Acronyms related to Banking - 2

Sl. No.	Short Form	Full Form
1	CPC	Credit Policy Committee
2	CD Ratio	Credit-Deposit Ratio
3	BCBS	Basel Committee for Bank Supervision
4	CAR	Capital Adequacy Ratio
5	CMRD	Credit Risk Management Department
6	CIR	Credit Information Report
7	LBS	Lead Bank Scheme
8	ANBC	Adjusted Net Bank Credit
9	CEOBSE	Credit Equivalent of Off-Balance Sheet Exposure
10	RIDF	Rural Infrastructure Development Fund
11	CIBIL	Credit Information Bureau of India Limited
12	NPI	Non-Performing Investments
13	PDAI	Primary Dealers Association of India
14	FIMMDA	Fixed Income Money Market and Derivatives Association of India
15	YTM	Yield to Maturity
16	MICR	Magnetic Ink Character Recognition
17	RTGS	Real Time Gross Settlement
18	NEFT	National Electronic Funds Transfer
19	ECS	Electronic Clearing Service
20	AMFI	Association of Mutual Funds in India

ASBA : How is it helpful?

In the time of raining Initial Public Offer's (IPO) the one important service that our Banks provide to us is rarely used. Most investors are not aware of this useful service which our Banks provide to us.


Quoting an excellent article from ET on ASBA and it's uses. Here it goes...


Application supported by blocked amount (ASBA) is a new investor-friendly way to apply for initial public offerings (IPOs). ASBA is an interface for banks to participate in the process of IPO payments as proposed by the capital markets regulator, the Securities and Exchange Board of India ( SEBI .. The objective of introducing ASBA is to ensure an investor's funds leave his bank account only on allotment of shares in public issues. 


The ASBA process also ensures that only the required amount of funds is debited to the investor's bank account on allotment of shares. In this mechanism, the need for refunds is completely obviated. The banks participating in an IPO process can upload the bids with respect to their customers into the electronic books of BSE and NSE. The interface facilitates not only the controlling branch but also the designated branches of the banks to directly upload the bids into the electronic books. 


ASBA provides an alternative mode of payment in issues whereby the application money remains in the investor's account till finalisation of basis of allotment in the issue. The process facilitates individual investors bidding at cut-off, with single option, to apply through self-certified syndicate banks (SCSBs), in which the investors have accounts. SCSBs are banks that meet the conditions laid down by SEBI. 


Role of SCSB 
Accept application 
Verify application 
Block funds to the extent of bid payment amount 
Upload the details on the web-based bidding system of the exchange 
Unblock once the basis of allotment is finalised 
Transfer the amount for allotted shares to the issuer 


This will co-exist with the current procedure of investors applying through sub-syndicate and syndicate members, with a cheque as a payment instrument. The ASBA is an application containing an authorisation to block the application money in the bank account to subscribe to an issue. If an investor is applying through ASBA, his application money will be debited from the bank account only if his application is selected for allotment after the basis of allotment is finalised, or the issue is withdrawn. 


Under the ASBA facility, investors can apply to any public or rights issues by using their bank account. Investor have to submit the ASBA form (available at the designated branches of banks acting as SCSB) after filling in details such as name, PAN number, demat account number, bid quantity, bid price and other relevant details to the branch with an instruction to block the amount in their account. In turn, the bank will upload the details of the application in the bidding platform. The investor should ensure the details that are filled in the ASBA form are correct. Otherwise, the form is liable to be rejected. Applying through ASBA facility has these advantages: 


No need for cheque payment 
The investor need not pay the application money through a cheque. He has to submit the ASBA which accompanies an authorisation to block the amount in the bank account - to the extent of the application money. 


Refunds don't arise 
The investor does not have to bother about refund, as in ASBA only that much money - to the extent required for allotment of securities - is taken from the bank account, only when his application is selected for allotment after the basis of allotment is finalised. 


Interest ensured 
The investor continues to earn interest on the application money as it remains in the bank account, which is not the case in other modes of payment. 


Simple form 
The application form is simpler. The investor deals with a known intermediary - his own bank. An investor who is eligible for ASBA has the option of making an application through the ASBA, or through the existing facility of applying with a cheque. 


Bid can be withdrawn 
An investor can also withdraw the ASBA bid. During the bidding period an investor can approach the same bank to which he had submitted the ASBA and request for withdrawal through a signed letter citing his application number. After the bid closure period, he can send his withdrawal request to the registrars before the finalisation of basis of allotment, and they will cancel the bid and instruct the SCSB to unblock the application money in the bank account after the finalisation of basis of allotment.


Source


Click here to download a handout by SEBI which explains the ASBA Process.

All about Base Rate

What is the Base Rate (BR)? 
It is the minimum rate of interest that a bank is allowed to charge from its customers. Unless mandated by the government, RBI rule stipulates that no bank can offer loans at a rate lower than BR to any of its customers.


How is the Base Rate calculated?
A host of factors, like the cost of deposits, administrative costs, a bank's profitability in the previous financial year and a few other parameters, with stipulated weights, are considered while calculating a lender's BR. The cost of deposits has the highest weight in calculating the new benchmark. Banks, however, have the leeway to take into account the cost of deposits of any tenure while calculating their BR. For example, SBI took costs of its 6-month deposits into account while calculating its BR, which it has fixed at 7.5%.


When did the Base Rate come into force?
Base rate came into effect from July 1, 2010. Only the new loans taken on or after July 1 and old loans being renewed after this date will be linked to BR.


How is it different from bank prime lending rate?
BR is a more objective reference number than the bank prime lending rate (BPLR) -- the current benchmark. BPLR is the rate at which a bank is willing to lend to its most trustworthy, low-risk customer. However, often banks lend at rates below BPLR. For example, most home loan rates are at sub-BPLR levels. Some large corporates also get loans at rates substantially lower than BPLR. For all banks, BR will be much lower than their BPLR. 


How often can a bank change its BR?
A bank can change its BR every quarter, and also during the quarter.


What does it mean for corporate borrowers?
Under the BPLR system, large corporates who enjoyed rates as low as 4-6% will be hit since from July 1, 2010 no bank can lend at rates below BR. However, there is a chance that some corporates, with low-risk profile, would get a lower rate under the new system as under the BR regime banks are expected to take into consideration the risk levels of the borrower.


What does it mean for retail customers?
The impact could be an increase or decrease of 25 basis points (100 basis points = 1%) compared to the current rate of interest they are enjoying. However, existing customers will not be impacted by this change.


What does it mean for the banks?
Banks' net interest margin will be unaffected. The impact on banks' profitability because of moving to the BR regime is yet not clear.


Can a customer move from the BPLR to BR regime before the expiry of the current BPLR-linked loan tenure?
It depends upon individual banks. Some banks, like the Central Bank of India, are offering such an option to existing customers. For customers, a shift before the expiry of the tenure of the existing loan will make sense only if the BR-linked interest rate is lower than the BPLR-linked rate.


Source

Acronyms Related to Banking - 1

Sl. No.	Short Form	Full Form
1	SIDBI	Small Industries Development Bank of India
2	TFCI	Tourism Finance Corporation of India Limited
3	PFCL	Power Finance Corporation Limited
4	SFC	State Financial Corporation
5	SIDC	State Industrial Development Corporation
6	NEDFI	North-Eastern Development Financial Institution Ltd.
7	NBFC	Non-Banking Financial Companies
8	HDFC	Housing Development Finance Corporation Limited
9	HUDCO	Housing and Urban Development Corporation Limited
10	RRB	Regional Rural Banks
11	NABARD	National Agriculture and Rural Development Bank
12	NDTL	Net Demand and Time Liabilities
13	EXIM Bank	Export Import Bank
14	CD	Certificate of Deposit
15	CASA deposits	Current Account and Savings Account deposits
16	IBA	Indian Bank Association
17	KYC	Know Your Customer
18	FEMA	Foreign Exchange Management Act

General Awareness for the week ending 20-11-2010

S.No.	Particulars	Answers
1	World’s fastest supercomputer made by China	Tianhe-1A
2	Myanmar’s pro-democracy leader who was set free recently.	Aung San Suu Kyi
3	Full form of ETF	Exchange Traded Funds
4	Full form of IFRS	International Financial Reporting Standards
5	HDR-2010 introduces three indices	(a)    Multidimensional Poverty Index, (b)    Gender Inequality Index (c)     Inequality-adjusted Human Development Index
6	RIC comprises of	Russia, India, China
7	National Advisory Council(NAC) chairperson	Sonia Gandhi
8	Which state in India attracts highest amount of FDI?	Maharashtra
9	Name the Indian city which is fifth most expensive office space in the world	Mumbai
10	First CommonWealth Games was held in	Hamilton, Ontario, Canada in 1930.
11	From which country does India attract highest FDI inflows?	Mauritius

Non-Performing Assets

A very informative article from ET about what Non-Performing Assets(NPA's) are.

What are non-performing assets (NPAs)?

Non-performing assets are bad loans . Any asset, including a leased asset, becomes non performing when it ceases to generate income for the bank. As per the guidelines issued by the Reserve Bank of India (RBI), banks classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter.

Are all loans where payment remains overdue classified as NPA?

Banks are required to classify non performing assets further into the following three categories based on the period for which the asset has remained non performing and the realisability of the dues. The three categories are -- Substandard Assets, Doubtful Assets and Loss Assets. If an account remains NPA for a period of 12 months it is classified under Substandard, if it remains Substandard for 12 months it is classified as Doubtful. A Loss Asset is one where loss has been identified by the internal or external auditors.

Can an account be termed as NPA if the loan is given through a consortium?

Yes, an account can be classified as NPA even if there are multiple lenders. The classification is based on the record of recovery of the individual member banks and other aspects having a bearing on the recoverability of the advances. The banks participating in the consortium should, therefore, arrange to get their share of recovery transferred from the lead bank in the consortium or get a consent from the lead bank for the transfer of their share of recovery, to ensure proper asset classification in their respective books.

Do banks have to keep aside extra funds for NPAs?

Banks have to keep aside extra funds, called provisioning in banking parlance, for standard assets as well. As per the norms, banks have to make a general provision of 0.40% for all loans and advances except that given towards agriculture and small and medium enterprise (SME) sector. In case of NPAs, provisioning needs to be done as per the NPA category. For substandard loans, a general provisioning of 10% on the total outstanding amount is made if the loan is secured, for unsecured loans the total provisioning that needs to be done is 20% on the outstanding balance.

How do banks recover their NPAs?

Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, the banks can take legal recourse to recover their dues. If a borrower makes any default in repayment and his account is classified as NPA, then the secured creditor has to issue notice to the borrower giving him 60 days to pay his dues. If the dues are still not paid, the bank can take possession of the assets and can also give it on lease or sell it.

Can bank sell their NPAs?

A bank can sell NPA from its books to asset reconstruction companies such as ARCIL only if it has remained NPA for at least two years. Such sale can take place only on cash basis. The purchasing bank has to keep the accounts in its books at least for a period of 15 months before it is sold to other banks. The purchased NPA may be classified as ‘standard’ in the books of the purchasing bank for a period of 90 days from the date of purchase.

Source

General Awareness for the week ending 12-11-2010

1. World's Tallest statue a giant 108 feet high idol of Hanuman (the Monkey God) was unveiled at Jakhoo Hanuman temple in Shimla. It surpasses the current tallest statue of 'Christ the Redeemer', which measures at 98 feet and stands at an altitude of 2296 feet in Rio de Janeiro, Brazil .
2. MPI = Multidimensional Poverty Index.
3. BIMARU States =  Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh.
4. Audacity of Hope written by Barack Obama
5. Comptroller and Auditor General (CAG) office completes 150 years. Sir Edmund Drummond was appointed the first Auditor General on November 16, 1860, and V. Narahari Rao was appointed the first Comptroller and Auditor General of Independent India in 1948. Current Comptroller and Auditor General (CAG) of India is Vinod Rai.
6. 16th Asian Games in Guangzhou, China.
7.  Fifth G20 Summit held in Seoul, South Korea on November 11–12.
8.  Attorney General of India = Goolam Essaji Vahanvati. 

General Awareness for 03-11-2010

1. USIBC = U.S.-India Business Council.
2. Current FDI cap in Defence Industry = 26%
3. MFI = MicroFinance Institutions.
4. RBI's GDP Growth forecast for 2010-11 = 8.5%.
5. Repo Rate = 6.25%, Reverse-Repo Rate = 5.25%, Cash Reserve Ratio(CRR) = 6.0%
6. First ethnically black player to play for the South African cricket team who retired recently = Makhaya Ntini.
7. NCSC = National Commission for the Scheduled Castes. 
8. Committee formed to look into Commonwealth Games projects corruption = Shunglu Committee.