Upload
asvasanthkm
View
219
Download
0
Embed Size (px)
Citation preview
7/27/2019 Important Acts Related to Banking
1/19
Important acts relating to Banking
Banking Regulation Act,1949
RBI Act,1934 & RBI Act, 1948
SBI Act,1955, General Regulations SBI Act,1956
Bankers Book Evidence Act,1891 Negotiable Instruments Act,1881
Indian Contract Act,1872
Suretys Liability
Partnership Act,1932
Companies Act,1956
Criminal Procedure Code, 1973
Consumer Protection Act, 1986
7/27/2019 Important Acts Related to Banking
2/19
Indian Penal Code, 1860
Prevention of Corruption Act, 1988
Income Tax Act
Banking Companies ( acquisition and transfer of undertakings) Act,1970/1980
Nationalized Banks (management and miscellaneous provisions) Schemes,1970/1980
Banking Services Commission Act, 1984 SBI Subsidiaries Act, 1959
IDBI Act, 1964
Industrial Finance Corporation of India Act, 1948
Capital Issues (control act, 1947)
Securitisation and Reconstruction of Financial Assets and Enforcement ofSecurity Interest (SRFAESI) Act, 2002
Securities and Exchange Board of India Act, 1992
7/27/2019 Important Acts Related to Banking
3/19
Important Financial Instituitions
EXIM Bank
DICGC
IDBI
SIDBI NABARD
Discount of Finance House of India
Stock Holding Corporation Of India
National Stock Exchange S.T.C.I (Securities trading corporation of India), 1994
National Housing Bank, 1988
Indian Banks Association
Joint Publicity Committee
7/27/2019 Important Acts Related to Banking
4/19
Structure of Indian Banking Central Bank of the country: RBI Commercial Banks: Public sectors & Private SectorSBI Group- Nationalised
SBI & 7 associate banks.
Branches of Banks incorporatedoutside India, Other Indian
scheduled commercial banks,Non-scheduled banks, Pvt LocalArea banks for Rural saving.
Regional Rural Banks- Co-operative banks,State Co-operative Banks,
Distt Co-operative Banks
Primary Co-operative Banks
PACs- Primary Agricultural Society.
Land Development Banks
State Land Development Banks
Primary Land Development Banks
Development Banks (Term Lending Instituitions)
All-India, ICICI- Industrial Credit and Investment Corporation of India
State level- IFCI, IRBI, IIBI, IDBI, SFCs, SIDBI, NABARD, EXIM, ECGC, UTI, LIC, GIC, MHB
7/27/2019 Important Acts Related to Banking
5/19
Phase of Banking Consolidation: 1951-1964
Banking Structure, Banking Regulation Act, 1949
replaced the Banking Companies Act.
Public confidence
Banking Policies & Practices
i. Upsurge in credit to industry.
ii. Diversification in form of financing.
iii. Enlargement of functional coverage.
iv. Credit authorization scheme- SSI, Exports,
Agricultural Finance.
7/27/2019 Important Acts Related to Banking
6/19
Phase of Innovative Banking: 1964-1990
Social Control.
Organizational changes.
National Credit Council.
Agriculture Finance Corporation Ltd.
Follow up of social control.
Organizational framework of implementation of social control.
Lead Bank Scheme (LBS).
Nationalization.
New Bill Market Scheme (NBMS).
Tondon committee report.
Bank credit to priority sector.
7/27/2019 Important Acts Related to Banking
7/19
Autonomy Measures
Recruitment and creation of posts.
Supervisory authority- BFS(Board of Financial Supervision).
Appointment of CMPs/CEOs and Board Members.
Narsimhan committee II on Banning of Sector Reforms, 1998.
Approach to Reform/Re-organization.
Directed Investments/Programmes and Interest Rates. Directed Credit Programmes.
Capital Adequacy, Accounting Policies and relational Matters.
Structural Organization.
Organization, Methods and Procedures.
Regulations and Supervision. Legislative Measures.
Asset/Liability management- Risk Management.
Earnings and Profitability.
7/27/2019 Important Acts Related to Banking
8/19
Systems and Methods in Banks.
Internal Systems.
Human Resources Management.
Technology upgradation.
Structural issues- DFIS/PFIS, NBFCs.
Rural and Small Industrial Credit.
CDR Standing Forum, CDR Empowered Group.
CDR Cell.
7/27/2019 Important Acts Related to Banking
9/19
Elements of Tier-I Capital
Paid up capital, statutory reserves, capital
reserves equity investment in subsidiaries,
intangible assets and losses in currentperiod and those brought forward from
previous periods should be deducted from
Tier-I capital.
7/27/2019 Important Acts Related to Banking
10/19
Elements of Tier-II
Undisclosed reserves & Cumulative Perpetual Shares.
Re-evaluation Reserves.
General Provision & Loss Reserves.
Hybrid Debt Capital Reserves.
Subordinated Debt. Reporting Requirements.
Exposure Norms.
Credit Exposures to Individual/Group Borrowers.
Investment Exposures.
Credit Exposure to Industry or certain sectors. Real Estate.
7/27/2019 Important Acts Related to Banking
11/19
Exposure to Leasing, Hire-Purchase & Factoring Services.
Exposure to Indian Joint Ventures/ Wholly owned subsidiariesabroad.
Exposure limits on Advances against Shares and Holding of Sharesas Investment.
Statutory limit on Shareholding Companies. Regulatory Limits.
Advances against Shares to Individuals.
Advances against limits of Mutual Funds.
Bank Finance to Employees to buy shares of their own Companies.
Advances against shares of Stock Brokers and Market Makers.
Bank loans for Financing Promoters Contributions.
Bridge Loans.
7/27/2019 Important Acts Related to Banking
12/19
Exposure to Unsecured Guarantees & Unsecured Advances.
Exposure Norms for Investments.
Investments in Shares, Debentures and Bonds.
Investments in New Bonds of a Corporate.
Exposure limit on Shareholding of companies.
Investment in Venture Capital (VC). Investment in Subordinated Debt Instruments.
Underwriting of Corporate Shares & Debentures.
Prohibitions on Underwriting Options.
Underwriting of Bonds of Public Sector Undertakings.
Safety Net schemes for Public Issues of Shares & Debentures. Lending to Non-Banking Financial Companies.
7/27/2019 Important Acts Related to Banking
13/19
Operational risk & the methods forcalculating operational risks,
capital charges of banks, under
Basel committee new framework.
7/27/2019 Important Acts Related to Banking
14/19
Operational risk is defined as the risk of
loss resulting from inadequate or failed
internal processes, people and systems or
from external events. This definitionincludes legal risks (i.e. exposure to fines,
penalties or punitive damages), but
excludes strategic and reputational risks.
7/27/2019 Important Acts Related to Banking
15/19
Measurement methodologies
The revised framework prescribes 3
approaches for calculating operational risk
capital charges are:
Basic indicator approach.
Standardized approach.
Advanced measurement approaches.
7/27/2019 Important Acts Related to Banking
16/19
Basic Indicator Approach
The capital for operational risk should be equal to theaverage over the previous three years of a fixed
percentage (denoted by alpha) of positive annual grossincome. Figures for any year in which annual grossincome or zero should be excluded from both the
numerator or denominator when calculating the average.The capital charge may be represented as follows:
KBIA= [ ( GI 1.n x )]/N
Where KBIA= the capital charge under the basic indicatorapproach.
GI = annual Gross Income, where positive, over in previousthree years.
n= no. of the previous three years for which GI is positive.
= 15%, which is set by the committee
7/27/2019 Important Acts Related to Banking
17/19
The Standard Approach
In the standard approach, banks activities are divided into 8 businesslines i.e. Corporate finance, trading & sales, Retail Banking,
Commercial Banking, Payment and Settlement, Agency Services,Asset Management and Retail Brokerage.
Within each business line, GI is treated as a broad indicator for
determining the operational risk exposure. The capital charge foreach business line is calculated by multiplying GI by a factor
(denoted by beta) assigned to that business line. Beta serves as aproxy for the industry wide relationship between the operational risk
loss experience for a given business line and in aggregate GI forthat business line.
7/27/2019 Important Acts Related to Banking
18/19
The capital charge for operational risk can berepresented as under:
KTSA= { years 1-3 max [GI18 x 1-8,0]}/3
Where KTSA= the capital charge under thestandard approach,
GI 1-8 = annual GI in a given year for each of the 8business line.
1-8=a fixed percentage, set by the committee,relating to the level of required capital to thelevel of GI for each of the 8 business lines.
7/27/2019 Important Acts Related to Banking
19/19
Advanced measurement
approaches
Under the AMA, the regulatory capital
requirements will equal the risk measure
generated by the banks internal
operational risk measurement systemusing the quantitative and qualitative
criteria for the AMA, subject to supervisory
approval.