(This post explains various types of insurance policies available in the market like Life Insurance policies, Health insurance policies, Property Insurance policies including plant and machinery, boiler, shipping insurance, stock of goods, etc., and conditions and clauses to be verified by the buyers before buying them). For many average insurance policy buyers verifying conditions and…
Escrow account is an account placed in trust with a third party usually a bank to hold money which belongs to others. The release of money parked in escrow account will be dependent on conditions agreed to by the transacting parties. The Escrow services are offered to meet diverse requirements of clients that include Sale…
[This article elucidates the gains of NPA recovery and the difference between Gross NPA and Net NPA] An asset (loan and advances of the bank) becomes non-performing asset (NPA) when it ceases to generate income for the bank. If interest and or installment of principal amount of loan remain ‘overdue’* for a period of more…
Off-balance sheet exposures refer to activities that are effectively assets or liabilities of a company but do not appear on the company’s balance sheet. The off-balance sheet exposures in banking activities refers to activities that do not involve loans and deposits but generate fee income to the banks. The non-fund based facilities like Issuance of…
Up till now, NEFT system has been providing a positive confirmation to the remitter of the funds regarding completion of the funds transfer, thus giving an assurance to the remitter that the funds have been successfully credited to the beneficiary account. Now onwards same facility will be extended by the banks to the remitter of…
A mortgage-backed security (MBS) is a bond type security in which the collateral is provided by a pool of mortgages. For example, A borrows money from Bank ‘B’ mortgaging his house to Bank ‘B’. The Bank ‘B’ sells the mortgage to a company ‘C’ (which may be a government agency or investment bank or private…
Modified duration is a concept that interest rates and bond prices move in opposite directions. It tells you how sensitive a bond is to interest rate changes. It is expressed in a formula that expresses the measurable change in the value of a security in response to a change in interest rates. Key points about…
‘Duration’ or Macaulay duration measures the price volatility of fixed income securities. As the term suggests, duration is expressed as a number of years and measures a bond’s sensitivity to change in interest rates. Usually, the higher the duration, the more is the volatility in the prices. To be precise, it measures the change in market…
Basket of currencies or currency basket means a currency in the basket (group) can be freely convertible to another currency of the basket without the special approval from the Central Bank of that country. The resulting exchange rate can be fixed or variable according to the demand for that currency in the international market.Majority of…
The ‘Market risk’ is an umbrella term used for multiple types of risk associated with adverse changes in market variables that include Liquidity Risk, Interest rate risk, Foreign exchange rate risk and equity price risk. Market risk causes substantial changes in income and economic value of banks. The Bank of International Settlements (BIS) defines market risk…