(This post elucidates on recovery and monitoring process of NPA accounts,advantage and disadvantage of Compromise settlement, and gains of NPA recovery) The asset of the bank, classified as NPA ceases to generate income to the bank. In addition to stoppage of income generation to the banks, banks are required to make provision for NPA. Therefore,…
The Credit Guarantee fund Trust for Micro Small Enterprises (CGTMSE) has been providing guarantee coverage to any collateral / third party guarantee free credit facilities extended by eligible institutions (Member lending institutions (MLI) like banks, financial institutions, select NBFCs and Small Finance banks etc.). Hitherto, all activities* that come under manufacturing and service sector as…
Trade Credit (Buyer’s credit/supplier credit) can be raised by Indian importers in any freely convertible foreign currency (FCY-denominated TC) or Indian Rupee (INR-denominated TC), as per the Trade Credits (TC) framework. Buyers’ credit finance means finance for payment of imports in India arranged by the importer (buyer) from a bank or financial institution outside India.…
Banks troubled with capital constraints sell their “excess baggage” of loan assets to other banks in the form of ‘Inter Bank Participation Certificate (IBPC). These IBPC transactions are aimed to fill the short-term requirements of banks and are typically bought back by the seller bank within three to four months, depending on the agreement. Reserve…
The assets of the bank, classified under NPA cease to generate income to the bank. In addition to stoppage of income generation to the banks, banks are required to make provision for NPA. Therefore NPA is a double edged razor; damaging the profit, weakening the capital structure and reducing the rating of the bank. Measures…
Easy money is known as cheap money, easy monetary policy and expansionary monetary policy. An easy money policy is a monetary policy that increases the money supply usually by lowering interest rates. The main purpose of Easy Money policy is to facilitate increase in investment thereby raising gross domestic product. Easy Money occurs when a…
The contingency planning is a regular part of risk management for exceptional risk though unlikely, may have disastrous consequences when an unexpected event or situation occurs. In the other words, contingency planning is a process that includes risk assessment and a mitigation strategy for those risks. It generally refers to a negative situation like direct…
The International Monetary Fund (IMF) defines funding liquidity as “the ability of a solvent institution to make agreed-upon payments in a timely fashion”. According to the IMF, funding liquidity is the ability lending agency agrees payment with immediacy. Funding liquidity is the availability of credit to finance the purchase of financial assets for a business…
A bankruptcy remote entity is a special-purpose vehicle (“SPV”) that is formed to hold a defined group of assets and to protect them from being administered as property of a bankruptcy estate. The corporate documents of bankruptcy remote like memorandum association and article association may also attempt to create disablements to a bankruptcy filing. For…
Stress test is a process or simulation technique that evaluates an institutions reaction to different crisis situations. Stress testing and capital planning are increasingly linked to many risk management processes that require coordination across risk, treasury, and financial planning and analysis functions. Banks have been using stress tests to evaluate their potential vulnerability to certain…