The Government of India has announced Sovereign Gold Bond Scheme 2018-19 (“the Bonds”). The Bonds under this Scheme may be held by a person resident in India, being an individual, in his capacity as such individual, or on behalf of minor child, or jointly with any other individual. The bond may also be held by…
Value at risk is a statistic technique that measures and estimates the level of financial risk within an organization or investment portfolio or position over a specific time frame (holding period). The three major methods are used to calculate VaR are (i) Parametric Estimates (ii) Monte Carlo simulation (iii) Historical simulation. Parametric Estimates: The method…
Let us take an example, one of your friends borrowed a sum of Rs.10000/-from you, but he was unable to repay because of his unusual financial difficulties. You have realized the situation of your friend that the repayment of loan is beyond his control; so you forgave the loan amount given to him and informed…
This post elucidates Asset Liability Committee (ALCO) that evaluates the risk associated with Assets and Liability of banks, financial institutions and also the practice of managing risks that arise due to mismatches between the assets and liabilities known as Asset Liability Management (ALM). ALCO (Asset Liability Committee): A risk management committee in a bank that…
Documentary Collection or bill collection refers to the collection of financial and/or commercial documents. The documentary collection is one of the conventional methods of payment in international trade whereby the seller forwards financial and/or commercial documents to the buyer through his bankers against cash payment or acceptance of a bill of exchange. Unlike a bill…
October 5, 2018: The Monitory Policy Committee (MPC) of Reserve Bank of India in its Fourth Bi-Monthly Statement for 2018-19, announced today did not increase the policy repo rate as widely expected. There was a time when banks followed closely on the heels of what the central bank did, i.e., when it raised rates, lenders, too,…
Credit risk measurement: Credit risk arises when a bank borrower or counter- party fails to meet his obligations according to specified schedule in terms of predetermined agreement either due to genuine problems or willful default. Banks are using two broad methodologies for computing their capital requirements for credit risk as per Basel II guidelines. First…
As per the existing policy on External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency, ECB can be raised under tracks I and III for working capital purposes. As per extant regulations ECB can be raised from direct and indirect equity holders or from a group company for working capital purpose. The above…
Adequate capital is required by banks to absorb any losses that arise during the normal course of the bank’s operations. Each Capital contribution/Equity contribution is a contribution of capital, in the form of money or property, to a business by an owner, partner, or shareholder. The capital adequacy frame work in banking business emphasizes adequate…
Capital Account Convertibility means that the currency of a country can be converted into foreign exchange without any controls or restrictions. The Report of the Tarapore Committee on Capital Account Convertibility (1997) provided the following working definition of CAC: “freedom to convert local financial assets into foreign financial assets and vice versa at market determined…