Term loan application received from educational institutions run by trusts, private management, requires appraisal of the project as well as appraisal of the management. First step of appraisal of project involves verification of whether the institution has the necessary approval from the Government agencies to run the school. Secondly, bank has to verify whether the…
The Cash Credit limit (known as working capital limit) is sanctioned by banks and financial institutions to industrial and trading establishments for their investment on various types of current assets used in the operating cycle. This facility offers the borrowers flexibility and comfort to withdraw funds from the bank as per their financial requirement from…
Reserve Bank of India on Friday (August 02, 2019) reminded all the commercial banks that they are not permitted to charge foreclosure charges / pre-payment penalties on home loans / all floating rate term loans sanctioned to individual borrowers. The above norm of prohibiting banks charging foreclosure charges/pre-payment penalties on floating rate loan is already…
As per existing External Commercial Borrowings policy norms, ECB proceeds could not be utilized by the borrowers for the following purposes. (i) Working capital purposes, (ii) General corporate purposes, (iii)Repayment of Rupee loans except when the ECB is availed from foreign equity holder for a minimum average maturity period of 5 years.(iv) On-lending for above…
Banks & Financial Institutions are generally free to determine the lending rates on loans and advances. The method to arrive at Lending Rate has changed drastically over the last decade. The Lending Rate like BPLR, Base Rate, and MCLR internal benchmark rates are used by individual banks to determine the interest rates on their credits.…
Securitization is the process in which certain types of assets are pooled so that they can be repackaged into interest-bearing securities. The interest and principal payments from the assets are passed through to the purchasers of the securities.Both Asset-backed securities (ABS) and mortgage-backed securities (MBS) are fixed-income financial securities collateralized (backed) by a pool of…
In the light of Hon’ble Supreme Court order dated April 2, 2019, which held the RBI circular dated February 12, 2018 on Resolution of Stressed Assets as ultra vires, the Reserve Bank of India on Friday (June 7, 2019) released fresh guidelines to deal with bad loans. The new directions shall be called the ‘Reserve…
In our previous posts we talked about (1) Tax audit, (2) What is a forensic audit? (3) What is a Legal Audit? (4) Concurrent Audit System in bank. (5) What is a statutory audit? In this post let us study what is a stock audit. Inspection of assets charged to the lender at a regular…
A restructured or rescheduled account is practically a new loan replacing the older account. The purpose of restructuring of a loan is to accommodate the borrower who is in financial difficulty and unable to repay the loan as per repayment schedule. Restructuring of loans involve modification of terms and conditions of the loan usually with…
The potential loan losses arise to banks and financial institutions due to default of repayments from borrowers or renegotiated terms of a loan or one time settlement that incur lower than previously estimated repayments. The provision for loan loss is the money banks and financial institutions set aside to cover these potential losses on their…