•
RISK MGMT
•
BANKING AND INSURANCE
•
DR. SHASHI AGGARWAL
•
MEANING OF RISK
•
RISK IS DERIVED FROM AN ITALIAN WORD,” RISICARE
MEANS TO DARE. MEANS RISK IS CHOICE THAN A FATE
•
IN STATISTICAL TERMS RISK IS DEFINED AS THE
DEGREE OF VARIABILITY OF POSSIBLE OUTCOMES FOR A PARTICULAR EVENT.
•
IN FINANCIAL IT IS ALWAYS ASSOCIATED WITH LOSS
THAT IS EXPECTED TO BE INCURRED OR NON HAPPENING OF CERTAIN EVENTS OR
ACTIVITIES. DEVIATION BETWEEN WHAT HAPPENS AND WHAT WAS EXPECTED TO HAPPEN
•
TYPES OF RISK IN BANKS
• CREDIT RISK:- FAIL TO MEET ITS OBLIGATION IN ACCORDANCE WITH AGREED TERMS
•
POSSIBILITY OF LOSSESS ASSOCIATED WITH
DIMINUTIONS IN THE CREDIT QUALITY OF BORROWERS OR COUNTER PARTY
•
CREDIT RISK MAY TAKE FOLLOWING FORM:-
1.
PRINCIPLES /INTERESTS NOT PAID
2.
NON AVAILABILITY OF FUNDS
3.
IN SECURITIES SETTLEMENT MAY NOT BE EFFECTED
4.
CROSS BORDER EXPOSURE
•
MGMT OF CREDIT RISK IN BANKS
•
MEASURMENT OF RISK THROUGH CREDIT RATING
•
RISK ESTIMATE OF LOSSES
•
RISK PRICING ON SCIENTFIC BASIS
•
CONTROLLING THE RISK THROUGH EFFECTIVE LOAN
•
MARKET RISK
•
ADVERSE CHANGES IN THE MARKET VARIABLES:-
•
LIQUIDITY RISK:- FUNDING OF LONG TERM LIABILITIES BY SHORT TERM
FUNDS
•
FUNDING RISK
•
TIME RISK PERFORMING ASSETS TURNED INTO NON
PERFORMING ASSETS
•
CALL RISK:- DUE TO CYRTILISATION OF CONTINGENT LIABILITY
•
INTEREST RATE RISK:-
•
GAP OR MISMATCH RISK
•
BASIS RISK:-INTEREST RATE RISK OF DIFFERENT
ASSETS,LIABILITIES AND OFF BALANCE SHEET ITEMS MAY CHANGE IN DIFFERENT
MAGNITUDE
•
EMBEDDED OPTION RISK : PREPAYMENT OF CASH
CREDIT/DEMAND LOANS
•
FOREGIN EXCHANGE RISK
•
COMMODITY PRICE AND EQUITY PRICE RISK
•
OPERATIONAL RISK
•
INTERNAL FRAUD
•
EXTERNAL FRAUD
•
EMPLOYMENT PRACTICES AND WORKPLACE SAFETY
•
CLIENT PRODUCTS AND BUSINESS PRACTICES
•
DAMAGE TO PHYSICAL ASSETS
•
BUSINESS DISRUPTIONS
•
EXECUTION,DELIVERY AND PROCESS MGMT
•
STEPS IN RISK MGMT
1.
RISK IDENTIFICATION
2.
RISK MEASURMENT
3.
RISK CONTROL AND MONITORING
4.
CAPITAL ALLOCATION
5.
RISK ADJUSTED PERFORMANCE MEASURMENT
•
MANAGEMENT OF DEPOSIT IN
COMMERCIAL BANKS
•
BANKING AND INSURANCE
•
DR.
SHASHI AGGARWAL
•
MANAGEMENT OF DEPOSITS
•
COMMERCIAL BANKS ARE THE MOST IMPORATNT
FINANCIAL INTERMEDIARY WHICH PROVIDES FINANCE FOR THE MOVING THE WHEELS OF
TRADE AND INDUSTRY. DEPOSITS ARE THE MOST IMPORTANT SOURCE OF FUNDS FOR
COMMERCIAL BANKS. LARGER IS VOLUME OF DEPOSITS WITH A BANK, GREATER IS THE
EXTENT OF TRANSACTIONS. DEPOSITS CONSTITUE 80-90 PERCENT OF THE TOTAL SOURCES
OF A BANK.
•
TYPES OF SEPOSITS
•
CURRENT
ACCOUNT
•
IS A RUNNING ACCOUNT AND OPENED FOR THE PURPOSE OF BUSINESS. THIS
DEPOSIT CAN BE WITHDRAWN BY THE DEPOSITER AT ANY TIME AND IT DOES NOT CARRY ANY
INTEREST. ALSO CALLED DEMAND DEPOSISTS.
•
SAVING ACCOUNT
•
ACCOUNT ARE OPENED FOR THE PURPOSE OF ENCOURAGING SAVING HABITS. MEANT
FOR LOW AND MIDDLE LEVEL. INTERST IS GIVEN BY THE BANK. CHEQUE FACILITY CAN
ALSO BE AVAILED UNDER IT.
•
FIXED DEPOSITS
•
FIXED DEPOSITS REPAYABLE AFTER THE EXPIRY OF
SPECIFIED PERIOD. THE RATE OF INTERSEST ON FIXED DEPOSITS IS DEPEND UPON PERIOD
OF DEPOSIT.
•
RECURRING DEPOSITS
•
DEPOSIT
A FIXED AMOUNT OF MONEY EVERY MONTH FOR A SPECIFIC PERIOD OF TIME.
•
FLEXI DEPOSITS
• THE AMOUNT OVER AND ABOVE A CERTAIN
PREDETERMINED LEVEL IS TRANSFERRED FROM A SAVING /CURRENT ACCOUNT TO A TERM
DEPOSITS AUTOMATICALLY IN CERTAIN PREDETERMINED AMOUNT OF UNITS FOR
APREDETERMINED PERIOD AND SUCH AMOUNT CARRY HIGHER RATE OF INTERST.
•
MISCELLANEOUS
DEPOSITS
• INTRODUCED SEVERAL DEPOSIT SCHEMES TO ATTRACT DIFFERENT TYPE OF
PEOPLE LIKE HOME CONSTRUCTION DEPOSITS SCHEME,SICKNESS BENEFIT DEPOSIT SCHEMES
ETC
•
FACTORS INFLUENCING BANK DEPOSITS
•
EXTERNAL
FACTORS
1.
STATE OF GLOBAL
ECONOMY
2.
STATE OF NATIONAL
ECONOMY
3.
STATE OF LOCAL
ECONOMY
4.
ROLE OF THE GOVT
5.
SAVING HABITS
6.
SHIFT OF
POPULATION
•
INTERNAL
FACTORS
1.
SERVICE FACILITIES
2.
PHYSICAL
FACILITIES
3.
STAFF
4.
BANK POLICIES
5.
LOCATOR
6.
MOMENUM TO EASY
START
•
DEPOSIT MOBILIZATION
•
BANKING AND INSURANCE
•
DR. SHASHI AGGARWAL
•
DEPOSIT MOBILIZATION
•
BANKS NEED THE RESOURCES TO PERFORM THEIR
PROMOTIONAL ROLE AND RESOURCES ARE PROVIDED THROUGH DEPOSITS. BANKS MUST MAKE
THEIR STRATEGIES TO TAP MAXIMUM DEPOSITS. BANKS SHOULD IDENTIFY THE NEGELECTED
AREA AND MAKE SUITABLE STRATEGIES TO CREATE AWARENESS AND MOTIVATING PEOPLE TO
DEVELOP BANKING HABITS.
•
THE HOUSE HOLD SECTOT CONTRIBUTES 75% OF
DOMESTIC SAVING BUT OF ITS TOTAL ONLY 45% COME TO THE BANK.
•
STRATEGIES FOR DEPOSIT MOBILIZATION
•
IDENTIFICATION OF POTENTIAL FOR SAVING
•
SELECTING TARGET GROUPS:-
•
MARKET SEGMENTTATION:
1.
ON THE BASIS OF INCOME
2.
ON THE BASIS OF AGE
3.
ON THE BASIS OF PROFESSION
4.
INCORPORATE SECTOR
5.
GEOGRAPHICALLY
6.
EVALUATING MARKET SEGMENTTATION
•
ASCERTAINMENT OF SAVING MOTIVES
•
STRATEGIES FOR DEPOSIT MOBILIZATION
• FORMULATING
DEPOSIT MOBILISATION SCHEMES
•
DAILY SAVING
SCHEME
•
ANNUITY FOR RETIRMENT SCHEME
•
MINOR’S SAVING SCHEME
•
HOUSE DEPOSIT SCHEME
•
INVESTMENT DEPOSIT SCHEME
•
LIABILITY LINED DEPOSIT SCHEME
•
INSURANCE LINKED SCHEME
•
DETERMINATION OF COMPETITIVE POSITIONING
•
MARKET STRATEGIC POSITIONING
•
FEATURES OF DEPOSIT MOBILIZATION
1.
TO MAKE ALL POSSIBLE EFFORTS TO ATTRACT MAXIMUM
DEPOSITS
2.
DIFFERENT MOBILIZATION STRATEGIES
3.
MORE EMPHASIS ON DEVELOPMENT OF BANKING HABITS
4.
PERSONAL CONTACT IN RURAL AREA
5.
PROMOTIONAL PROGRAMMES
6.
SELF EXPLANATORY SCHEMES
7.
VOLUME AND TRENDS OF DEPOSITS
•
VOLUME
OF DEPOSITS
•
KYC(
KNOW YOUR CUTOMER)
• VERIFY YOUR CUSTOMER
• TO PREVENT BANKS FROM BEING USED
INTENTIONALLY OR UNINTENTIONALLY BY CRIMINAL ELEMENTS FOR MONEY LAUNDERING
ACTIVIITES.
•
KYC
POLICIES:-
1.
CUSTOMER POLICY
2.
CUTOMER
IDENTIFICATION NUMBER
3.
MONITORING OF
TRANSACTIONS
4.
RISK MGMT
•
KYC
• CUTOMER USE MAY BE DEFINED AS:-
• A PERSON OR ENTIITY THAT MAINTAINS AN ACCOUNT/HAS A BUSINESS RELATIONSHIP WITH THE BANK
• BENEFICIAL OWNER( ON WHOSE BEHALF THE
ACCOUNT IS MAINTAINED)
• BENEFICIARIES OF TRANSACTIONS CONDUCTED
BY PROFESSIONAL INTERMEDIARIES
• ANY PERSON OR ENTIITY CONNECTED WITH A
HUGE FINANCIAL TRANSACTION
•
KYC
CONTROLS
1.
BASIC IDENTITY
INFORMATION
2.
DETERMINATION OF
THE CUSTOMER’S RISK
3.
MONITORING OF
CUTOMER’S TRANSACTIONS
·
CREDIT WORTHINESS OF
BORROWERS
•
BANKING AND INSURANCE
•
DR. SHASHI AGGARWAL
•
CREDIT WORTHINESS OF BORROWERS
•
JUDGED OR ASSESSED BY THEIR CHARACTER, CAPACITY
AND CAPITAL. THESE ARE CALLED THREE C’S OF UNSECURED ADVANCES
•
CHARACTER:-
1.
IMPLIES PERSONAL QUALITIES LIKE
HONESTY,INTEGRITY,PROMPTNESS,BUSINESS REPUTATION
2.
A MAN OF GOOD CHARACTER WILL BE VERY PROMPT IN
SETTLING HIS ACCOUNT
3.
STUDY OF HIS PAST TRANSACTIONS WITH THE BANKS
•
CAPACITY:-
•
DEPENDS UPON TECHNICAL/MANAGERIAL/EXPERIENCE
•
EFFECTS THE REPAYMENT SCHEDULE
•
ABILITY,COMPETENCE AND PERSONAL EXPERIENCE OF
THE ENTREPRENUR REFLECTS THE NATURE OF HIS BUSINESS TRANSACTIONS
•
CAPITAL:-
•
ADEQUATE FUNDS
•
WOTHWHILE FUNDS TO THE BUSINESS
•
CREDIT WORTHINESS OF BORROWERS
•
CHARACETER+CAPACITY+CAPITAL = SAFE CREDIT
•
CHARACETER+CAPACITY+INSUFFICIENT CAPITAL = FAIR
CREDIT RISK
•
CHARACETER+CAPACITY-CAPITAL = LIMITED SUCCESS
•
CHARACETER+IMPAIRED CAPACITY+CAPITAL = DOUBTFUL
CREDIT RISK
•
CAPACITY+CAPITAL -CHARACETER= DANGEROUS RISK
•
CHARACETER+CAPITAL-CAPACITY = INFERIOR CREDIT
RISK
•
CHARACETER-CAPACITY-CAPITAL = FRADULENT ONE
•
PRINCIPLES OF LENDING
•
BANKING AND INSURANCE
•
DR. SHASHI AGGARWAL
•
PRINCIPLES
OF LENDING
•
SAFETY : REPAYMENT OF THE CAPACITY DEPENDS UPON THE
BORROWER;S CAPACITY TO APY AND WILLINGNESS TO PAY AND GENERATION OF INCOME
•
LIQUIDITY:-MONEY SHOULD RETURN TO BANK AS PER PAYMENT
SCHEDULE
•
PROFITABILITY:CUTOMER PROFITABILTY ANALYSIS
•
PURPOSE
•
DIVERSIFICATION OF RISK
•
SECURITY:ADEQUATE,MARKETABLE,EASY TO HANDLE AND FREE FROM
ENCUMBERANCES
•
NON FUND
BASED LIMITS
•
BANK
GUARANTEE:-
1.
LIMIT REQUIRED BY
GUARANTEE
2.
PURPOSE
3.
PARTICULARS OF THE
CONTRACT
4.
AMOUNT
5.
APPORPRIATE
CONDITIONS
•
LETTER
OF CREDIT:-
1.
VALUE OF RM
CONSUMED
2.
VALUE OF CREDIT
PURCAHSE
3.
TIME FOR SHIPMENT
AND CONSIGNMENT
4.
CREDIT PERIOD
5.
MAXIMUM
PERMISSIBLE FINANCE
•
ESTIMATING WORKING CAPITAL NEED
• TO SATISFY BANK ABOUT HIS
CHARACTER,CAPACITY AND CAPITAL AND COLLATERAL
•
THE OPERATING
CYCLE METHODS
•
PROJECTED NET
WORKING CAPITAL
•
THE PROJECTED
TURNOVER METHOD
•
THE CASHBUDGET
• DETAILED APPRISAL OF PAST AND FUTURE
VAIBILITY OF THE FIRM’S PLANNING, OPERATION AND FINANCIAL POSITION.
• ASSESSMENT OF WORKING CAPITAL NEED IS
MADE ON:
•
PAST TRENDS
•
END USE OF FUNDS
•
ESTIMATED
REQUIRMENTS
•
CREDIT APPRISAL TECHNIQUES
• LENDING BANKERS USUALLY COMPUTE
THE CREDIT REQUIRMENT AFTER A STRUCTURED
ANALYSIS OF THE FINANCIAL STATEMENTS
• ALSO INQUIRE WHY THE BUSINESS MAN
REQIRE FUNDS ,FOR WHAT PURPOSE AND WHAT ARE ITS CREDENTIALS
•
NON PERFORMING ASSET MGMT
•
BANKING AND INSURANCE
•
DR. SHAHSI AGGARWAL
•
MEANING
• MEANS A LOAN OR AN ACCOUNT OF BORROWER WHICH
HAS BEEN CLASSIFIED BY BANK OR FINANCIAL INSTITUTION AS SUB STANDARD, DOUTFUL
OR LOSS ASSET IN ACCORDANCE WITH THE DIRECTIONS OR GUIDELINES RELATING TO ASSET
CLASSIFICATION ISSUED BY RBI. AN ASSET INCLUDING A LEASED ASSET BECOMES NPA
WHERE IT CEASED TO GENERATE INCOME FOR THE BANKS.
•
AN NPA OR LOAN:
•
THE INTERES/INSTALLMENT DUE FOR 90 DAYS OR MORE
•
OUT OF ORDER
•
A BILL OVER DUE
•
OVERDUE FOR TWO CROP SEASON FOR LONG DURATION
CROPS
•
ONE CROP SEASON FOR LONG DURATION CROPS
•
OUT OF ORDER STATUS:-OUTSTANDING BALNCE REMAINS CONTINUOUSLY IN
EXCESS OF SANCTIONED LIMIT
•
IN CASES WHERE THE OUTSTANDING BALNCE IN THE
OPERATING ACCOUNT IS LESS THAN SANCTIONED LIMIT AND THE CREDITS ARE NOT
SUFFICIENT TO COVER THE INTEREST
•
OVER DUE
• INCOME RECOGNITION:- WHEN IT IS ACTUALLY RECEIVED
• FEES AND COMMSIIONS ON ACCRUAL BASIS
• IF GOVT GUARANTEED ADVANCES BECOMES NPA
THEN INTERST SHOULD BE TAKEN WHENA CTUALLY RECEIVED
• REVERSAL OF INCOME
•
ASSET CLASSIFICATION
•
SUBSTANDARD ASSETS:-REMAINED NPA FOR A PERIOD
NOTLESS THAN OR EQUAL TO 12 MONTHS
•
DOUBTFUL ASSETS:-
•
REMAINED IN SUBSTANDARD CATEGORY FOR MORE THAN
12 MONTHS
•
D1:-UP TO ONE YEAR 20% PROVISION IS MADE
•
D2:- UP TO 2 YEAR 30% PROVISION IS MADE
•
D3 UP TO 3 YEARS 100%
•
LOSS
ASSETS:-
• WHERE LOSS HAS BEEN IDENTIFIED BY THE
BANK OR INTERNAL OR EXTERNAL AUDITORS OR THE RBI INSPECTION BUT THE AMOUNT HAS
NOT BEEN WRITTEN OFF WHOLLY.
•
GUIDELINES FOR CLASSIFICATIONS OF ASSETS
•
ACCOUNT WITH TEMPORARY DEFICIENCIES:-
•
BASED ON RECORD OF RECOVERY
•
NOT ON
SOME DEFICIENCIES LIKE NON
AVAILABILITY OF ADEQUATE DRAWING POWER
•
FOLLOW THE GUIDELINES
•
DRAWING IN THE WORKING CAPITAL ARE COVERED BY
ADEQUACY OF CA. DRAWING POWER ON THE CURRENT STOCK STATEMENTS
•
A WORKING CAPITAL BORROWER ACCOUNT WILL BECOME
AN NPA IF SUCH IRREGULAR DRAWINGS ARE PERMITTED IN THE ACCOUNT FOR MORE THAN 90
DAYS
•
REGULAR AND ADHOC LIMITS NEEDS TO BE REVIEWED
NOT LATTER THAN THREE MONTHS
•
AN ACCOUNT WHERE THE REGULAR AND ADHOC CREDIT
LIMITS HAVE NOT REVIEWED /RENEWED WITH IN 180 DAYS FROM THE DUE DATE WILL BE
TREATED AS NPA
•
UPGRADATION OF LOAN ACCOUNT CLASSIFIED AS NPAS
•
ASSET CLASSIFICATION TO BE BORROWER WISE AND
NOT FACILITY WISE
•
GUIDELINES
FOR THE CLASSIFICATION OF NPA
•
ADVANCES UNDER CONSORTIUM ARRANGMENTS:- TOAL
LOANS 150 CRORES AND ABOVE GIVEN BY MORE
THAN ONE BANK SHOULD BE BASED ON THE RECORD OF RECOVERY OF INDIVIDUAL MEMBER
BANKS AND OTHER ASPECTS HAVING ABEARING ON THE RECOVERABILITY OF THE ADVANCES
•
ACCOUNT WHERE THERE IS EROSION IN THE VALUE OF
SECURITY: - REALISABLE VALUE OF SECURIT IS LESS THAN 50%. MAY BE STRAIGHTWAY CLASSIFIED UNDER DOUBTFUL
CATEGORY
•
LESS THAN 10% THEN LOSS ASSET
•
REASON
BEHIND NPA
•
LACK OF PRE INQUIRY
•
NON PERFORMANCE OF THE BUSINESS
•
WILLDEFAULTER
•
LOANS SANCTIONED FOR AGRICULTURE PURPOSE
•
CHANGE IN GOVT POLICY LEADS TO NPA
•
SPECULATION
• NPA MGMT STRATEGIES
•
PREVENTIVE
MGMT
•
DEVELOPING KYC
•
MONITORING EARLY WARNING SIGNALS
•
PROPER CREDIT ASSESSMENT AND RISK MGMT
MECHANISM
•
GENERATING WATCH LIST
•
CURATIVE
MGMT
1.
REPHASMENT OF
LOANS
2.
CORPORATE DEBT
RESTRCURING
3.
REHABILITAION
4.
ACQUSITION OF SICK
UNITS BY HEALTHY
5.
COMPROMIZE
6.
USING
SECURITISATION
7.
DEBT RECOVERY
TRIBUNALS
•
FACTORS
• EXTERNAL FACTORS
• INEFFECTIVE LEAGAL FRAMEWORK
• RECESSION
• CHANGE IN GOVT POLICIES
• WILFUL DEFAULT
• ALLEGED POLITICAL INTERFERENCE
•
INTERNALS
•
DEFECTIVE LENDING PRACTICES
•
IMPROPER SWOT ANALYSIS
•
MANAGERIAL DEFICIENCIES
•
CORRUPTION
•
INADEQUATE CREDIT APPRISAL SYSTEM
•
ASSET
AND LIABILITY MGMT IN COMMERCIAL BANKS
•
BANKING
AND INSURANCE
•
DR.
SHASHI AGGARWAL
•
MEANING OF ASSET-LIABILITY MGMT
•
REFERS TO MGMT OF A BANK’S PORTFOLIO OF ASSETS
AND LAIBILITIES IN ORDER TO MAXIMISE PROFITABILITY AND STOCKHOLDER’S EARNINGS
OVER LONG TERM, CONSISTENT WITH SAFETY AND LIQUIDITY CONSIDERATIONS.
•
SYSTEM OF MATCHING CASH INFLOWS AND OUTFLOWS IN
THE SYSTEM AND TOOL OF MGMT OF LIQUIDITY MGMT.
•
BROAD OBJECTIVES:-
•
PLANNING TO MEET THE LIQUIDITY NEEDS:- PROPER
MIX OF FUNDS
•
ARRANGING MATURITY PATTERN OF ASSETS AND
LIABILITIES
•
CONTROLLING THE RATES RECEIVED AND PAID
•
ACHIEVMENT OF OBJECTIVES
•
SPREAD MGMT: - INTEREST SPREAD/INTEREST
MARGINS/NET INTEREST SPREAD MEANS DIFFERENCE BETWEEN INTERSEST EARNED ON
DEPPLOYMENT AND INTEREST PAID ON THE ACQUISITION OF FINANCIAL RESOURCES. SPREAD
MGMT STRATEGY INVOLVES:-
•
REDUCING BANK’S EXPOSURE TO CYCLICAL RATES AND
STABILISING EARNING OVER THE LONG RUN
•
PREDICTING RATE CHANGES
•
COORDINATING RATE STRUCTURE
•
BALANCING DEFAULT RISK ON LOANS AND INVESTMENTS
AGAINST PROBABLE BENEFIT
•
ENSURING A STEADY BUT CONTROLLED GROWTH
• ACHIEVMENT OF OBJECTIVES
• GAP MGMT:-DIFFERENCE BETWEEN ASSETS AND
LIABLITIES THAT CAN BE IMPACTED IN THE INTEREST RATES. THESE ARE REFERRED TO
RATE SENSITIVE ASSETS AND RATE SENSITIVE LIABILITIES. ASSETS AND LIABILITIES
ARE DISTRIBUTED OVER DIFFERENT TIME BONDS AND BUCKETS CALLING FOR:-
•
IDENTIFYING ASSETS AND LIABILITIES OVER
DIFFERENT TIME BONDS
•
OPTIMISING EARNINGS
•
BUILDING A MECHANISM TO EXPAND AND CONTRACT
ASSET AND LIABILITY IN RESPONSE TO RATE CYCLE PHASES
•
COMPONENT OF A BANK BALANCE SHEET
•
TOOLS USED BY BANKS FOR ALM
•
ALM INFORMATIONS SYSTEM
•
ALM ORGANIZATION
•
ALM PROCESS
•
ROLE OF INFORMATION TECHNOLOGY
•
IT ENABLES SYSTEM RESULT IN BETTER ALM. BECAUSE
DATA CAPTURE AND ANALYSIS IS FASTER.
•
MGMT TECHNIQUE RELEVENT FOR ALM:-
1.
TIME SERIES ANALYSIS
2.
SIMULATION
3.
SCENARION BUILDING
4.
LINEAR PROGRAMMING
•
ROLE OF
INFORMATION TECHNOLOGY
•
ASSETS AND LIABILITES COMMITTEE( ALCO)
•
PRIMARILY RESPONSIBLE FOR THE ASSET AND
LIABILITY MGMT OF BANK
•
DEVICE BROAD STRATEGIES
•
FOLLOWING TASK PERFORMED BY ALCO:-
•
DEVELOP MAINTAIN ASSET AND LIABILITY MGMT
•
COORDINATED ALM STRATEGY
•
MAINTAIN ANALYTIC TOOLS
•
REVIEW THE ANNUAL BUDGET
•
DOCUMENT THE CURRENT ALM STRATEGY
• STRATEGIES
•
INTEREST RATE RISK :
•
COUNTERPARTY RISK
•
VALUATION RISK
•
LIQUIDITY RISK
•
CREDIT RISK
•
COMPLINACE RISK
•
BASIS RISK
•
EVENT RISK
•
FRAMEWORK OF POLICY
•
CREDIT
POLICY
•
INVESTMENT
POLICY
•
LIQUIDITY
POLICY
•
INTEREST
SENSTIVITY POLICY
• RETAIL BANKING
•
BANKING AND INSURANCE
•
DR. SHASHI AGGARWAL
•
MEANING
OF RETAIL BANKING
•
ALSO KNOWN AS CONSUMER BANKING
•
PROVISION OF SERVICES BY A BANK TO THE GENERAL
PUBLIC
•
IT COVER:-
1.
FIXED
2.
CURRENT
3.
SAVING
4.
MORTGAGE LOANS
5.
OTHER FINANCIAL PRODUCTS
PURE RETAIKL BANKING IS LINKED TO PROVIDING
PROVISION OF MASS BANKING PRODUCTS AND SERVICES TO INDIVIDUAL FOR PERSONAL
CONSUMPTION
• RETAIL BANKING
•
MULTIPLE PRODUCTS:-
•
VARIOUS TYPES OF DEPOSITS/ACCOUNTS
•
CREDIT AND DEBIT CARDS
•
LAONS
•
INSURANCE ,MUTUAL FUNDS
•
MULTIPLE CHANNELS OF DISTRIBUTION
•
INTERNET BANKING
•
MOBILE BANKING
•
CALL CENTRES
•
MULTIPLE CUTOMERS GROUS:-INDIVIDUAL,PETTY
BUSINESS,SMALL AND MEDIUM TYPE OF BUSINESS
•
FUNCTIONS OF RETAIL BANKING
•
GIVE CREDIT: MORGAGES AND LOAN
•
ACCEPT DEPOSIT
•
MONEY MGMT: MANAGE MONEY THUROUGH ACCOUNTS NAD
CREDITS AND ALSO FACILITY TO TRANSACTIONS ON LINE
•
PRODUCTS
1.
TRANSACTIONAL ACCOUNT:
2.
CHECKING ACCOUNTS/CURRENT ACCOUNT
3.
CURRENT ACCOUNT
4.
SAVING ACCOUNT
·
A CERTIFICATE OF DEPOSIT: TERM DEPOSIT ISSUED
BY THE BANK. FIXED TERM AND FIXED INTEREST.
·
DEBIT CARDS
·
ATM CARDS
·
CREDIT CARDS
·
TRAVELLER’S CHEQUE
·
MOTGAGES
·
HOME LOANS
·
PERSONAL LOANS
•
FEATURES
•
CONSUMER BANKING FOCUS
•
INTERNAL PROMOTION TO CROSS SELL SERVICES
•
CUSTOMER RELATIONSHIP MGMT PRACTICES
•
EXTENDED HOUR: ATM
•
NEW CUSTOMER INCENTAIVES
•
SUB TYPE OF RETAIL BANKS
•
COMMUNITY DEVELOPMENT BANKS:-LOW TO MODERATE
INCOME
•
PRIVATE BANKS: HIGH NET WORTH CLIENTS WITH HIGH
LEVEL OF INCOME AND ASSETS
•
POSTAL SAVING BANKS: SERVICES TO THOSE WHO DON
NOT HAVE ACCESS TO BANKS.
• ADVANTAGE OF RETAIL BANKING
1.
RETAIL DEPOSITS
ARE STABLE AND CONSTITUTE CORE DEPOSITS
2.
INTEREST SENSITIVE
3.
EFFECTIVE CUTOMER
RELATION MGMT
4.
INCREASE THE
SUBSIDIARY BUSINESS OF BANK
5.
IMPROVE BETTER
YIELD
6.
INNOVATIVE BANKING
PRODUCTS
7.
GOOD AVENUE FOR
FUND DEPLOYMENT
•
DISADVANTAGES
•
PROBLEMS IN MANAGING LARG NUMBER OF CLIENTS
•
COST OF MAINTAINING NETWORK IS VERY HIGH
•
DESIGINING NEW PRODUCTS AND SERVICES VERY
COSTLY
•
HUGE INVETSMENT IN TECHNOLOGY
•
MONOITORING AND FOLLOW UP OF LOANS
•
NON PERFORMING ASSETS
• GROWTH OF RETAIL BANKING IN INDIA
•
CUTOMER ORIENTED
•
DEMAND FOR CONSUMER DURABLE HAS INCREASED
•
HIGHEST PROPORTION OF INDIA BELOW 35
•
DEVELOPMENT OF TECHNOLOGY
·
ONLINE BANKING/INTERNET
BANKING
·
MEANING OF ON LINE BANKING/E
BANKING
•
LIQUIDITY MANAGEMENT
•
BANKING AND INSURANCE
•
DR. SHASHI AGGARWAL
•
LIQUIDITY MGMT
•
BANKS ARE FINANCIAL INTERMEDIARY, MOBILIZE THE
DEPOSIT FROM PUBLIC FOR THE PURPOSE OF LENDING A D INVESTMENTS AND TO EARN
PROFITS FROM SUCH OPERATIONS. A PART OF DEPOSITS IS KEPT IN CASH AND OTHER LIQUID ASSETS ENABLING THE BANKER TO MEET
THEIR REQUIRMENT TOWARDS DEPOSITERS,
SOURCES OF BANK FUNDS:-
THE OWNED FUNDS
THE BORROWED FUNDS
•
BANKER’S OBLIGATION TO
DEPOSITEORS
•
TO PAY BACK THE AMOUNT
•
PAY INTEREST
•
IMPORTANCE OF LIQUID ASSETS:
•
BANK’S ABILITY TO SATISFY DEMAND FOR CASH IN
EXCHANGE FOR DEPOSITS
•
MAINTAIN SUFFICIENT CASH WITH THEM.
•
LIQUID ASSETS
•
THE ASSETS WHICH CAN BE READILY CONVERTED INTO
CASH WITHOUT ANY LOSS ARE CALLED LIQUID ASSETS.
•
AND THESE ARE:-
•
CASH IN HAND AND BALNCES WITH OTHER BANKS
•
MONEY AT CALL AND SHORT NOTICE
•
INVESTMENT IN GOVT SECURITIES
•
A BANKER HAS TO STRIKE A BALANCE BETWEEN
LIQUIDITY AND PROFITABLITY.
•
HAS TO ALLOCATE TOTAL RESOURCES AT HIS
COMMAND AMONG VSRIOUS ASSETS-LIQUID,SEMI
LIQUID AND INCOME EARNING IN SUCH A PROPORTION TO SATISFY HIS OBJECTIVE:-
•
TO EARN MAXIMUM PROFIT
•
TO MEET HIS OBLIGATION
•
LIQUID ASSETS
•
CASH HELD WITH ITSELF OR WITH
RBI OR OTHER BANKS IN CURRENT ACCOUNT
•
CASH RESERVE ARE ALSO CALLED FIRST LINE OF DEFENCE
•
ABIDE BY BANKING REGULATIONS AND ALSO DETERMINE A DEQUATE SIZE OF CASH
BALANCE
•
FACTORS:
•
GROWTH OF BANKING HABIT
•
EXISTENCE OF CLEARING HOUSE BANKERS
•
TYPE AND SIZE OF DEPOSITS ACCOUNTS
•
NATURE OF ADVANCES AND AVAILABILITY OF
REFINANCE
•
STATUTORY CASH RESERVE WITH RESERVE BANKS
•
BALANCE WITH OTHER BANKS
•
MONEY AT CALL AND SHORT NOTICE
•
THEORIES
OF LIQUIDITY MGMT
•
COMMERCIAL
LOAN THEORY
•
PROVIDE SHORT TERM SELF LIQUIDATING LOAN TO
BUSINESS FIRMS TO ENABLE THEM TO MEET WORKING CAPITAL REQUIRMENT.
•
SELF LIQUIDATING LOAN REFERS TO LOANS WHICH
FINANCE MOVE THROUGH THE SUCCESSIVE STAGES OF PRODUCTION, TRANSPORTATION,
STORAGE, DISTRIBUTION AND FINALLY CONSUMPTION.
•
SHIFT-ABILITY
THEORY
•
BANK NEED NOT RELY UPON MATURITIES IF IT HAS
MAINTAINED SUBSTANTIAL AMOUNT OF SUCH ASSETS ASC A BE SHIFTED ON TO OTHERS TO
MEET AN UNEXPECTED HEAVY RUN ON IT.
•
ANTICIPATED INCOME THEORY
•
LOAN REPAYMENT SCHEDULES HAVE TO ADAPTED TO THE
ANTICIPATED INCOME OR CASH RECEIPT L
•
LIABILITY
MGMT THEORY
• AN INDIVIDUAL BANK ACQUIRE RESERVES
FROM SEVERAL DIFFERENT SOURCES BY CREATING ADDITIONAL LIABILITIES AGAINST
ITSELF.
• TIME CERTIFICATES OF DEPOSITS
• BORROWING FROM OTHER COMMERCIAL BANK
• BORROWING FROM CENTRAL BANK
• RAISING OF CAPITAL FUNDS
•
THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
•
BANKING AND INSURANCE
•
DR.
SHASHI AGGARWAL
•
INTRODUCTION
•
ON THE BASIS OF RECOMMEDATION OF MALHOTRA
COMMITTEE, THE GOVT OF INDIA CONSTITUTED THROUGH RESOLUTION AN INTERIM INSURANCE
REGULATORY AUTHORITY ON 23 JAN, 1996. THE BILL WAS RETITLED AS INSURANCE
REGULATORY AND DEVELOPMENT AUTHORITY AND INTRODUCED AGAIN IN 1999.
•
THE PREAMBLE OF THE ACT
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