Types of charges

Types of Charges : Very simple way

Purpose, Various types of charges:
1. Pledge - It is used when the bank (or, lender, known as pledgee) takes
actual possession of the securities, such as goods, certificates, golds,
etc, (you provide it to bank to avail loan) which are generally movable in nature.

Bank keeps the securities with itself, and provide loan to you.
Bank will return the securities (possession of goods) to you (borrower,known
as pledgor), after you repay all the debts (i.e., loan) to the bank. In case you
are unable to pay back, then the bank has the right to sell the assets,
and recover the loan amount (with interest).
Example - Gold loans, Jewellry loans, warehouse finance.
2. Hypothecation - It is used when you (borrower) have the
actual possessionof the asset, for which you have taken the loan. Generally,
this is charged against loans for movable assets, like car, bus, etc.
(i.e., vehicle loans). Here, the assets (bus, car, etc.) remain with you, and you
are hypothecated to the bank for the loan granted.
In case you are unable to repay the loan amount, then the bank has the right
to sell the asset (bus, car, etc.), (which is possessed by you) and recover the
total amount (with interest).
Example - Car loans, Bus loans, etc.
3. Mortgage - It is used when you (borrower) have the
actual possession of the assets, for which you are granted loan (e.g., house
loan), or against whichyou are granted loan (e.g., house
mortgaged). Mortgages are generally those assets, which
are permanently attached with Earth surface, like house, land, factory etc.
In case you are unable to repay the loan amount, the bank has
the right to seize and sell the mortgage, and recover the loan amount (with
interest).
4. Lien - It is almost similar to Pledge, except that in case of lien,
the lendercan only detain the asset/goods until the borrower repays the loan,
but have no right to sell the asset, unless explicitly declared in the lien
contract. (For a pledge, the lender can sell the asset, if the borrower is unable
to pay the loan). Loan against FD is a lien .
5. Assignment: It is done in case of loan is provided on documents of some
other organization. Like, Loan against assignment policies, NSC, etc. A
notification is required to be sent to the concerned organization to inform that the
original document is with you as a security for loan. Else, the customer can apply
with indemnity to the concerned organization for issuance of duplicate doc and
defraud you.

ECGC case study

Advances covered by ECGC guarantee( USEFUL FOR CAIIB AND CCP)
In the case of advances classified as doubtful and guaranteed by ECGC, provision should be made only for the balance in excess of the amount guaranteed by the Corporation. Further, while arriving at the provision required to be made for doubtful assets, realisable value of the securities should first be deducted from the outstanding balance in respect of the amount guaranteed by the Corporation and then provision made as illustrated hereunder:

Example::

Outstanding Balance Rs. 4 lakhs
ECGC Cover 50 percent
Period for which the advance has remained doubtful More than 2 years remained doubtful (say as on March 31, 2014)
Value of security held Rs. 1.50 lakhs

Provision required to be made

Outstanding balance Rs. 4.00 lakhs
Less: Value of security held Rs. 1.50 lakhs
Unrealised balance Rs. 2.50 lakhs
Less: ECGC Cover
(50% of unrealisable balance) Rs. 1.25 lakhs
Net unsecured balance Rs. 1.25 lakhs

Provision for unsecured portion of advance Rs. 1.25 lakhs (@ 100 percent of unsecured portion)
Provision for secured portion of advance (as on March 31, 2012) Rs.0.60 lakhs (@ 40 per cent of the secured portion)
Total provision to be made Rs.1.85 lakhs (as on March 31, 2014)

Basic accounting terms

Basic Accounting Terms::

The understanding of the subject becomes easy when one has the knowledge of a few important terms of accounting. Let us go through some of them.

Transactions
Transactions are those activities of a business, which involve transfer of money or goods or
services between two persons or two accounts. For example, purchase of goods, sale of
goods, borrowing from bank, lending of money, salaries paid, rent paid, commission
received and dividend received. Transactions are of two types, namely, cash and credit
transactions.

Cash Transaction is one where cash receipt or payment is involved in the transaction. For
example, When You buys goods from a seller paying the price of goods by cash
immediately, it is a cash transaction.

Credit Transaction is one where cash is not involved immediately but will be paid or
received later. In the above example, if You, do not pay cash immediately but promises to
pay later, it is credit transaction.

Proprietor
A person who owns a business is called its proprietor. He contributes capital to the business
with the intention of earning profit.

Capital
It is the amount invested by the proprietor/s in the business. This amount is increased by the
amount of profits earned and the amount of additional capital introduced. It is decreased by
the amount of losses incurred and the amounts withdrawn. For example, if Mr. Ram starts
business with Rs.10,00,000, his capital would be Rs.10,00,000.

Assets
Assets are the properties of every description belonging to the business. Cash in hand, plant
and machinery, furniture and fittings, bank balance, debtors, bills receivable, stock of
goods, investments, Goodwill are examples for assets. Assets can be classified into tangible
and intangible.

Tangible Assets: These assets are those having physical existence. It can be seen and
touched. For example, plant & machinery, cash, etc.

Intangible Assets: Intangible assets are those assets having no physical existence but their
possession gives rise to some rights and benefits to the owner. It cannot be seen andtouched. Goodwill, patents, trademarks are some of the examples.

Liabilities
Liabilities refer to the financial obligations of a business. These denote the amounts which a
business owes to others, e.g., loans from banks or other persons, creditors for goods
supplied, bills payable, outstanding expenses, bank overdraft etc.

Drawings
It is the amount of cash or value of goods withdrawn from the business by the proprietor for
his personal use. It is deducted from the capital.

Debtors
A person (individual or firm) who receives a benefit without giving money or money’s
worth immediately, but liable to pay in future or in due course of time is a debtor. The
debtors are shown as an asset in the balance sheet. For example, Mr. Ravi bought goods on
credit from Mr. Ram for Rs.10,000. Mr. Ravi is a debtor to Mr. Ram till he pays the value
of the goods.

Creditors
A person who gives a benefit without receiving money or money’s worth immediately but
to claim in future, is a creditor. The creditors are shown as a liability in the balance sheet. In
the above example Mr. Ram is a creditor to Mr. Ravi till he receive the value of the goods.

Purchases
Purchases refers to the amount of goods bought by a business for resale or for use in the
production. Goods purchased for cash are called cash purchases. If it is purchased on
credit, it is called as credit purchases. Total purchases include both cash and credit
purchases.

Purchases Return or Returns Outward
When goods are returned to the suppliers due to defective quality or not as per the terms of
purchase, it is called as purchases return. To find net purchases, purchases return is
deducted from the total purchases.

Sales
Sales refers to the amount of goods sold that are already bought or manufactured by the
business. When goods are sold for cash, they are cash sales but if goods are sold and
payment is not received at the time of sale, it is credit sales. Total sales includes both cash
and credit sales.

Sales Return or Returns Inward
When goods are returned from the customers due to defective quality or not as per the terms
of sale, it is called sales return or returns inward. To find out net sales, sales return is
deducted from total sales.
Stock
Stock includes goods unsold on a particular date

Stock includes goods unsold on a particular date. Stock may be opening and closing stock.
The term opening stock means goods unsold in the beginning of the accounting period.
Whereas the term closing stock includes goods unsold at the end of the accounting period.
For example, if 5,000 units purchased @ Rs. 30 per unit remain unsold, the closing stock is
Rs. 1,50,000. This will be opening stock of the subsequent year.
Revenue
Revenue means the amount receivable or realised from sale of goods and earnings from
interest, dividend, commission, etc.
Expense
It is the amount spent in order to produce and sell the goods and services. For example,
purchase of raw materials, payment of salaries, wages, etc.
Income
Income is the difference between revenue and expense.
Voucher
It is a written document in support of a transaction. It is a proof that a particular transaction
has taken place for the value stated in the voucher. It may be in the form of cash receipt,
invoice, cash memo, bank pay-in-slip etc. Voucher is necessary to audit the accounts.
Invoice
Invoice is a business document which is prepared when one sell goods to another. The
statement is prepared by the seller of goods. It contains the information relating to name and
address of the seller and the buyer, the date of sale and the clear description of goods with
quantity and price.
Receipt
Receipt is an acknowledgement for cash received. It is issued to the party paying cash.
Receipts form the basis for entries in cash book.

MSME

ABCD OF MSME :::: Excellent Content plz read everybody..

1.Keynote address delivered by Shri S. S. Mundra, Deputy Governor, Reserve Bank of India at the 2nd CII
National Conference on MSME Funding held in New Delhi on August 23, 2016 ).
Thank you for inviting me to deliver the keynote address at this second edition of the Conference on
MSME Funding. I compliment the CII for having chosen a very relevant theme for the Conference
‘Propelling MSME Growth through Enhanced Financial Access and Support’. The theme lays emphasis on
two crucial pillars that are pertinent for the sector i.e. enhancing financial access and ensuring adequate
support to enable MSMEs to attain faster growth.
2.It is universally recognized that small businesses are the best vehicles for generate jobs. A IFC
/Mckinsey Study has estimated worldwide MSME population at 420 to 510 million, of which 360 to 440
million alone, are in emerging markets. The report also estimates that the formal SMEs contribute up to
45 percent of total employment and up to 33 percent of national income (GDP) in emerging economies
and these numbers could be significantly higher when informal SMEs are included. The Asia SME Finance
Monitor 2014 published by the Asian Development Bank has estimated that 96% of all enterprises in the
Asian region fall under the MSME category, absorb close to 2/3rd of the working force and contribute to
about 42 % of GDP.
3. According to MSME Ministry’s Annual Report for 2015-16, MSME sector in India today is a network of 51
million enterprises providing employment to 117.1 million persons and contributing 37.5 per cent of
India’s GDP2
. The development of this sector is, therefore, crucial in generating significant levels of
employment across the country, more so since we have a large young and educated population which is
on lookout for employment.
MSME – Significance beyond job creation
4. While job creation is certainly critical, small businesses play a far greater role than just providing
employment. Let me state two key contributions of MSME sector here.
5.One, the MSME sector is a nursery for entrepreneurship and a school for innovation. Countless medium
and large corporates in India have evolved out of being micro and small sometime in not so distant past. I
am sure many in the audience here, who own fairly large businesses today, would have cut their teeth in
business through the route of micro and small enterprises.
6. Secondly, MSME sector is crucial for the success of the national agenda of Financial Inclusion. Let me
explain. Normally, when we talk about financial inclusion, we do so largely from the perspective of an
individual or at best a household. However, to my mind, universal financial inclusion cannot be considered
to have been achieved unless it is ensured that the micro and small businesses are financially included.
Credits to these small family run or individual run entities from the formal financial channels would make
these businesses sustainable and help them move out of poverty and propel them to a better quality of
life.
7. The surmise that I am trying to drive at is that if this is the sector that is the bulwark for such criticaldevelopmental paradigms, there are compelling enough reasons for all stakeholders- be they the
Associations, the Financial Institutions, the regulators or the Government, to put all their might together
in a convergent fashion so that the right environment is created to propel growth of MSMEs in our
country.
8. For achieving this objective, there is a need to create an ecosystem which can facilitate handholding
and nurturing of MSME units particularly at the nascent stages. Also, there is a need to eliminate a host of
impediments – of permits, of inspections, of red tape and provide a set of enablers – skill development,
infrastructure, markets, technology etc. However, of all the enablers, probably none is more important
than Credit. The IFC/Mckinsey has estimated the credit gap for formal and informal MSMEs worldwide at
around $ 3.9 trillion globally, of which $2.1 to 2.6 trillion is in emerging markets.
The ABCD of Credit
9. As I said, credit is perhaps the most critical component for MSME entrepreneurs. Provision for Credit is
essentially dependent on four pivotal issues which I would call ‘ABCD’ of credit. Let me take you through
each of them and also explain what we are doing to iron out these issues.
a) The Á of Credit –Access/Availability
10. The 4th All India survey of MSMEs states that close to 90 per cent of MSMEs are dependent on
informal sources, which by any standards is a worrisome figure. Since that survey, some headway must
have been made in improving MSMEs’ access to formal financial channels; however, it still remains a
challenge. The public sector banks today have close to 3000 specialized branches which specialize in
lending to MSME units. Private sector banks have built up products and processes, which enable quick
disbursal of loans. Most banks have switched over to centralized credit sanctioning, which enables better
turnaround time. Many others have increased the credit limits to the field level functionaries. While these
steps have improved access, there is still a huge unmet demand for credit for MSMEs. (There is a total
finance requirement of INR 32.5 trillion ($650 billion) in the MSME sector, which comprises of INR 26
trillion ($ 520 Billion) of debt demand and INR 6.5 trillion ($130 Billion) of equity demand).As per
provisional data for period ended March 2016, total outstanding loan of the banking system to MSME
sector stood at around 11.1 trillion rupees in 20.6 million loan accounts. Contrast this to the estimated
need of INR 26 trillion and number of MSMEs at 51 million.
11. An important piece of the problem is adequacy of banking outlets. Small entrepreneurs are spread
across remote locations in the country where physical bank branches are not available. Also, the banking
correspondent mechanism is yet to mature to a level where they can play a key role in credit disbursal.
Second and perhaps a more import dimension is availability of credit at a time when it is required by the
entrepreneur. Ability of small entrepreneurs to withstand life cycle shocks is extremely limited and hence
availability of timely credit becomes critical for their survival. The formal financial system, due to a variety
of reasons, which may include cumbersome procedures, lack of understanding of the business model,
inability of the entrepreneur to meet the requirements of the banks etc., is unable to meet this immediate
need of the entrepreneur.
b) ‘B’- Banks and Business
12. ‘B’ in the ‘ABCD’ paradigm of credit fundamentally refers to the information asymmetry between the
two Bs – Banks and Business.
The United States Agency for International Development (2009) defines a financially literate SME
owner/manager as “someone who knows what are the most suitable financing and financial management
options for his/her business at the various growth stages of his/her business; knows where to obtain the
most suitable products and services; and interacts with confidence with the suppliers of these products
and services. He/she is familiar with the legal and regulatory framework and his/her rights and recourse
options.”
13.I don’t think that majority of the MSME entrepreneurs in the country today meet the criterion.
Financial literacy in the context of a MSME focuses on an individual’s ability to translate financial literacy
concepts to business needs. Financial literacy is essential for effective money management and low levels
of financial literacy hinder the understanding of available financial products and services. MSE
entrepreneurs are also constrained by lack of operational skills, accounting and finance acumen, business
planning etc. which underscores a need for facilitation by banks/other agencies.
14. However, it is not a one way street. Large-scale retirements in banks in recent years have also
adversely impacted the collective skill-sets available at the field level in understanding, appraising and
monitoring the MSME loan portfolio. The poor underwriting skills leads to avoidable under or ovefinancing, which can have a telling effect on the health of the MSME units, particularly in adverse life cycle
situations.
c) ‘C’- Collateral Requirements
15. The formal financial institutions particularly banks consider lending to MSMEs as highly risky since the
entrepreneurs often do not possess adequate collateral to support the credit. Very often, the loans are
rejected, despite the project prima facie, being feasible. While there are several dispensations to tide over
the problem, the credit culture has not matured enough to a level existing in developed economies where
lending is done against the assets of the firm including its movable assets. This also necessitates that we
build up strong financial infrastructure, which would support the banks in lending to these sectors without
worries and using all types of assets available to secure the loan. It is also pertinent for banks to realise
that though the loan to the individual entities in the sector may be riskier on a solo basis, overall on a
portfolio level, these are less vulnerable than loans to corporate.
d) ‘D’- Documentation
16. Many of the MSMEs, particularly the Micro units, do not have adequate documentation to match the
rigours of a formal financial system. Absence of documentation drives the small entrepreneurs to informal
sources that are willing to provide credit with minimum documentation. Further, a vast majority of the
MSMEs are informal, which brings down the credit score of the entrepreneur and hinders the ability of the
formal financial system to lend to them. Banks, on their part will need to leverage on modern technology
algorithms and Big data so that they can differentiate between a good borrower and a not so good one
even in the absence of conventional documentation.
17. Having analysed various impediments in finance to the sector let me dwell on some of the steps
taken by RBI, Government of India and other Apex institutions in bridging these gaps.
(i) Access/ Availability
RBI has initiated several measures to improve the availability of banking services, especially in the rural
and far-flung areas where access to formal finance is arduous.
18. New institutions: As you are aware, two new universal banks have started operations while in-
principle approval has been granted to 10 entities to set up Small Finance Banks that would primarily
focus on lending to unserved and underserved sections including small business units, small and marginal
farmers, micro and small industries and unorganized
sector entities. These small finance banks have been mandated to extend 75 per cent of its Adjusted Net
Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve
Bank. At least 50 per cent of its loan portfolio should constitute loans and advances of up to Rs. 25 lakh.
Many of the SFBs have prior experience of working with small businesses as MFIs/NBFCs and we believe
that they will be able to bring in technology backed innovative last mile practices to serve their
customers.
19. Increased branch penetration/ Specialized branches: RBI has advised banks to set up ‘brick and
mortar’ branches in villages with population of more than 5000 in a phased manner. Coupled with a more
mature Banking Correspondent mechanism, this would give considerable fillip in meeting the banking
needs of the MSMEs particularly in rural areas. Besides, creating presence of physical branch, there is
also a need to have large number of bank officials with appropriate skill sets and knowledge to handle
the life cycle needs of the small businesses. Already, Public Sector banks have established specialized
MSME branches in every district to cater to the needs of the small businesses. We are already working
towards improving the skill sets and entrepreneurial sensitivity of the field level functionaries.
20. P2P lending: New players have entered the MSME lending landscape in form of P2P companies. These
entities use an online platform to match lenders with borrowers to provide unsecured loans and mostly for
receivables financing. P2P lending has great potential as an alternative form of low-cost finance as it can
reach to the needy where formal sources are unable to reach or unwilling to lend. RBI has been mindful of
a need to regulate these entities without stifling their ability to innovate and is currently in the process of
issuing final guidelines on P2P lending.
21. Policy intervention for Life Cycle Issues: We have advised the banks to keep a provision for
additional credit limits (Standby Credit Facility for term loans and an additional provision within the overall
working capital limits) in order to provide timely financial support to Micro and Small enterprises facing
financial difficulties during their lifecycle. Banks have also been advised to carry out mid-term review of
regular working capital limits and fix up timelines for credit decisions. I am happy to say that most banks
have put in place similar provisions in the last one year or so.
22. Co-origination of loans: While several steps have been taken to address the problems related toaccessibility, there are certain structural problems which would take their own sweet time in getting
sorted out. One of this is the issue of reaching the last mile. Much as we have encouraged the banks to
establish brick and mortar branches across remote villages, we must be conscious that they would always
be driven by viability assessments/
cost considerations. One possible solution for this problem could be convergence of efforts between banks
on one hand and the NBFCs, MFIs on the other, who have ‘feet on the ground’ in such locations, better
understanding of the local conditions and business viability, better knowledge about the credit worthiness
of individuals, their repayment capabilities etc. Could we envisage a framework for co-origination of
loans by banks and the NBFCs/MFIs with risk participation? While it would ensure skin in the game
for both parties, it would benefit the entrepreneurs in terms of cost of credit, which on account of blending
could be substantially lower. This could probably be the most ideal structure to serve the micro
enterprises who are the most deprived in terms of availability of credit.
(ii) Banks and Business
23. Let me now turn my focus to steps for bridging the information asymmetry between the banks
and the businesses. As I mentioned earlier, this is not a one-way street. Not only are the small
entrepreneurs often ignorant about banking products and practices, several bankers have little
understanding of the lifecycle credit needs of small businesses. Towards covering this base, RBI has
started a capacity building initiative called the National Mission for Capacity Building of Bankers for
financing MSME Sector (NAMCABS) in a mission mode. The field level functionaries must appreciate the
importance of two critical pillars of financing MSME sector viz., timeliness and adequacy of credit. I am
happy to state that close to 3300 officials of the banks have undergone this programme in the last one
year.
24. Credit Counsellors : For bridging the information asymmetry on the MSME borrowers side, RBI is
initiating a process for putting in place a framework for accreditation of credit counsellors who are
expected to serve as facilitators and enablers for micro and small entrepreneurs. Since MSMEs are
typically enterprises with little credit histories and with inadequate expertise in preparing financial
statements, credit counsellors will assist the borrowers in preparing their project reports and also help
banks make better informed credit decisions.
25. Revival and Rehabilitation of MSMEs: Another key step in the direction of supporting the firms in
distress is the issuance of guidelines on the Framework on Revival and Rehabilitation of MSMEs, which
provides an institutionalized framework for rehabilitation of enterprises which are potentially viable, but
are under temporary duress. The Framework provides for a structured mechanism, which could be
triggered either by the banker or by the entrepreneur at the first signs of stress. The problem resolution is
scaled up to a committee with a time bound schedule. I see this as a very powerful tool and urge upon
the bankers to get this process rolling at the earliest.
(iii) The difficult ‘C’s -Credit and Collateral
26. The issue of finding the right balance in securing a loan without pushing the borrower to informal
sector has been a bugbear for the banking system. This is sought to be addressed through creation and
development of right institutional structures. Let me delve upon some of these efforts:
27. Movable Asset Registry: Movable assets, as opposed to fixed assets such as land or buildings, often
account for most of the capital stock of private firms and comprise an especially large share for micro,
small and medium-size enterprises. Hence, movable assets are the main type of securities that firms can
pledge to obtain bank financing. I am happy to state that CERSAI, in active coordination with Government
of India and Reserve Bank has established the movable asset registry, which when mature would have a
multiplier effect in lending to the sector.
28. TReDS: In order to solve the problem of delayed payment to MSMEs, RBI has licensed three entities
for operating the Trade Receivables Discounting System (TReDS). The system would facilitate the
financing of trade receivables of MSME enterprises from corporate and other buyers, including
government departments and public sector undertakings (PSUs) through multiple financiers. The
objective is to create Electronic Bill Factoring Exchanges which could electronically accept and settle
bills so that MSMEs could encash their receivables without delay. It is expected that the TReDS will
commence operations within this current fiscal. It would be important that the use of TReDS is
made mandatory for, to begin with corporate and PSUs and later for the Government
departments. I would urge the Chambers and the MSME Ministry to proactively examine this
aspect as success of TReDS initiative can be a game changer for the sector.
29. Utility of the Credit Guarantee Scheme: Realizing the problems of small borrowers in posting
collaterals, RBI has asked the banks not to insist on collateral in case of loans up to Rs 10 lakh extendedto units in the MSE sector. Also, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
has been set up to encourage the Member Lending Institutions to extend credit based on the viability of
the proposal rather than insisting on security or surety. Based on practical experience however, I tend to
believe that these provisions have not led to desired outcomes. Let me elaborate.
On one hand, the guideline on collateral-free loans has led banks to at times devise ways of denying
credit to the MSMEs borrowers, while on the other extreme, the provision for credit guarantee has
potential to cause deterioration in quality of credit appraisal and due diligence, consequently straining
the resources of the CGTMSE. Clearly, both outcomes are undesirable. I would rather advocate that
borrower is compensated by way of a better pricing in loan for the availability of collateral. Further, I
would also like to see the CGTMSE to evolve a framework for making the pricing risk-based rather than
having a uniform risk premium related to the past performance and quality of individual portfolios.
Eventually, this activity should also move to an open market system.
(iv)The Cumbersome ‘D’- Documentation
31. The absence of credit history and the need for documentation often pushes the micro
entrepreneur away from conventional banking channels to the more informal sectors. This has to be
addressed through a constant process of simplification of procedures and more importantly by leveraging
technology.
32. Udyami Mitra portal set up by SIDBI leverages IT architecture of Stand-Up Mitra portal and
aims at instilling ease of access to MSMEs’ financial and non-financial service needs. The Portal, as a
virtual market place endeavours to provide 'End to End' solutions not only for credit delivery but also for
the host of credit-plus services by way of hand holding support, application tracking, multiple interface
with stakeholders (i.e. banks, service providers, applicants).We could see development of more such
technological interfaces in the coming days making it easier for MSME entrepreneurs to borrow from the
banking system. RBI is committed to support such initiatives with appropriate safeguards and consumer
protection measures.
33. Role of Associations: The entrepreneur and Industry bodies have a significant role to play in
linking, maintaining and sustaining the borrower-banker relationship. This could be in handholding,
enabling and capacity building of the new entrepreneurs. As you are aware, the BCSBI has formulated a
Code of Bank's Commitment to Micro and Small Enterprises for voluntary adherence by the banks. The
industry associations must also spread awareness about various facilities available/guidelines issued by
the regulators to bridge the information asymmetry.
Conclusion
34. Let me conclude by going back to the theme of propelling growth of MSMEs. In using the term
‘propel’ you have underlined the sense of urgency that is required in this area. Our demographics compel
us to push forward this agenda and make quantum jumps so that entrepreneur can start and drive
businesses without worrying about finance. We are committed to this paradigm shift and the slew of
measures that are being taken by the RBI

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These Books might seem bulky but has covered the entire syllabus & has everything you need to know. The Book is designed in a way that 1can easily be prepared by just reading the definition & summary. the MCQs will give you a fair Idea of level of preparations.
If you don't have enough time & don't want to study IIBF Books, you can by the Books JAIIB/CAIIB by N.S.Toor, which are in QA format.
2. KNOW YOUR SYLLABUS: As a Banker it's likely that there will not be a lot of time left for studies after a hectic day of work. Hence it's best to start early. the Idea is to plan for the Syllabus & Time them so that the Level of Preparedness is High. Knowing your syllabus will give Idea, how much time need to prepare.
If you've been a Commerce student, you'll find the AFB & some part of LRAB, you've already covered during your studies earlier. So 60% of your Job is already done. You can mark these topics & focus on those topics which you've not studied earlier.
If You've been Arts/Science & Engg Student, everything is New for you & need to prepare for everything..

3. MAKE A STRATEGY FOR STUDYING: ( I've already posted about JAIIB-CAIIB Study Strategy & Study Plan a Month Ago, You must keep follow them out of action).

4. PRACTICE & ATTEMPT SOME MOCK TESTS: Another great step is to find out previous 3years Question Papers. Prepare them all leaving 1 which will work as a model test before you actually face the Exam. the Idea is to practice a lot of question type compared to cramming. You can attempt in JAIIB-CAIIB Forum, Blogs website 'Free Mock Tests for JAIIB-CAIIB', which will give you an Idea how the actual exam is held. attempting Mock Test help you practice the actual Exam conditions.
5. ON THE ACTUAL TEST DAY: Choose the easy questions 1st as they will give you an estimate of the Score. then come back to the Questions which were missed. Also, there's No NEGATIVE (-) Marking, so attempt all Questions. If you stuck in a question, leave that by Marking & Go ahead..

ALL THE VERY BEST.
WISH YOU GOOD LUCK...

Ten Mistakes to avoid while preparing for CAIIB exam

Ten  Mistakes to avoid while preparing for CAIIB exam

1.Not allocating sufficient amount of Study time daily:
This is a very common mistake done by many CAIIB aspirants, Cramming the information before the night of the exam or before two days may helped you in JAIIB examination (Although it is a wrong way of preparation).  But here in CAIIB examination it won’t help you to even score thirty marks. A thorough understanding of concepts are needed for almost all topics so having a daily study routine is must for all aspirants.
I know it is very tough to find time during our busy banking hours. If you don’t have time for continuous 2 hrs then split the study hours into three or four sessions of 30 to 40 minutes a day. Since syllabus of CAIIB subjects cover many topics; In depth understanding of each topic is also needed to answer questions that test our knowledge, analytical skills and problem solving skills.  So daily allocating sufficient amount of study time is necessary.
2.Not having clear focus on optional paper:
Selecting the correct optional paper and having clear focus on it, is must for successful completion of CAIIB exam. Although the Retail banking and Financial Banking are easy papers to clear, You need choose your optional paper based on your knowledge, interested areas in banking and career development. Don’t follow others recommendation for optional paper blindly. You have to analyse and decide your optional paper.
Remember CAIIB is not only for increments; it also provides many useful theoretical knowledge in different areas of banking.

3.Not learning the basic concepts:
Every topic of a subject has basic and fundamental concepts to be learnt by heart. Learning them thoroughly makes us to understand the more complex concepts. Complex concepts are nothing but complex combination of simple and basic concepts. We should have studied the fun1damental concepts in JAIIB (who knows it now ;P ;)). If not revise it then and there when it is required.
To learn the fundamental concepts of economy, business maths, accountancy you can refer more books from your commerce background friends. Remember learning complex concepts won’t be useful if you don’t understand the fundamental concepts behind them.

4.Not understanding and giving importance to syllabus:
In any examination if we want to pass that exam we should thoroughly understand the syllabus first.  Because understanding the syllabus will give us a clear picture of what we are going to learn. We also get some insights about the subject. It also helps us to have an idea whether we are familiar with that topic or not. This will help you to assess the complexity of the subject and how much time you need to spend with a topic.
Give importance to syllabus helps to choose the right books for our preparation. Because there are materials that doesn’t cover the full syllabus (only the main areas of the syllabus) are available free in many study groups and websites. Aspirants who doesn’t aware of syllabus simply read those material and attend the exam.

5.Not having a preparation strategy and study plan
This is a common mistake many aspirants do, thinking there is no necessary for planning your study. They even think it is a waste of time. Whatever excuses we give, having a preparation strategy and study plan is must for any type of exam. It will help us to be goal oriented and stay focused of our target. If you do your targeted studies every day, it will make you motivated. As your progress through your schedule you will feel relaxed and your stress level for exam is reduced.
Creating a schedule will hardly take one to two hours of your time. While creating a schedule of your own you will also analyse the syllabus. There are many benefits can be pointed for having a good study plan. Though the initial effort may look too much; But the benefits are fruitful and long-lasting.
6.Not taking effective notes while studying itself
Many aspirants not even consider taking notes is a part of study. While studying if you take notes you will give importance to details. Giving importance to details will make you to ask more questions and to find short answers for it. This enhances your understanding about the topic. It also makes you to break down the contents of your learning in an easy way. Therefore your memory increases and whenever you see the notes you can recollect the content.
Thus taking notes helps you for better and easy revision. I know it is time consuming but once you are familiarised, it will be easy for you to take notes. Because your eyes can spot the important detail easily; Your mind organise them with an analogy for easy remembrance.

7.Not solving and practising mathematical problems:
Unlike JAIIB, here calculations, formulas and case studies are very important. You definitely need to solve all the problems in your study materials and work books you got. Don’t simply study a formula using one example of a problem related to it. Change the parameters and create problem of your own then solve it. By doing so, you will learn about importance of each parameter of the formula.
Practice, Practice, Practice!!!!!. There is no replacement for practising when solving problems, case studies and balance sheet analysis. When solving problems related to Balance sheet also use the same method as described above. There by we can improve our problem solving skills and analytical skills

8.Not revising the topics regularly:
Many aspirants ignore the importance of revising, stating there is no time for revising. If you are not making study plan you will not even find time to complete the syllabus. So no excuses, use your notes to revise the topic at regular intervals. For example every Sunday spare  20 to 30 minutes for revising, in addition to your study time.
 “Revise little but often” is the key strategy. Repeated revision make you feel bored and gives a feeling “Ahh!!! I know it. Don’t need to study”. But it makes you to master a topic; If five questions are asked from a single topic for knowledge testing; You can answer all, with 100% accuracy. 
9.Not learning from the mistakes:
The biggest and costliest thing is learning from your mistake. If you have failed in an attempt, accept the failure and analyse where you lacked. When I say accept your failure that doesn’t mean to blame yourself. It means asking yourself questions related to find the cause of the failure. What is the main reason for non completion of the syllabus? In which topic i should improve my knowledge? etc,. How can I improve my reading ability further?
The answer to the questions should not be too general. It should be specific to spot your weakness. When you find your weakness please work on it. Nobody is perfect in the universe; So find your weakness and mistakes; Try to rectify it before your next attempt.

10.Not using the technology for proper and effective preparation of exam:
Because of the technology we can study anything from anywhere. So use your mobile, internet, websites, facebook communities,forums and blogs etc,.You can get any information from internet in just a single click or a single press of your finger. I am not saying you to depend on them but to use them as effectively as possible. So do your search whatever you feel useful subscribe to them.
Also many websites offering free mock test use them to test your knowledge. While giving mock test take it as serious as an exam. Then only you can know your time management under pressure and boosts your confidence.

Strategy for jaiib caiib

DEAR JAIIB/CAIIB ASPIRANTS.
Preparation Strategy & Study Plan for JAIIB/CAIIB Exam..

JAIIB/CAIIB Exam needs some dedicated preparation to crack the exam (Especially for the Non-Commerce Graduates). Many young bankers prepare for they exam only during the Last Week. Then they write 1Paper after getting Low Marks, they simply give up the attempt. Some take 2days leave before the Exam & Prepare for it eventually they fail because of shortage of 4-5 Marks. These strategies may work for 5 talent Bankers but not for all. After your busy working hours daily you've to spend some time for preparation of the exam. Since most of you are very new to the Banking Industry & Its concepts. You need regular revisions to familiarise with the concept. So all it needs a self disciplined & determined mind to prepare for the Exam.

-Allocation of Study Time: Daily You need to spend at least 1-2 hours a day for preparation of the Exam. Cramming before the Exam Night or before 2days won't help for understanding the information. It may help for 5 direct questions but it won't be useful for complex questions. Also You wont have enough time to complete the syllabus & will lead to anxiety & stress. Sacrificing your sleep before the exam night will also make you counterproductive so it better to study every day.
- Importance of Studying Daily: Studying daily & revising regularly helps to familiarise with concepts. It also helps to understand the info. Having a study routine is not only helpful for exam but also improves your reading habit which every Banker needs, as your industry is very dynamic. In hectic banking hours finding time for continuously 2 hours a daily is very hard. But having small sessions of 30-40 mins thrice in a day is easy to find. In the era of smart phones, you can study anything at anywhere so when you find a spare time please use it.
- Study Material: For Preparation, I strictly recommend the 3 comprehensive courseware developed by IIBF, published by MacMillan for each

Some important acts

#Some_Important_Acts



🔴NEGOTIABLE INSTRUMENTACTS -1881



⚫Section 4 :- Promissory Notes

⚫Section 5 :-Bill of Exchange

⚫Section 6 :- Cheque

⚫Section 13 :- Negotiable instrument

⚫Section 123 :- Cheque Crossed Generally

⚫Section 124,126 : -Cheque Crossed Specially

⚫Section 130 : -Cheque bearing Not Negotiable

⚫Section 118 :- Presumption as to Negotiable instrument



🔴RESERVE BANK ACT (RBI ACT 1934)



⚫Section 17 :- Define Banking Business

⚫Section 18 :-Deals With Emergency Loan To Bank

⚫Section 22 :-Exclusive Rights To Issue Currency Notes In India

⚫Section 24 :-Maximum Denomination a Note Can Be Rs 10,000

⚫Section 26 :- Describe The Legal Tender Character of Indian Bank Notes

⚫Section 28 :-Form Rule Regarding The Exchange Of Damaged and imperfect Notes

⚫Section 31 :-In India only RBI or the central government issue and accept promissory notes that are payable on demand

⚫Section 42 :-Every schedule bank must have an average daily balance with RBI



🔴BANKING REGULATION ACT -1949



⚫Section 10 :-Power of RBI to appoint chairman of banking company

⚫Section 11 :-Recruitment as to minimum capital and reserve.

⚫Section 12 : -Regulation of Paid of capital, authorized capital,voting rights of shareholder

⚫Section 21 :-To control advances by banking company

⚫Section 21(A) : - Rate of interest charged by banking company

⚫Section 22 :- license of banking company

⚫Section 23 :-Restriction on opening transfer of business

⚫Section 29 :-Account and balance sheet

⚫Section 36 :-Power of central government to acquire banking company in a certain case

⚫Section 44 :-Amalgamation of banking company

⚫Section 47 :-Power of RBI to impose penalty



🔴Some Other Important Acts Related To Banking -



⚫SBI ACT: -1955

⚫SBI SUBSIDIARY ACT: - 1959

⚫DICGC ACT :- 1961

⚫EXIM ACT: - 1981

⚫NABARD ACT: - 1981

⚫RRB ACT: - 1976

⚫NHB ACT: - 1987

⚫SIDBI ACT :- 1989

⚫SARFASI ACT :- 2002

⚫FEMA ACT: - 1999

⚫CREDIT INFORMATION CORP :- 2005

⚫PMLA ACT: -2002

Kyc aml RECOLCTED on 23 March 2019

Recollected qns of kyc and aml- 23/03/2019

1. CBTR Is to be submitted- 15 th of every month.

2. Designated director- criteria

3. Str typology- benami entity/mlm activity

4.placement- one qn 

5. Integration

6. CKYC R - reporting entity

7. Small account-the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand

8. Funnel account

9.hawala system

10.CDD- fill form

11. UCIC - fullform

12. If SHG is opening SB account- kyc details is obtained for all members or few

13.can NRI student wants to open his SB account with introduction letter from principal

14.walk in customer has to provide kyc documents if amount involved is rs 50000 or more

15.4 to 5 qns from STR...

16.correspondant banking- regulatory actions and due diligence

17 .FATF- which is regional body among options

18. Egmont group- informal network of fiu

19. Fiu is responsible for

20. Terrorism comes under which - ministry of defense/ finance minister or govt

21. Staff training

22.money laundering

23. UAPA

24. SIFO is set up under ministry of corporate affairs

25. If customer comes for opening account - ekyc of customer has to be captured

26. Passport as ovd is for-  only nri/ only nro/ only if is issued under regional officer/ 

27. Risk categorisation

28.proprietary firm account can be opened which ovd among options.

29. PEP

30. Staff callousness- staff should not disclose banks policy and procedures with outsiders

31. Staff training should not  be given to senior MGMT/designated director/ board of directors/ shareholders

32. One qn on audit

33.Questions also on role of senior management, ekyc, vostro account,

KYC SHORT NOTES:3

 KYC SHORT NOTES:3

81.    The UAPA nodal officer of the State/UT may cause such inquiry to be conducted by the State Police so as to ensure that the particulars sent by the Registrar performing the work of registering immovable properties are indeed of these designated individuals/entities. This verification would be completed within a maximum of 5 working days and should be conveyed within 24 hours of the verification, if it matches with the particulars of the designated individual/entity to Joint Secretary(IS-I), Ministry of Home Affairs at the Fax telephone numbers and also on the e-mail id given below.

82.    In case, the results of the verification indicate that the particulars match with those of designated individuals/entities, an order under Section 51A of the UAPA would be issued within 24 hours, by the nodal officer of IS-I Division of MHA and conveyed to the concerned Registrar performing the work of registering immovable properties and to FIU-IND under intimation to the concerned UAPA nodal officer of the State/UT.

83.    Implementation of requests received from foreign countries under U.N. Security Council Resolution 1373 of 2001. : U.N. Security Council Resolution 1373 obligates countries to freeze without delay the funds or other assets of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities owned or controlled directly or indirectly by such persons; and of persons and entities acting on behalf of, or at the direction of such persons and entities, including funds or other assets derived or generated from property owned or controlled, directly or indirectly, by such persons and associated persons and entities. Each individual country has the authority to designate the persons and entities that should have their funds or other assets frozen. Additionally, to ensure that effective cooperation is developed among countries, countries should examine and give effect to, if appropriate, the actions initiated under the freezing mechanisms of other countries.

To give effect to the requests of foreign countries under U.N. Security Council Resolution 1373, the Ministry of External Affairs shall examine the requests made by the foreign countries and forward it electronically, with their comments, to the UAPA nodal officer for IS-I Division for freezing of funds or other assets. The UAPA nodal officer of IS-I Division of MHA, shall cause the request to be examined, within 5 working days so as to satisfy itself that on the basis of applicable legal principles, the requested designation is supported by reasonable grounds, or a reasonable basis, to suspect or believe that the proposed designee is a terrorist, one who finances terrorism or a terrorist organization, and upon his satisfaction, request would be electronically forwarded to the nodal officers in Regulators. FIU-IND and to the nodal officers of the States/UTs. The proposed designee, as mentioned above would be treated as designated individuals/entities. The freezing orders shall take place without prior notice to the designated persons involved.

84.    Procedure for unfreezing of funds, financial assets or economic resources or related services of individuals/entities inadvertently affected by the freezing mechanism upon verification that the person or entity is not a designated person

·        Any individual or entity, if it has evidence to prove that the freezing of funds, financial assets or economic resources or related services, owned/held by them has been inadvertently frozen, they shall move an application giving the requisite evidence, in writing, to the concerned bank, stock exchanges/depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State/UT nodal officers.

·        The banks stock exchanges/depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State/UT nodal officers shall inform and forward a copy of the application together with full details of the asset frozen given by any individual or entity informing of the funds, financial assets or economic resources or related services have been frozen inadvertently, to the nodal officer of IS-I Division of MHA as per the contact details within two working days.

·        The Joint Secretary (IS-I), MHA, being the nodal officer for (IS-I) Division of MHA, shall cause such verification as may be required on the basis of the evidence furnished by the individual/entity and if he is satisfied, he shall pass an order, within 15 working days, unfreezing the funds, financial assets or economic resources or related services, owned/held by such applicant under intimation to the concerned bank, stock exchanges/depositories, intermediaries regulated by SEBI, insurance company and the nodal officers of States/UTs. However, if it is not possible for any reason to pass an order unfreezing the assets within fifteen working days, the nodal officer of IS-I Division shall inform the applicant.

85.    Communication of Orders under section 51A of Unlawful Activities (Prevention) Act.: All Orders under section 51A of Unlawful Activities (Prevention) Act, relating to funds, financial assets or economic resources or related services, would be communicated to all banks, depositories/stock exchanges, intermediaries regulated by SEBI, insurance companies through respective Regulators, and to all the Registrars performing the work of registering immovable properties, through the State/UT nodal officer by IS-I Division of MHA.

86.    Regarding prevention of entry into or transit through India :As regards prevention of entry into or transit through India of the designated individuals, the Foreigners Division of MHA, shall forward the designated lists to the immigration authorities and security agencies with a request to prevent the entry into or the transit through India. The order shall take place without prior notice to the designated individuals/entities. The immigration authorities shall ensure strict compliance of the Orders and also communicate the details of entry or transit through India of the designated individuals as prevented by them to the Foreigners' Division of MHA.

87.    Procedure for communication of compliance of action taken under Section 51A :

The nodal officers of IS-I Division and Foreigners Division of MHA shall furnish the details of funds, financial assets or economic resources or related services of designated individuals/entities frozen by an order, and details of the individuals whose entry into India or transit through India was prevented, respectively, to the Ministry of External Affairs for onward communication to the United Nations.

88.    Clients of special category (CSC): Such clients include the following-

i.    Non resident clients

ii.    High net-worth clients,

iii.     Trust, Charities, Non-Governmental Organizations (NGOs) and organizations receiving donations

a.    Companies having close family shareholdings or beneficial ownershipPolitically Exposed Persons (PEP) are individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., Heads of States or of Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc.

b.      Companies offering foreign exchange offerings

vii.    Clients in high risk countries where existence / effectiveness of money laundering controls is suspect, where there is unusual banking secrecy, countries active in narcotics production, countries where corruption (as per Transparency International Corruption Perception Index) is highly prevalent, countries against which government sanctions are applied, countries reputed to be any of the following – Havens/ sponsors of international terrorism, offshore financial centers, tax havens, countries where fraud is highly prevalent. While dealing with clients in high risk countries where the existence/effectiveness of money laundering control is suspect, intermediaries apart from being guided by the Financial Action Task Force (FATF) statements that identify countries that do not or insufficiently apply the FATF Recommendations, published by the FATF on its website (www.fatf- gafi.org), shall also independently access and consider other publicly available information.

viii.   Non face to face clients

Clients with dubious reputation as per public information available etc. The above mentioned list is only illustrative and the intermediary shall exercise independent judgment to ascertain whether any other set of clients shall be classified as CSC or not

AMLKYC   Recollected Questions and Exam Tips::::

Kindly focus on case studies in Macmillan, international organization for AML, FATF  latest recommendations,PMLA act latest developments, Reports sent to FIU_IND

 1.high medium low risk categories kyc review period 3 questions came directly
2.Gave example of transactions and asked wat type of money laundering is that-funnel accts,deposit structuring,multiple tier account 3ques
3.IBA study group paper published 3 questions from that
4.Placment,layering, integration 1 case study each topic
5.hawala is wat type of ml
6.ml word is coined by the guardian in -watergate scandal
7.FIU IND based questions 6-8
8.5-7case studies one came from text book itself
9.OVD based questions 3
10.given options with type of customer and the documents they submit and asked which customer is eligible for opening sb
11.reporting entity have-designated director
12.designated director is appointed by
13.report submission questions 3
STR within 7 days
CTR within 15th of next month
14.kyc policy is revised by n within
15.key elements of STR

All 2 marks from case studies.

(Placement

Layering

Integration)

Funnel account

Copy of byelaws

Trust company percentage in shars or.profits

Ration card valid or not

Money laundering acts

Str

Ccr

Ftr

Max punishment for money laundering

Wolfsburg principle

Penality for pmla maintainance of records

How many years records to be maintained

Counterfeit notes more than 5

Dormant accounts

Customer not giving info abt the account, what action we have to take

Fatf

Banks under Wolfsburg grp

Small accounts max limits

Thresholds 3 questions

Reports around 4 to 5

Fiu ind, fatf around 5

Wire transfer direct questions like max limit, originator information

Front company

Red flag indicator

Risk category 3 questions around

Some direct questions like

Customer definition in kyc norms

Key elements in kyc policy

Non profit organization

Ckycr

Company trust partnership

Overall if we go though MacMillan book it's good enough to clear the exam..

Case studies are scoring part