The Reserve Bank of India has mandated the banks to fix limits on their exposure to specific industry or sectors and has prescribed regulatory limits on banks’ exposure to single and group borrowers in India. This measure of RBI is aimed at better risk management and avoidance of credit risks. In addition to credit exposure…
All financial exchanges between one country and another country of the rest of the world are made up of the current account transactions (such as exports and imports of goods and services of a country) and the capital account transaction that reflects net change in ownership of national assets. Capital account includes all kinds of…
The real value of money is based on the concept of time value of money, in that one hundred Rupees of present day is worth more than the hundred Rupees received at a future date. Here, real value of money means what one unit of money is capable of purchasing; in short, its purchasing power.…
Contrasting HTM (held to maturity) securities in which the holder has the intention to hold them until specific date of maturity, ‘Held for Trading’(HFT) investments are the securities that a holder purchases with the intent of selling them within a short period of time, with the sole intent of generating short term profits by taking…
The investment portfolio of the banks are classified under three categories viz. ‘Held to Maturity’, ‘Available for Sale’ and ‘Held for Trading’. Banks take decision to categorise their investments at the time of acquisition of these securities and recorded on the investment proposals of the bank. The Available for Sale (AFS) are debt and equity…
The entire investment portfolio of the banks (including SLR securities and non-SLR securities) are classified under three categories viz. ‘Held to Maturity’, ‘Available for Sale’ and ‘Held for Trading’. Held-to-maturity securities are debt security investments which the holder has the intention and ability to hold them until specific date of maturity. The investments classified under…
The Indian Financial Network (INFINET) is a Closed User Group (CUG) Network for the exclusive use of Member Banks and Financial Institutions. It was set up by the Reserve Bank in 1999 through the Institute for Development and Research in Banking and Technology (IDRBT) Hyderabad. The Institute explored capability, methods, procedure to expand the network…
There are three types of capital viz. Regulatory capital, Book capital, and Economic capital. Regulatory capital is the amount of capital a bank is required to hold as per the stipulations prescribed by the banking regulator of the country. Book Capital is the actual capital that the bank has, which includes equity capital, loans, and…
In terms of Section 20 of the RBI Act 1934, RBI has the responsibility to undertake the receipts and payments of the Central Government and to carry out the exchange, remittance and other banking operations, including the management of the public debt of the Union. In addition to that RBI has the right to transact…