickup, to the extent of shortage in incremental deposits. Minimum
amount of a CD should be one lakh and in multiples thereof. The maturity period of CDs
should be not less than 7 days and not more than one year. However FIs are allowed to
issue CDs not exceeding 3 years from the date of issue. Banks have to maintain the
appropriate reserve requirements (CRR/SLR) on the issue price of the CDs. It attracts
stamp duty. Banks/Fis cannot grant loans against CDs.
Mumbai Inter Bank Offered Rate (MIBOR) - Currently there are two calculating
agents for the benchmark viz., Reuters and the National Stock Exchange (NSE). The NSE
MIBOR benchmark is the more popular of the two and is based on rates polled by NSE
from a representative panel of 31 Banks / Institutions / Primary Dealers. It is used by
different Indian banks either for interbank lending of the surplus funds or for interbank
borrowing for meeting their short term liquidity requirements. MIBOR has been in use as
a reference/benchmark rate by the financial institutions for deciding interest rates for
the different financial instruments like Interest Rate Swaps, Forward Rate Agreements,
Floating Rate Debentures and Term Deposits, Loans of different maturities and
mortgages, etc. It is also the benchmark for the Call Money Market Rates.
Securitization is an effective tool to reduce the mismatches in the maturities of assets
and liabilities. It is a financing technique that involves pooling and re-packing of illiquid
financial assets in to marketable securities. There are six players viz., Borrowers,
Lending Banker (who becomes an originator for the Securitization transaction), Special
Purpose Vehicle (SPV), Credit Rating Agency, Investors and Service Providers. The
process of securitization involves identification of financial assets, rating of these assets
by the rating agency, creation of a SPV for handling the securitization transaction,
assignment of future receivables in favour of the SPV, issuance of marketable securities
based on these underlying financial assets and selling the same to the investors. The
service providers recover the amount periodically and remit to the SPV and who in turn
pass the benefit to the investors.
Asset and Liability Management – RBI Guidelines: Of late, it is observed that PSBs
have been accepting Bulk Deposits/Certificate of Deposits route to increase balance
sheet size at very high interest rates, adversely affecting the profitability besides
exposing the banks to ALM Risk. RBI directed banks not to accept Bulk Deposits beyond
10% of the total deposits and the total of Bulk Deposits & Certificates of Deposits should
not exceed 15% of total deposits of the bank at any given point of time. An appropriate
time-bound strategy for reduction of such existing bulk deposits should be put in place.
Adjusted Net Bank Credit (ANBC) denotes Net Bank Credit plus investments made
by banks in non-SLR bonds held in HTM category. However, investments made by banks
in the Recapitalization Bonds and Inter-bank exposures will not be taken into account for
the purpose of priority sector lending targets/sub-targets.
Subordinate Debt is a debt owed to an unsecured creditor that in the event of
liquidation can only be paid after the claims of secured creditors have been met.
Normally, subordinate debt ranks below other secured loans with regard to claims on
assets or earnings.

Types of letter of credits

🔴Types of Letter of Credits :



✅Documents against Payment LC : Where payment is made against documents ( D/P LC )

✅Documents against Acceptance LC : Where payment is made on maturity date ( D/A LC )



🔴Irrevocable LC/ Revocable LC :



✅In Irrevocable LC : Issuing bank can amend/cancel LC with the consent of beneficiary (Seller)



✅In Revocable LC : Issuing bank can amend/cancel LC without the consent of beneficiary (Seller)



🔴With or Without Recourse LC :



✅With Recourse : Where the beneficiary holds himself liable to the holder of the bill, if dishonoured.



✅Without Recourse : Where the beneficiary does not hold himself liable, if the bill is dishonoured.



✅Restricted LC : Where a specified bank is designated to pay, accept or negotiate the documents



✅Confirmed LC : Where the advising/other bank at the request of issuing bank adds confirmation that payment will be made



✅Transferable LC : At the request of the opener, the LC can be transferred to one or more parties.



✅Back to Back LC : Where an exporter request for opening of LC in favour of local suppliers in cover of original LC received from his buyer Types of Letter of Credit



✅Red Clause LC : Where the LC permit the negotiating bank to grant of packing credit to the beneficiary at issuing bank ’ s responsibility



✅Green Clause LC : LC permits the advance for storage of goods in addition to pre-shipment advance



✅Stand by LC : It is similar to performance bond or guarantee. The beneficiary can submit the claim alongwith requisite documents to issuing bank



✅Revolving LC : The amount of drawing made under LC would be reinstated and made available to the beneficiary again

BFM



Parties to Letter of Credit :



Applicant : The buyer of goods



Issuing Bank : Buyer ’ s bank



Advising Bank : To whom LC is sent for onward transmission to the seller



Beneficiary : The party to whom, the LC is addressed i.e. seller



Negotiating Bank : The bank to whom the beneficiary will present the documents



Reimbursing Bank : Third bank, which repays/settles the funds at request of issuing bank



Confirming Bank : The bank, which undertake the responsibility of issuing bank on his failure Parties to Letter of Credit

Current Affairs on 14.10.2018

Today's Headlines from www:

*Economic Times*

📝 TCS to see 28,000 campus hires, highest in 3 years

📝 Avenue Supermarts Q2 net profit rises 18% YoY to Rs 226 crore

📝 Sun pharma invests 120 crore in Assam to set up production line

📝 Telcos may take Rs 6,000 crore knock on import duty hike

📝 Norwest Venture buys into Veritas

📝 Amway appoints Milind Pant as CEO

📝 Railways to use 'green' composite sleepers

📝 Jaiprakash, RKM, 5 others bag 1,900MW power supply deals

*Business Standard*

📝 Morgan Stanley bets on start-ups in India for future collaboration

📝 Amazon bids $400 mn for stake in Spencer's; deal stuck at valuation stage

📝 Banks face various risks from trade tensions, market turmoil: IIF Panel

📝 UAE boosts financial market with law permitting federal govt to issue debt

📝 As withdrawal deal looms over UK, diplomats expect Brexit summit to crash

📝 EESL inks MoU with DoP for distribution of energy-efficient appliances

📝 Govt to form national trade portal to cut logistics cost: Commerce jt secy

📝 US makes last-ditch effort in urging India to go easy on data localisation

*Financial Express*

📝 Coal India dispatches 84% coal to power sector in October

📝 RBI unlikely to hike rates in rest of FY19: SBI report

📝 El Salvador woos Indian companies to invest; offers incentives

📝 Crop insurance: Payout ratio jumps after Centre’s prodding

📝 IIT-Madras, Australian varsity to set joint research centre

📝 Weaker encryption boon for criminals, warns Apple

*Mint*

📝 IMF members pledge to avoid using currencies as trade weapon

📝 Walmart investor day to focus on Flipkart deal

📝 Facebook hack included search history, location data of millions

📝 Indian Navy acquires deep submarine rescue capabilities.

Bank merger essay

Bank merge is a situation in which two banks pool their assets and liability to become one bank. In simple word unification of two or more bank into single bank. Merger in indian bank have been started the recommendation of narsimhan committee .
In present days merger is a big step where financial world are affected by such a move
Positive effect
1.Merger will reduce competition between banks
2.operstional cost will be reduce which will effect in profit
3.indian bank facing tough competition from foreign bank. Merger enables the bank to strengthen their capital base
4.after merger banks extend their business in various product at many different location
Negative effect
When a merger occurs an independent bank loss it’s charter and become a part of an existing bank and is driven by a unified control. Bank policy will change .

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.

Current Affairs on 13.10.2018

Today's Headlines from www:-

*Economic Times*

📝 Microsoft and Niti Aayog partner to deploy AI solution

📝 Emami Cement files for Rs 1,000 crore IPO with Sebi

📝 No internet shutdown in India: Cyber Security official

📝 DIPP develops portal for filing of IEM, IL applications

📝 India targets oil traders for $1.5 billion emergency oil reserve

📝 New branch opening pace has come down: Kotak Mahindra Bank

📝 Aluminium consumption may double to 7.2 million tonne in five years: Nalco CMD

📝 UP to open 6 pharma parks; gets Rs 5,000-6,000 cr commitment

*Business Standard*

📝 Alibaba in talks to purchase a minority stake in Spencer's Retail

📝 Biggest gain for markets in 2 years: Sensex, Nifty end over 2% higher

📝 NSE plans to enter spot bullion exchange, says CEO Vikram Limaye

📝 STFC to raise Rs 13.5 bn through NCDs, issue to open on October 15

📝 Govt's oil subsidy bill exceeds Rs 460 billion at end of September

📝 SpiceJet to be the first airline in India to offer free on-board wifi

📝 India's foreign exchange reserves down by $915.8 million to $399.6 billion

*Financial Express*

📝 Big proud moment! India wins election to United Nations Human Rights Council

📝 NHAI may acquire incomplete projects of IL&FS

📝 FPIs sell bonds worth $537 m in October so far

📝 HUL net jumps 20% on price rise, volume growth

📝 PCA essential to maintain fiscal stability: Viral Acharya

📝 Reliance Power’s market cap falls by 93.3% since IPO

📝 Life insurance industry sees 7% premium growth

*Mint*

📝 Sebi eases promoter stake lock-in norm for Bandhan Bank

📝 Facebook: Hackers accessed 29 million accounts, fewer than thought

📝 Twin worry for govt as retail inflation surges, IIP falls

📝 Passenger vehicle sales decline 5.6% to 3-month low in September

📝 IL&FS to cut costs in efforts to tackle crisis

📝 Venture capital funds explore backing small-town startups

📝 ArcelorMittal signs pact with Liberty House to sell 4 steel plants.

Important points for Risk management

 Important points for Risk Management



Risk and Capital

Risk is possible unfavorable impact on net cash flow in future due to uncertainty of happening or non- happening of events. Capital is a cushion or shock observer required to absorb potential losses in future. Higher the Risks, high will be the requirement of Capital and there will be rise in RAROC (Risk Adjusted

Return on Capital). Types of Risks

Risk is anticipated at Transaction level as well as at Portfolio level. Transaction Level

Credit Risk, Market Risk and Operational Risk are transaction level risk and are managed at Unit level. Portfolio Level

Liquidity Risk and Interest Rate Risk are also transaction level risks but are managed at Portfolio level. Risk Measurement

Based on Sensitivity

It is change in Market Value due to 1% change in interest rates. The interest rate gap is sensitivity

of the interest rate margin of Banking book. Duration is sensitivity of Investment portfolio or Trading

book



Based on Volatility:

It is common statistical measure of dispersion around the average of any random variable such as

earnings, Markto market values, losses due to default etc. Statistically Volatility is Standard deviation of Value of Variables

Calculation

Example 1 : We have to find volatility of Given Stock price over a given period. Volatility may

be weekly or monthly. Suppose we want to calculate weekly volatility. We will note down Stock

price of nos. of weeks. Mean Price = 123.62 and

Variance (sum of Squared deviation from mean) is 82.70

(extracted from weekly Stock prices) Volatility i.e. sd =

∫Variance = ∫82.70 = 9.09

Volatility over Time Horizon T = Daily Volatility X ∫T

Example 2

Daily Volatility =1.5%

Monthly Volatility = 1.5 X ∫30 = 1.5 X 5.48 = 8.22

Volatility will be more if Time horizon is more. Downside Potential

It captures only possible losses ignoring profits and risk calculation is done keeping in view two

components:

7. Potential losses

8. Probability of Occurrence. The measure is more relied upon by banks/FIs/RBI. VaR (Value at Risk is a downside Risk

Measure.)

Risk Pricing Risk Premium is added in the interest rate because of the following:

6. Necessary Capital is to be maintained as per regulatory requirements. 7. Capital is raised with cost. For example there are 100 loan accounts with Level 2 Risk. It means there can be average loss of 2% on

such type of loan accounts: Risk Premium of 2% will be added in Rate of Interest. Pricing includes the following:

j) Cost of Deploying funds

k) Operating Expenses

l) Loss Probabilities

m) Capital Charge

Risk Mitigation

Credit Risk can be mitigated by accepting Collaterals, 3rd party guarantees, Diversification of

Advances and Credit Derivatives.





Interest rate Risk can be reduced by Derivatives of Interest Rate Swaps. Forex Risk can be reduced by entering into Forward Contracts and Futures etc.

If we make advances to different types of business with different Risk percentage, the overall risk will

be reduced through diversification of Portfolio. Banking Book, Trading Book and Off Balance Sheet Items

Banking Book

It includes all advances, deposits and borrowings which arise from Commercial and Retail Banking. These are Held till maturity and Accrual system of accounting is applied. The Risks involved are:

Liquidity Risk, Interest Rate Risk, Credit Default Risk, Market Risk and Operational Risk. Trading Book

It includes Assets which are traded in market. 6. These are not held till maturity. 7. The positions are liquidated from time to time. 8. These are Mark- to–market i.e. Difference between market price and book value is taken as

profit. 9. Trading Book comprises of Equities, Foreign Exchange Holdings and Commodities etc. 10. These also include Derivatives

The Risks involved are Market Risks. However Credit Risks and Liquidity Risks can also be there. Off Balance Sheet Exposures

The Off Balance sheet exposures are Contingent Liabilities, Guarantees, LC and other obligations. It

includes Derivatives also. These may form part of Trading Book or Banking Book after they become

Fund based exposure. Types of Risks

1. Liquidity Risk

It is inability to obtain funds at reasonable rates for meeting Cash flow obligations. Liquidity Risk is of

following types:

Funding Risk: It is risk of unanticipated withdrawals and non-renewal of FDs which are raw material

for Fund based facilities. Time Risk: It is risk of non-receipt of expected inflows from loans in time due to high rate NPAs

which will create liquidity crisis. Call Risk: It is risk of crystallization of contingent liabilities.



includes Frauds Risk, Communication Risk, Documentation Risk, Regulatory Risk, Compliance Risk and

legal risks but excludes strategic /reputation risks. Two of these risks are frequently occurred. Transaction Risk: Risk arising from fraud, failed business processes and inability to maintain

Business Continuity. Compliance Risk: Failure to comply with applicable laws, regulations, Code of Conduct may attract

penalties and compensation. Other Risks are:

3. Strategic Risk: Adverse Business Decisions, Lack of Responsiveness to business changes and no

strategy to achieve business goals. 4. Reputation Risk ; Negative public opinions, Decline in Customer base and litigations etc. 5. Systemic Risks ; Single bank failure may cause collapse of whole Banking System and result into

large scale failure of banks.

In 1974, closure of HERSTATT Bank in Germany posed a threat for the entire Banking system

BASEL–I

Bank for International Settlements (BIS) is situated at Basel (name of the city in Switzerland). Moved by

collapse of HERSTATT bank, BCBS – Basel Committee on Banking Supervision consisting of 13

members of G10 met at Basel and released guidelines on Capital Adequacy in July 1988. These

guidelines were implemented in India by RBI w.e.f. 1.4.1992 on the recommendations of Narsimham

Committee. The basic objective was to strengthen soundness and stability of Banking system in India in

order to win confidence of investors, to create healthy environment and meet international standards. BCBS meets 4 times in a year. Presently, there are 27 members. BCBS does not possess any formal supervisory authority. 1996 Amendment

7. Allowed banks to use Internal Risk Rating Model. 8. Computation of VaR daily using 99th percentile. 9. Use of back-testing

10. Allowing banks to issue short term subordinate debts with lock-in clause. Calculation of CRAR (Capital to Risk Weighted Asset Ratio)

Basel – I requires measurement of Capital Adequacy in respect of Credit risks and Market Risks

only as per the following method:

Capital funds(Tier I & Tier II)/(Credit Risk Weighted Assets + Market RWAs + Operational RWAs) X

100

Minimum requirement of CRAR is as under:

As per BASEL-II recommendations 8%





As per RBI guidelines 9%

Banks undertaking Insurance business 10%

New Private Sector Banks 10%

Local Area banks 15%

For dividend declaration by the banks (during previous 2 years and current year) 9%

Tier I & Tier II Capital

Tier –I Capital

Tier –I Capital includes:

8. Paid up capital, Statutory reserves, Other disclosed free reserves, Capital Reserve representing

surplus out of sale proceeds of assets. 9. Investment fluctuation reserve without ceiling. 10. Innovative perpetual Debt instruments (Max. 15% of Tier I capital)

11. Perpetual non-cumulative Preference shares

Less Intangible assets & Losses. 5 Sum total of Innovative Perpetual Instruments and Preference shares as stated above should not

exceed 40% of Tier I capital. Rest amount will be treated as Tier II capital. Tier –II Capital

It includes:

6. Redeemable Cumulative Preference shares, Redeemable non-cumulative Preference shares

& Perpetual cumulative Preference shares, 7. Revaluation reserves at a discount of 55%, 8. General Provisions & Loss reserves up to 1.25 % of RWAs

9. Hybrid debts (say bonds) & Subordinate debts (Long term Unsecured loans) limited to 50% of

Tier –I Capital. Tier – III Capital

Banks may at the discretion of the National Authority, employ 3rd tier of Capital consisting of short term

subordinate debts for the sole purpose of meeting a proportion of capital requirements for market risks. Tier III capital will be limited to 250% of bank’s Tier –I Capital (Minimum of 28.5%) that is required to

support market risks. Tier – II capital should not be more than 50% of Total Capital. Capital adequacy in RRBs

The committee on financial sector assessment has suggested introducing CRAR in RRBs also in a

phased manner. Two ways to improve CRAR

$ By raising more capital. Raising Tier I capital will dilute the equity stake of existing investors including

Govt. Raising Tier II Capital is definitely a costly affair and it will affect our profits. $ Reduction of risk weighted assets by implementing Risk mitigation Policy.



Risk Weights on different Assets

Cash and Bank Balance 0%

Advances against NSC/KVC/FDs/LIC 0%

Govt. guaranteed Advances 0%

Central Govt. Guarantees 0%

State Govt. Guarantees 20%

Govt. approved securities 2.5%

Balance with other scheduled banks having CRR at least 9% 20%

Other banks having CRR at least 9% 100%

Secured loan to staff 20%

Other Staff loans -not covered by retirement dues 75%

Loans upto 1.00 lac against Gold/Silver 50%

Residential Housing Loans O/S above 30 lac 75%

Residential Housing loans O/S upto 30 lac 50%

Residential property if LTV ratio is above 75% 100%

Residential Housing Loans O/S above 75 lac 125%

Mortgage based securitization of assets 77.5%

Consumer Credit / Credit Cards/Shares loan 125%

Claims secured by NBFC-non-deposit taking (other than AFCs) 100%

Venture Capital 150%

Commercial Real Estates 100%

Education Loans (Basel –II -75%) 100%

Other loans (Agriculture, Exports) 100%

Indian Banks having overseas presence and Foreign banks will be on parallel run (Basel -I) and Basel-II

for 3 years commencing from 31.3.2010 up to 31.3.2013. These banks will ensure that : Basel-II

minimum capital requirement continues to be higher than 80% of Basel-I minimum capital

requirement for credit Risk and Market Risk.” Further, Tier –I CRAR should be at-least 6% up to 31.3.2010 and 8% up to 31.3.2011

BASEL II

The Committee on Banking Regulations and Supervisory Practices released revised version in the year

2004. These guidelines have been got implemented by RBI in all the banks of India. Parallel run was

started from 1.4.2006. In banks having overseas presence and foreign banks (except RRBs and local

area banks. Complete switchover has taken place w.e.f. 31.3.2008. In banks with no foreign branch, switchover will took place w.e.f. 31.3.2009. Distinction between Basel I and Basel II

Basel – I measures credit risks and market risks only whereas Basel II measures 3 types of risks i.e. Credit Risk, Operational Risk and Market Risk. Risk weights are allocated on the basis of rating of the

borrower i.e. AAA, AA, A, BBB, BB and B etc. Basel –II also recognized CRM such as Derivatives, Collaterals etc.



Three Pillars of BASEL-II

Pillar –I Minimum Capital Requirement

Pillar – II Supervisory Review Process

Pillar –III Market Discipline

Pillar - I – Minimum Capital Requirement

CRAR will be calculated by adopting same method as discussed above under Basel – I with the only

difference that Denominator will be arrived at by adding 3 types of risks i.e. Credit Risks, Market Risks

and Operational Risks. Credit Risk

Credit Risk is the risk of default by a borrower to meet commitment as per agreed terms and

conditions. In terms of extant guidelines contained in BASEL-II, there are three approaches to

measure Credit Risk given as under:

$ Standardized approach

$ IRB (Internal Rating Based) Foundation approach

$ IRB (Internal Rating Based) Advanced approach

1. Standardized Approach

RBI has directed all banks to adopt Standardized approach in respect of Credit Risks. Under

standardized approach, risk rating will be done by credit agencies. Four Agencies are approved for

external rating:

1. CARE 2. FITCH India 3.CRISIL 4. ICRA

Risk weights prescribed by RBI are as under:

Rated Corporate

Rating & Risk Percentage

$ 20%

6. 30%

6. 50%

(v) 100%

BJ. & below 150%

Education Loans 75%

Retail portfolio and SME portfolio 75% Housing

loans secured by mortgage 50 to 75%

Commercial Real Estates 100%

Unrated Exposure 100%

2. IRBA – Internal rating Based Approach

At present all advances of Rs. 5.00 crore and above are being rated from external agencies in our bank.

IRBA is based on bank’s internal assessment. It has two variants (Foundation and advanced). Bank will

do its own assessment of risk rating and requirement of Capital will be





calculated on

i)Probability of default (PD)

j)Loss given default (LD)

k) Exposure of default (ED)

l)Effective maturity. (M)

Bank has developed its own rating module system to rate the undertaking internally. The internal rating is

being used for the following purposes:

m)Credit decisions

n) Determination of Powers

o) Price fixing

Rating by Outside Agencies

The risk weights corresponding to the newly assigned rating symbols are as under:

Table : PART A – Long term Claims on Corporate – Risk Weights Long

Term Ratings

CARE CRISIL Fitch ICRA Risk Weights (%) CARE AAA

CRISIL AAA Fitch AAA ICRA AAA 20 CARE AA CRISIL

AA Fitch AA ICRA AA 30 CARE A CRISIL A Fitch A ICRA

A 50

CARE BBB CRISIL BBB Fitch BBB ICRA BBB 100

CARE BB & below CRISIL BB & below Fitch BB & below ICRA BB & below 150 Unrated

Unrated Unrated Unrated 100

How to Calculate RWAs and Capital Charge in respect of Credit risk

Ist Step : Calculate Fund Based and Non Fund Based Exposure

2nd Step: Allowable Reduction

3rd Step : Apply Risk Weights as per Ratings

4th Step: Calculate Risk Weighted Assets

5th Step : Calculate Capital Charge

Ist Step: Calculate Fund Based and Non Fund Based Exposure:

Example:

Fund Based Exposure (Amount in ‘000)

Nature of loan Limit Outstanding Undrawn portion

CC 200 100 100

Bills Purchased 60 30 30

Packing Credit 40 30 10

Term Loan 200 40 160

Total Outstanding 200

Out of Undrawn portion of TL, 60 is to drawn in a year and balance beyond 1 year.



Adjusted Exposure:

100% Outstanding(Unrated) = 200

20% of Undrawn CC, BP & PC (140*20/100) = 28

20% of Undrawn TL (1 yr) (60*20/100) = 12

50% of Undrawn TL (>1Yr) (100*50/100) = 50

Total Adjusted Exposure FB limits 290

Non Fund Based Exposure (Amount in ‘000)

Type of NBF Exposure CCF Adjusted Exposure

Financial Guarantees 90 100% 90

Acceptances 80 100% 80

Standby LC 50 100% 50

Clean LC 50 100% 50

Unconditional Take out finance 100 100% 100

Performance Guarantee 80 50% 40

Bid Bonds 20 50% 10

Conditional Take out finance 50 50% 25

Documentary LC 40 20% 8

Total Adjusted Exposure FB limits = 453

Total Adjusted Exposure = 290000+453000 = 7,43,000

2nd Step: Allowable Reduction after adjusting CRMs (Credit Risk Mitigates)

Reduction from adjusted exposure is made on account of following eligible financial collaterals:

Eligible Financial Collaterals . 7. Deposits being maintained by a borrower under lien. 8. Cash (including CDs or FDs), Gold, Govt Securities, KVP, NSC, LIC Policy, Debt Securities, Mutual Funds’ 9. Equity and convertible bonds are no more eligible CRMs. Formula for Deposits under lien: C*(1-Hfx) X Mf

(C=Amount of Deposit; Hfx =0 (if same currency), Hfx = 0.08 (if diff currency) Mf = Maturity factor). Formula for Approved Financial collaterals: C*(1-Hc-Hfx) *Mf ) - E*He

Haircuts(He–Haircut for Exposure & Hc-Haircut for Collateral)

Haircut refers to the adjustments made to the amount of exposures to the counter party and also the

value of collateral received to take account of possible future fluctuations in the value of either, on

account of market movements. Standardized Supervisory Haircuts for collateral /Exposure have been

prescribed by RBI and given in the said circular. Capital Requirement for collateralized transaction

E* = max { 0, [E X (1+He) – C X (1-Hc- Hfx) } ]

E* - exposure value alter risk mitigation

E – Current value of exposure for which coll. Qualifies

C = current value of collateral received





Hfx = Haircut appropriate for currency mismatch between collateral and exposure. E* will be multiplied by the risk weight of the counter party to obtain RWA amount.

Illustrations clarifying CRM

In the case of exposure of Rs 100 (denominated in USD) having a maturity of 6 years to a BBB rated

(rating by external credit rating agency) corporate borrower secured by collateral of Rs 100 by way of A+

rated corporate bond with a maturity of 6 years, the exposure amount after the applicable haircut @ 12%, will be Rs 112 and the volatility adjusted collateral value would be Rs 80, (after applying haircut @ 12%

as per issue rating and 8% for currency mismatch) for the purpose of arriving at the value of risk weighted

asset & calculating charge on capital. There is an exposure of Rs 100 to an unrated Corporate (having no rating from any external agency)

having a maturity of 3 years, which is secured by Equity shares outside the main index having a market

value of Rs 100. The haircut for exposure as well as collateral will be 25%. There is no currency mismatch in this case. The volatility adjusted exposure and collateral after application of haircuts works out to Rs 125 and Rs

75 respectively. Therefore, the net exposure for calculating RWA works out to Rs 50. There is a demand loan of Rs 100 secured by bank’s own deposit of Rs 125. The haircuts for

exposure and collateral would be zero. There is no maturity mismatch. Adjusted exposure and

collateral after application of haircuts would be Rs 100 and Rs 125 respectively. Net exposure for the

purpose of RWA would be zero

Other Examples

No. 1: • Exposure----------------------------------------- 100 lac with tenure 3 years

• Eligible Collateral in A+ Debt Security -----30 lac with Residual maturity 2 years

• Hair cut on Collateral is 6%

• Table of Maturity factor shows hair cut as 25% for remaining maturity of 2 years/

Calculate Value of Exposure after Risk Mitigation:

Solution:

Value of Exposure after Risk Mitigation = Current Value of Exposure – Value of adjusted collateral for Hair cut and maturity mismatch

Value of Adjusted Collateral for Hair cut = C*(1-Hc) = 30(1-6%) = 30*94% = 28.20

Value of Adjusted Collateral for Hair cut and Maturity Mismatch = C*(t-0.25) / (T-0.25) = 28.20*(2-.25)/(3-.25) = 17.95

(Where t = Remaining maturity of Collateral T= Tenure of loan )

Value of Exposure after Risk Mitigation = 100-17.95= 82.05 lac. No. 2

An exposure of Rs. 100 lac is backed by lien on FD of 30 lac. There is no mismatch of maturity.



Solution:

Hair Cut for CRM i.e. FDR is zero. Hence Value of Exposure after Risk Mitigation is 100 lac – 30 lac = 70 lac

Computation of CRAR

In a bank ; Tier 1 Capital = 1000 crore

Tier II Capital = 1200 crore

RWAs for Credit Risk = 10000 crore

Capital Charge for Market Risk = 500 crore

Capital Charge for Op Risk = 300 crore

Find Tier I CRAR and Total CRAR. Solution:

RWAs for Credit Risk = 10000 crore

RWAs for Market Risk = 500/.09 = 5556 crore

RWAs for Op Risk = 300/.09 = 3333 crore

Total RWS = 10000+5556+3333 = 18889 crore

Tier I Capital = 1000 crore

Tier II Capital can be up to maximum 1000 crore

Total Capital = 2000 crore

Tier I CRAR = Eligible Tier I Capital /Total RWAs = 1000/18889=5.29% Total

CRAR = Eligible Total Capital /Total RWAs = 2000/18889 = 10.59% We may

conclude that Tier I Capital is less than the required level. Credit Risk Mitigates

It is a process through which credit Risk is reduced or transferred to counter party. CRM

techniques are adopted at Transaction level as well as at Portfolio level as under:

At Transaction level:

4. Obtaining Cash Collaterals

5. Obtaining guarantees

At portfolio level

4. Securitization

5. Collateral Loan Obligations and Collateral Loan Notes

6. Credit Derivatives

1. Securitization

It is process/transactions in which financial securities are issued against cash flow generated from

pool of assets. Cash flow arising from receipt of Interest and Principal of loans are used to pay interest and

repayment of securities. SPV (Special Purpose Vehicle) is created for the said purpose. Originating bank transfers assets to SPV and it issues financial securities.





2. Collateral Loan Obligations (CLO) and Credit Linked Notes (CLN)

It is also a form of securitization. Through CLO, bank removes assets from Balance Sheet and issues

tradable securities. They become free from Regulatory Capital. CLO differs from CLN (Credit link notes in the following manner.

i) CLO provide credit Exposure to diverse pool of credit where CLN relates to single credit.

ii) CLO result in transfer of ownership whereas CLN do not provide such transfer.

iii) CLO may enjoy higher credit rating than that of originating bank. 3. Credit Derivatives

It is managing risks without affecting portfolio size. Risk is transferred without transfer of assets from the

Balance Sheet though OTC bilateral contract. These are Off Balance Sheet Financial Instruments. Credit

Insurance and LC are similar to Credit derivatives. Under a Credit Derivative PB (Prospective buyer)

enter into an agreement with PS (Prospective seller) for transfer of risks at notional value by making of

Premium payments. In case of delinquencies, default, Foreclosure, prepayments, PS compensates PB

for the losses. Settlement can be Physical or Cash. Under physical settlement, asset is transferred

whereas under Cash settlement, only loss is compensated. Credit Derivatives are generally OTC instruments. ISDA (International Swaps and Derivatives

Association) has come out with documentation evidencing such transaction. Credit Derivatives are:

vii) Credit Default Swaps

viii) Total Return Swaps

ix) Credit Linked Notes

x) Credit Spread Options

Operational Risk

Operational Risk is the risk of loss resulting from

iii. Inadequate or failed internal processes, people and system.

iv. External events such as dacoity, burglary, fire etc.

It includes legal risks but excludes strategic /reputation risks.

Identification

(iii) Actual Loss Data Base

(iv) RBIA reports

(v) Risk Control & Self Assessment Survey

(vi) Key Risk indicators

(vii) Scenario analysis

Four ways to manage Risk

8. Prevent

9. Reduce

10. Transfer

11. Carry/Accept





Operational Risk – Measurement

Three approaches have been defined to measure Operational Risk at the bank: • Basic Indicator approach

• Standardized approach

• AMA i.e. Advanced measurement approach

Basic Indicator Approach

15% of Average positive gross annual income of previous 3 years will be requirement of capital. To start

with banks will have to adopt this approach and huge capital is required to be maintained. In our bank, estimated requirement of capital will be about Rs. 1000 crore. The Standardized Approach

All banking activities are to be divided in 8 business lines. 1) Corporate finance 2) Trading &

Sales 3) Retail Banking 4) Commercial Banking 5) Asset Management 6) Retail brokerage 7)

Agency service 8) Payment settlement

Within each business line, Capital requirement will be calculated as under:

By multiplying the average gross income generated by a business over previous 3 years by a factor

β ranging from 12 % to 18 % depending upon industry-wise relationships as under:

Retail Banking, Retail Brokerage and Asset Management -----------12%

Commercial Banking and Agency Services--------------------------- 15%

Corporate, Trading and Payment Settlement------------------------ 18%

Advanced Measurement Approach

Capital requirement is calculated by the actual risk measurement system devised by bank’s own internal

Operational Risk Measurement methods using quantitative and qualitative criteria. Our bank has started

measuring actual losses and estimating future losses by introducing statement of Operational Risk Loss

data w.e.f. 1.4.2005. Minimum 5 year data is required for a bank to switch over to AMA. How to calculate RWAs for Operational Risk?

RWAs for Operational Risk = Capital Charge / 0.09% (If required CAR is 9%)

Operational Risk – Scenario Analysis

It is a term used in measurement of Operational Risk on the basis of scenario estimates. Banks use scenario analysis based on expert opinion in conjunction with external data to evaluate its

exposure to high severity events.

In addition, scenario analysis is used to assess impact of deviations from correlation assumptions in the

bank’s Operational Risk measurement framework to evaluate potential losses arising from operational

risk loss events. Operational Risk Mitigation

Insurance cover, if available can reduce the operational risk only when AMA is adopted for





estimating capital requirements. The recognition of insurance mitigation is limited to 20% of total

Operational Risk Capital Charge calculated under AMA. Practical Example - AMA approach

Under AMA approach, Estimated level of Operational Risk is calculated on the basis of: • Estimated probability of occurrence

• Estimated potential financial impact • Estimated impact of internal control. Estimated Probability of Occurrence: This is based on historical frequency of occurrence &

estimated likelihood of future occurrence. Probability is mapped on scale of 5 as under:

Negligible risk -----1

Low risk-------------2

Medium Risk--------3

High Risk------------4

Very High Risk------5

For Calculation, following formula is used:

Estimated level of Operational Risk = {Estimated probability of occurrence x Estimated potential

financial impact x Estimated impact of internal control} ^0.5 ^0.5 implies Under root of whole

Example:

Probability of occurrence = 2 (medium)

Probability of Financial impact = 4 (very high)

Impact of Financial control = 50%

Solution

[ 2x4x(1-0.5)] ^0.5 = ∫4 = 2 (Low)

Market Risk

It is simply risk of losses on Balance sheet and Off Balance sheet items basically in investments due to

movement in market prices. It is risk of adverse deviation of mark to Market value of trading portfolio

during the period. Any decline in the market value will result into loss. Market Risk involves the following:

d) Risk Identification

e) Risk Measurement

f) Risk monitoring and control

g) Risk mitigation

Current Affairs on October 12th 2018

Today's Headlines from www:-

*Economic Times*

📝 Govt hikes import duty on select communication items to 20%

📝 RBI remains net seller of US dollar in Aug; sells $2.323 billion

📝 TCS Q2 profits up 23%, wins four $100 million deals

📝 NSE signs MoU with IBJA to deepen commodity market

📝 LG India to expand production of B2B LED panels

📝 Uber looking to sell $1.5-billion Junk Bonds

📝 India's manufacturing sector to record robust growth in Q2: Report

📝 Life insurers' new premium income down 16 per cent at Rs 17,491 crore in September

*Business Standard*

📝 RBI firm on data localisation; 80% of firms to comply by Oct 15 deadline

📝 ArcelorMittal in talks with lenders on payment of dues as deadline looms

📝 IMF chief Lagarde defends rate hikes after Donald Trump slams 'crazy' Fed

📝 India ranks 115 in World Bank's Human Capital Index; govt dismisses report

📝 Markets plunge on global sell-off; investor wealth erodes by Rs 2.69 trn

📝 As imports surge, aluminium companies look to widen export volumes

*Financial Express*

📝 Google India FY18 standalone net up 33%

📝 Concept Medical raises Rs 440 cr for sirolimus coated balloon

📝 Coal imports seen rising by 8-17% in FY19

📝 Sundaram-Clayton sets up new plant in Chennai

📝 Union Bank of India to raise Rs 700 cr from stake sale in six firms

📝 Venture financing remains robust in Q32018: Report

📝 PNB sells credit card outstandings worth 3% of its card portfolio

📝 Area under soybean up 6.7%, says SOPA

*Mint*

📝 RBI changes tack on forex intervention, focuses on forwards market

📝 Ikea to invest close to Rs 1,000 crore in Bengaluru store

📝 Godrej Consumer to go slow on acquisitions, take stock of past investments

📝 Tata Power among bidders in race for Odisha’s CESU

📝 Aurobindo Pharma gets USFDA nod for infections treatment drug

📝 IOC to invest ₹5,463 crore in city gas network in 7 districts

📝 Windfall for engineers as IT salaries shoot up.

Financial ratios

Financial Ratios ::: (Most useful) Very important read everyone

The broad categories in which Financial

Ratios are classified are:

 Liquidity Ratios

 Gearing Ratios

 Profitability Ratios

 Turnover Ratios

 Coverage Ratios

Liquidity Ratios

 Liquidity Ratios are important for the working

capital lenders, who provide loans for shorter

duration. As such Banks, which generally

provide working capital loans, want to know

the liquidity position of the unit over a short

term period say one year. These ratios can

be analysed in under noted two forms:

 Current Ratio

 Acid Test Ratio or Quick Ratio

Current Ratio

 Current Ratio = Current Assets / Current

Liabilities

 Acid Test Ratio = (Current Assets - Inventory)

/ Current Liabilities

Gearing Ratios

 Gearing Ratios are of two types:



 Total Debt/Equity Ratio =

Total Outside Liabilities (TOL)

Tangible Net Worth (TNW)

 Total Debt/Equity Ratio =

Long-Term Liabilities

Tangible Net Worth

Total Outside Liabilities (TOL)

The sources of funds of an enterprise can broadly be

classified into following three categories:

 Own funds or Tangible Net Worth [Total Networth (ie

Capital plus reserves) less Intangible assets]

 Short-term loans and

 Long-term loans

 Among the above three, the last two are external

sources of funding and therefore are together

classified as Total Outside Liabilities (TOL).

Profitability Ratios

 Profitability ratios measure the profit earning capacity of the unit

vis-à-vis many parameters like sales, capital employed etc. The

ratios used for ascertaining the profitability of the main activity

of the unit are :

Operating Profit Ratio

 Operating Profit Before Interest = --------------------------------------

 (Before Finance Cost) Net Sales

Operating Profit After Interest

 Operating Profit Ratio =

-----------------------------------------

(After Finance Cost) Net Sales

Turnover Ratios

Raw Material holding

Stock of raw material X 365/

Annual consumption of raw

material

Stock in process holding

Stock in process level X 365/

Cost of production

Finished goods holding

Finished goods level X 365/

Cost of production

Receivables holding level

Bills receivables level X 365/

Annual gross sales

Trade Creditors holding level

Expression

Trade Creditors level X 365/

Annual purchase

Coverage Ratios

The two types of coverage ratios are:

 Interest Coverage Ratio

 Debt Service Coverage Ratio

Interest Coverage Ratio

 Interest Coverage Ratio are computed as –

Interest Coverage Ratio = (Profit before Tax +

Depreciation + Interest) / Interest

Gross Debt Service Coverage Ratio

The Gross Debt Service Coverage Ratio

(DSCR), is computed as –

 Gross Debt Service Coverage Ratio

Profit after tax + Depreciation + Interest on TL

= ----------------------------------------------------

Annual principal instalments + Interest

on TL

Current Affairs on October 11th 2018

Today's Headlines from www:-

*Economic Times*

📝 Back series of GDP likely this month, says chief statistician

📝 ONGC plans to buy 27 rigs for up to Rs 3,500 cr

📝 Zydus leads race for Complan with Rs 4,500-crore bid

📝 Gold imports drop 14% on weak rupee in Sept: GFMS

📝 ESAF Small Finance Bank raises Rs 464 crore equity

📝 ZEE Q2 revenue up 25% at Rs 1,976 crore

📝 Vodafone Idea moves TDSAT to recover bank guarantees

📝 GRSEL eyes order book of Rs 28,000 crore from Navy contracts

*Business Standard*

📝 Tatas take control of AirAsia India with new CEO Sunil Bhaskaran, board

📝 IL&FS books, riddled with irregularities, sent to audit regulator NFRA

📝 M&M enters vehicle leasing business via tie-up with Orix, ALD Automotive

📝 Trillions in US net worth vulnerable to recession, says IMF report

📝 Investor wealth soars over Rs 3 trn as equity market makes strong recovery

📝 Usha Martin to seek shareholder nod for business sale to Tata Steel

📝 Lamborghini looks to boost India sales with SUV for millionaires

📝 Need for liquidity set to drive secondary deals in the Indian market

*Financial Express*

📝 Ensono takes over Wipro’s hosted data services

📝 Non-food credit growth slips to 12.57% from near 4-year highs

📝 Draft electronics policy aims whopping $400 billion manufacturing ecosystem turnover by 2025

📝 Zomato, Swiggy, Foodpanda, 7 others delist over 5,000 restaurants: FSSAI

📝 PE/VC investments fell 23% in July-Sept

📝 Iron ore prices rise on robust demand

📝 Pepper prices touched 10-year-low

*Mint*

📝 Excise duty on jet fuel cut from 14% to 11% in relief for airlines

📝 CCI amends M&A approval regulations

📝 Bandhan Bank Q2 profit jumps 47% to Rs 487 crore

📝 Amazon lands $1 billion in cloud deals with SAP, Symantec

📝 Future Enterprises acquires 55% stake in LivQuik

📝 P&G India fund to invest in Indian start-ups

📝 Pepperfry cuts losses by 32% in 2017-18

📝 Alibaba founder Jack Ma reclaims top spot among Chinese billionaires.

FEDAI important points

FEDAI



The important rules are:



Export Transactions : Forex liability must be crystallized into Indian rupees on 30th day after expiry of NTP (Notional Transit Period) in case of Sight bills and on 30th day after notional due date in case of Usance bills. The rule has since been relaxed and bank can frame its own rule for nos. of days for crystallization.



Concessional rate of interest is applied up to Notional due date or up to value date of realization of export dues (whichever is earlier)



Import Transactions: For retirement of Import bills whether under LC or otherwise, banks Bill



selling rate on date of retirement or the Forward rate will be applied.



DP Bills (sight) are retired after crystallization on 10th day after receipt.



DA Bills are retired (crystallized) on Due Date.



All Foreign Currency bills under LC, if not retired on receipt, shall be crystallized into Rupee liability on 10th day after date of receipt of documents at TT Selling Rate.



Normal Transit Period is:



- 25 days for export bills,



- 3 days for Rupee bills drawn under LC and payable locally



- 7 days for rupee bills drawn under LC and payable at other centers



- 20 days for Rupee bills not drawn under LC.



- For exports to Iraq, normal transit period is 60 days.

Current Affairs on October 10th 2018

Today's Headlines from www:

*Economic Times*

📝 Panel proposes relief for mega power projects

📝 Investors rush to mutual funds, 65 lakh folios added in H1FY19

📝 DHFL likely sold Rs 5,000-7,000 crore loans to SBI

📝 Oil output drops 3.3% in April-August

📝 Challenge grows for NBFCs as banks turn tight-fisted

📝 DIAL plans to make Delhi airport plastic free by 2019-end

📝 Rising electricity demand in India leading to costlier coal imports: ICRA

*Business Standard*

📝 Snapdeal has $125 million with run-time of a decade, says Kunal Bahl

📝 Microsoft boasts of a security win ahead of Pentagon cloud computing bids

📝 Govt exempts wireless chargers, low range devices from licensing norms

📝 Muthoot Microfin gets Sebi nod for IPO, firm eyes Jan or Feb for listing

📝 Silver jewellery exports fall 88% in FY19, industry seeks policy support

📝 Sebi panel may recommend single regime for FPI, NRI fund outflows

📝 40-50% debt haircut can help boost stressed coal plants: CRISIL report

📝 Dividend cut from OMCs, reduction in subsidies unlikely: DEA secy

*Financial Express*

📝 China sales’ decline puts brake on Tata JLR’s sales; Tats Motors stocks tumble 19.79 %

📝 Reliance Jio users set to get access to ZEE content

📝 FPIs continue to sell shares, bonds in October

📝 LinkedIn acquires employee engagement firm Glint

📝 Online smartphone sales to cross $1 bn in festive sale, says report

📝 SBI reports 1,329 fraud cases worth Rs 5,555 cr in Apr-Sep 2018

📝 India's personal wealth to grow by 13% to $5 trillion, set to become 11th wealthiest country by 2022: BCG

📝 RBI to inject Rs 12,000 cr into system to manage liquidity

*Mint*

📝 As users dip, data drives growth in India’s telecom sector

📝 IEA urges Opec to open taps as oil markets enter ‘red zone’

📝 Oyo set to enter Japan, tap into 2020 Olympic Games demand

📝 Xander signs $350 million Hyderabad office project deal

📝 Alpha Capital to invest ₹ 1,500 crore in consumer-facing business

📝 Suminter India raises funds from responsAbility’s PE arm

📝 ONGC piling up debt due to govt decisions, says union.

Current Affairs on 09.10.2018

Today's Headlines from www:

*Economic Times*

📝 100% FDI in insurance broking in the works

📝 Over 20 tenders worth Rs 88,000 cr for bullet train project by Jan: Sources

📝 IMF retains India FY19 growth outlook at 7.3%

📝 128 IPOs garner $5.24 billion till August in 2018: EY

📝 MCF plans to ramp up production capacity from 1000 to 2000 coaches per year by 2020-21

📝 Tata Steel sales up to 7 per cent in Q2FY19 to 3.18 million tonne

📝 Bank Unions to protest against PSU banks' merger decision on Tuesday

📝 L&T Construction bags orders worth Rs 1,881 crore

*Business Standard*

📝 GMR Infra seals deal with three PE investors, gives 5.8% in airport firm

📝 Suzlon aims to reduce 40-50% of debt through asset monetisation by March

📝 India's personal wealth may grow at a CAGR of 13% to $5 tn by 2022: BCG

📝 CBDT extends deadline for filing ITR, audit report for FY18 till Oct 31

📝 As deadline for data localisation approaches, Jaitley meets RBI DG, IT secy

📝 Oil marketing firms threaten to cut supply to Air India in case of default

📝 Godrej Interio targets millennials, takes on rival IKEA on social media

*Financial Express*

📝 Mercer to acquire talent assessment company Mettl

📝 Aluminium firms suffer sharp share price drop on global cues

📝 Indian shrimp exports to US likely to grow 15%

📝 Cotton industry body trims production estimates

📝 Investment in P-notes rises to Rs 84,647 crore by August-end

📝 Walmart seeks patent for drones to deliver products

📝 Fuel price reduction to be credit negative for OMCs, says Moody’s

📝 SBICap seeks buyers for Videocon Oil Ventures’ overseas oil, gas assets

*Mint*

📝 Alphabet shuts Google+ after user data exposed

📝 Creditors put Videocon arm’s overseas assets on sale

📝 IL&FS faces impairments of ₹ 15,000 crore in loans, equity

📝 Air India makes fresh bid to raise ₹ 500 crore

📝 Accenture new revenue catches up with top five Indian IT firms

📝 NHB hikes refinance limit to ease liquidity for housing finance firms

📝 After Orange, Greenko plans to buy Skeiron in Rs 3,500 crore deal

📝 Oil prices fall 1% as US considers granting some waivers on Iran crude sanctions.

Tips to fail

Tips to fail :

A collection of thoughts on how 
to  fail  in  written  exams  for 
Promotions.  Equally  useful  for 
JAIIB,  CAIIB,  Diplomas, 
Certifications  and  all  Banking 
Exams.  
A. Always cry for time not
available. Because people
who clear exams are free in
their job or they do not
work at all. Blame them.
B. Please do not leave any
opportunity to wish your
all the known and
unknown in Groups /
Social Media. Else they
may forget you!
C. Do not buy any single book
as it is not reimbursed by
Bank. Just collect PDFs
even for books readily
available in Market at dirt
cheap prices.
D. Join all WhatsApp,
Telegram, Kaizala,
Facebook, Snapchat, Hike
Groups and Lists where
word Promotion is used.
Keep on reading all
messages.
E. If that is not enough
prepare your own Group
and keep on sharing
material in PDF, PPT from
various sources.
Knowledge is important. It
is not a copyright job of
Faculties only.
F. Collect maximum possible
eBooks in PDF and save in
a folder well organised by
topics. Don’t read any of
them You can read them
next year.
G. Keep on asking for latest Pdf s in Groups. Older
edition was published in
1881 and become
obsolete in 2018.
H. Be a silent reader in
Groups you joined. Do not
ask any doubt as that may
prove you less
knowledgeable. So keep
silence.
I. Blame Group Admins for
useless Groups you joined
after a thorough search.
They should keep on
sharing eBooks, Material in
soft copy.
J. Never ever share any idea
for preparing. If you do so
you will get another and
that will create
competition.
K. Pass E-Lessons using
already available keys on
Social Media. What I know
about ETHICS is a
web-based application
used for WebCAS and
OTMS.
L. Never practice MCQs. If
you do that you get
confused of options. So
read directly answers. You
have got memory and will

remember options directly.
After all Paper Setters will
copy these questions only.
M.Do not practice any
Rationale, Situation
Analysis, For & Against,
Case Study, Essay. Why I
should I develop my
writing skills! Descriptive
Exams are Disruptive!

Cyber fraud management exam Recollected questions on 06.10.2018

Recollected questions cyber crime 06102018
1. Word associated with cybercrime
2.NETRA IS DEVELOPED BY
3.guidelines for use of UAV are issued by
4.which of the following is not industrial body
Ficci,Nasscom,DSCI
5.CISA act of USA pass for
6.CbI branches,Ccrdu,CCIC,CFL
7..org.,.com are top level domain
8.cyber crime defined in Indian contract act.
9.Definition of data manipulation language
10.steps in online payment
11.masquereading definition
12.boss developed by cdac
13. Cyber smearing means
14. Meaning of accept term & condition
15In case of Andhra Pradesh &TCS fraud computer &computer terminal
16. Data backup is which type of control. 17. Which is better option if we received email from unknown person
18.concept of rupay card year
19. If you are branch manager and received email from nri customer to transfer amount of rs.10k from his acct what will I do
Four option given1 make transaction 2 ask him to send application by post for transaction 3 ask him to send proof of address verified by Foreign authorities
20. Arrange sequence for steps involved in online transaction
21. State It adjuator..
22.e kyc 2015- digital signature by Aadhar authorities and e consent of subscriber
23.firewall used for
24. Blue hat hacker definition
25. What is mean by ethical hacker
26.defination of annonomus
27.scripkiddie definition
28.scada used in
29.what is smart card.
30.micro ATM
31.online batch processing (oltp).edi ,eft, STP

32.pki advantages

Current Affairs on 08.10.2018

Today's Headlines from www:

*Economic Times*

📝 Growth in India firming up, projected to accelerate further, says World Bank

📝 Flipkart forays into insurance space, teams up with Bajaj Allianz

📝 Saudi prince eyes Aramco IPO by 2021, valuation at $2 trillion

📝 China cuts CRR for fourth time in 2018 as growth slows

📝 Skills Ministry banks on India Inc to help in apprenticeship

📝 HCL Technologies to invest Rs 750 crore in Andhra Pradesh, create 7,500 jobs

📝 Hike in MSPs in July was well below ones announced in FY 2009 &FY 2013: RBI

📝 Chemical industry may reach USD 304 billion by FY25: Report

*Business Standard*

📝 Amalgamation not on cards, focus on internal consolidation, says PNB MD

📝 Aadhaar enrolment, update services by banks, post offices to stay: UIDAI

📝 As power plants graple with shortages, coal imports up 35% to 21 MT in Sep

📝 IPOs, FPOs, ESoPs exempted from STT for availing of concessional 10% LTCG

📝 Govt plans to give significant autonomy to Air India's board, with a rider

📝 IL&FS board likely to meet again this week; to chalk out course of action

📝 China empowers banks to pump $109 bn into economy hit by trade war

*Financial Express*

📝 Fund raising via IPO slumps 53% to Rs 12,470 crore in April-September FY19

📝 Government plans to auction over 100 mineral blocks by March 2019

📝 Indian aviation sector is vibrant, country a strategic market: Lufthansa

📝 India’s drone market expected to grow $885.7 mn by 2021

📝 Indiabulls Housing expects over 20% growth in current fiscal

📝 Bankruptcy Code will deepen Indian corporate bond market: Assocham

📝 Tech Mahindra expects 30-40 pct growth in cyber security business

📝 Fujifilm India forays into endoscopy segment; expects to contribute 10 pct of medical business

*Mint*

📝 Reliance hikes petrochemical prices to offset rising oil

📝 HNIs, retail investors shun IPOs amid market turmoil

📝 Shapoorji Pallonji arm plans land monetization programme

📝 Opic looking to invest in late-stage Indian start-ups

📝 Greenko-Orange deal back on the table

📝 No swift resolution in sight for Essar Steel’s legal quagmire

📝 Govt panel set to probe e-tailers’ big discounts.