Upload
prudhviraj
View
224
Download
0
Tags:
Embed Size (px)
DESCRIPTION
over of banking sector
Citation preview
BALANCE SHEET
LIABILITIES
CAPITALAuthorized CapitalIssued CapitalSubscribed CapitalCalled up capitalPaid up capital
RESERVES AND SURPLUS
B.R.A. 1949 – Section 17 20% STATUTORY RESERVE II. CAPITAL RESERVE III.SHARE PREMIUM IV. REVENUE AND OTHER RESERVES V. BALANCE IN PROFIT AND LOSS ACCOUNT
4-3
DEPOSITS
Represents 90% of bank’s fundIndividualsBUSINESS FirmsGovernment Bodies
Other Institutes
4-4
DEPOSITS
I. DEMAND DEPOSITS
i) From Banks
ii) From others
II. SAVINGS BANK DEPOSITS
III. TERM DEPOSITS I. From Banks
II. From others
4-5
BORROWINGS
4-6
Innovative Perpetual Debt Instruments
I BORROWINGS IN INDIA Subordinated Debt
Other Institutions & Agencies
Banks (other than RBI)
BILLS FOR COLLECTIONS
Bills Held by Bank till maturity on behalf of customers
There will be contra entry
4-7
ACCEPTANCE ENDORSEMENT
The practice of banks to accept or endorse bills of exchange on behalf of the customers.
4-8
CASH AND BALANCES WITH RESERVE BANK OF INDIA
Cash in hand (including Foreign Currency Notes)
II. Balances with Reserve Bank of India -in Current Account
4-9
INVESTMENTS IN INDIA
i) Government Securities ii) Other Approved Securities iii) Sharesiv) Debentures and Bonds v) Subsidiaries and/or Joint Venture (Units
of UTI/Mutual Funds, CP and CD etc) vi) Others
4-10
ADVANCES (IN INDIA)A) Bills purchased and discounted Cash Credits, Overdrafts and Loans repayable on demand Term Loans
B) I. Secured by Tangible Assets II. Covered by Bank/Government guarantees III. Unsecured C) I. Priority Sector II. Public Sector III. Banks
4-11
BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
(i) In Current Accounts
(a) Balances with Banks
(b) Money at Call and Short notice With Other Institutions:
(ii) In Other Deposit Accounts
I. IN INDIA
II. OUTSIDE INDIA -In Current Accounts
4-12
CASH AND BALANCES WITH RESERVE BANK OF INDIA
I. Cash in hand (including Foreign Currency Notes)
II. Balances with Reserve Bank of India -in Current Account
4-13
DEPOSITS
Features of Deposits
Bank deposits are safeBanks are under control of RBI Highly liquid-even fixed deposits can be
taken back on demand. Loans can be raised against bank deposits Interest rate differ from deposits to deposit Interest rate are subject to regulation by
RBI
Deposit accounts - categories of customers
Individual account Joint account Partnership account Sole proprietor CompanyGovt./Corporate/Society/Trusts/Trade
Unions
Deposit accounts of Indian residents
Saving deposits - motivate and attract savings from public. Interest on saving is now 4% on daily balance.
Current amount - opened by businessman and banks do not allow any interest on this deposit.
Fixed Deposit- Deposit for a fixed period. Interest depends upon period.
Recurring Deposit- Depositing small amount every month maturing after fixed period say 5 years.
Special deposit schemes For senior citizens For specified period say 555 days, 333
days, 444 days Tax saving schemes e.g. fixed deposits for 5
years
Deposits for Non-Resident-Indians
Non Resident Ordinary (NRO – Account to be open by NRI taking employment in a foreign country. Amount credited is not subject to tax deduction at source and covered under General/special regulation by RBI.
Non-Resident External (NRE) - Accounts for person employed in foreign countries in firms owned by NRI‟s at least 60%. Deposits are accepted in foreign currency and freely repatriable, interest is exempted from tax.
Foreign Currency Non-Resident (FCNR) - Accounts such account are like NRE account but they are maintained in designated foreign currency at approved dealer. These currencies are US Dollar, Pond Sterling, Euro and Japanese Yen. Accounts are in the form of term deposits only.
Resident Foreign Currency (RFC) Account - Can be opened by a NRI who was in a foreign country for at least a year. Account may be in the form of current, saving, term deposit. No loan against & deposit balance outstanding can be transferred to NRE/FCNR accounts.
Escrow Account - Account opened with the approval of RBI for adjustment of value of goods imported or exported. Account is opened in US Dollar in the name of overseas organization, no overdraft or loan is permitted.
Other accounts such as- a. Foreign currency accounts of Airline
Shipping companies.
b. Foreign currency accounts of overseas buyers.
c. Foreign currency accounts of foreign Embassies/Missions/Diplomats
After passing Government Savings Banks Act 1973, Post Office saving bank of India came in to existence.
National Small Saving Fund- All deposits are credited to NSSF- withdrawals are permitted-amount in credit is invested in government securities.
National Saving Certificates (NSC’s) - Certificates are issued by post offices maturing after 5 years with tax benefit. Loan can be taken from banks against pledging these NSC‟s
Post Office Monthly Income Account- Can be opened with a minimum of Rs.1000 and maximum of Rs. 3 lakh for single and 6 lakhs for Joint Account. Depositor gets monthly interest.
Public Provident Fund Account- Another saving plan with minimum of Rs.500 and maximum of Rs. 70,000 per month. Deposits qualify for deduction of income tax under section 80-C of Income Tax Act.
CREDIT POLICYThe measures through which Central Bank
of the country i.e. BRI controls the supply of money to attain general economic objectives such as:
Price stability Exchange rate stability Full employment Economic development
KEY OBJECTIVES
To encourage savings and mobilize savings for capital formation and development.
To encourage investment and create environment for investments in planned programmes.
Supply of adequate credit to meet increasing demand of activities so that overall economic development is encouraged.
To control inflationary pressure and maintain price stability.
To encourage economic development without financial hindrance
TOOLS AND TECHNIQUESQuantitative Techniques
Bank rate Open Market Operations Change in CRR/SLR
Quantitative Techniques Rationing of credit Changes in Margin requirements Regulation of consumer credit Direct action Moral suasion
THE CREDIT PROCESSBusiness Development and Credit Analysis
Credit Execution and Administration
Credit Review
Market research Advertising, public relations Officer call programs Obtain formal loan request Obtain financial statements,
borrowing resolution, credit reports
Financial statement and cash flow analysis
Evaluate collateral Line officer makes
recommendation on accepting/rejecting loan
Loan committee reviews proposal/recommendation
Accept/reject decision made, terms negotiated
Loan agreement prepared with collateral documentation
Borrower signs agreement, turns over collateral, receives loan proceeds
Perfect security interest File materials in credit file Process loan payments, obtain
periodic financial statements, call on borrower
Review loan documentation Monitor compliance with loan
agreement: Positive and negative loan covenants Delinquencies in loan payments Discuss nature of delinquency or other problems with borrower Institute corrective action: Modify credit terms Obtain additional capital, collateral, guarantees Call loan
The Credit Process
Loan PolicyFormalizes lending guidelines that employees
follow to conduct bank businessCredit Philosophy
Management’s philosophy that determines how much risk the bank will take and in what form
Credit CultureThe fundamental principles that drive lending
activity and how management analyzes risk
The Credit ProcessCredit Culture
The fundamental principles that drive lending activity and how management analyzes risk
Values DrivenFocus is on credit quality
Current-Profit DrivenFocus is on short-term earnings
Market-Share DrivenFocus is on having the highest market share
BUSINESS DEVELOPMENT AND CREDIT ANALYSIS
Business DevelopmentMarket researchTrain employees:
On what products are availableWhat products customers are likely to needHow they should communicate with customers
about those needsAdvertising and Public RelationsOfficer Call Programs
BUSINESS DEVELOPMENT AND CREDIT ANALYSIS
Credit AnalysisEvaluate a borrower’s ability and willingness
to repayQuestions to address
What risks are inherent in the operations of the business?
What have managers done or failed to do in mitigating those risks?
How can a lender structure and control its own risks in supplying funds?
BUSINESS DEVELOPMENT AND CREDIT ANALYSIS
Five C’s of Good CreditCharacterCapitalCapacityConditionsCollateral
BUSINESS DEVELOPMENT AND CREDIT ANALYSIS
Five C’s of Bad CreditComplacencyCarelessnessCommunicationContingenciesCompetition
CREDIT EXECUTION AND ADMINISTRATION
Loan DecisionIndividual officer decisionCommitteeCentralized underwriting
Loan AgreementFormalizes the purpose of the loanTerms of the loanRepayment scheduleCollateral requiredAny loan covenantsStates what conditions bring about a default
Credit Execution and Administration
Documentation: Perfecting the Security InterestPerfected
When the bank's claim is superior to that of other creditors and the borrower
Require the borrower to sign a security agreement that assigns the qualifying collateral to the bank
Bank obtains title to equipment or vehicles
Credit Execution and Administration
Position LimitsMaximum allowable credit exposures to any
single borrower, industry, or geographic localRisk Rating Loans
Evaluating characteristics of the borrower and loan to assess the likelihood of default and the amount of loss in the event of default
Credit Execution and Administration
Loan ReviewMonitoring the performance of existing loansHandling problem loans
Loan review should be kept separate from credit analysis, execution, and administrationThe loan review committee should act
independent of loan officers and report directly to the CEO of the bank
Credit Execution and Administration
Problem LoansOften require special treatment
Modify terms of the loan agreement to increases the probability of full repayment
Modifications might include:» Deferring interest and principal payments» Lengthening maturities» Liquidating unnecessary assets