(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…
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…
In banking jargon the word ‘spread’ is used in issuance of corporate bonds,interest levied on loans and in foreign exchange transactions. In foreign exchange transactions the difference between the buying rate and selling rate is referred as spread or margin. The term ‘credit spread’ is used in the fixed income corporate bonds and bank loans.…
In simple words, Commercial Real Estate (CRE) can be described as any property which is used for non-residential purposes such as housing buildings, hotels, restaurants, gymnasiums, hospitals, condominiums, shopping malls, office blocks, theatres, amusement parks, cold storages, warehouses, educational institutions, industrial parks etc. In terms of Basel II definition if the repayment primarily depends on…
In securitization, credit enhancement refers to a risk-reduction technique that increases the credit profile of structured financial products or transactions. Credit enhancement may be divided into First Loss facility and Second Loss facility. First loss facility represents the first level of financial support to a special purpose vehicle (SPV) as part of the process in…
The ‘Securitisation’ is a two-stage process in which pool of assets are structured or packaged and sold by an originator(Banks and financial institutions) to a bankruptcy remote* special purpose vehicle (SPV). In the first stage there is sale of single asset or pooling and sale of pool of assets to a SPV in return for…
Currently the banks are mandated to extend collateral-free agriculture loans up to Rs.1 lakh. This limit of Rs.1 lakh was fixed in the year 2010.In view of overall inflation and rise in agriculture input cost since 2010, Reserve Bank of India vide its circular RBI/2018-19/118 FIDD.CO.FSD.BC.No.13/05.05.010/2018-19 dated February 7, 2019 advised all the scheduled commercial…
Deferred Payment Guarantee is a guarantee for a payment usually on installments which has been deferred or postponed. Banks issue DPG in the cases of purchase of capital goods/machinery where the seller offers credit to the buyer and buyer’s bank guarantees the due payments to the seller. Here the seller draws drafts of different maturities…
“Prudential norms” are the guidelines and general norms issued by the banking regulator (the central bank) of the country for the proper and accountable functioning of banks and financial institutions. The provisioning requirements for all types of standard assets, sub-standard assets, Doubtful assets and Loss assets stands as below. Standard assets: Banks should make general…