What are the strategies used for reducing NPA?
(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,…
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CGTMSE guarantee for credit facility covered by collateral security
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…
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What is Inter Bank Participation Certificate – IBPC?
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…
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Effects of NPA on profitability
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…
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What is easy money?
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…
What is contingency planning?
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…
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