RAROC approach for risk evaluation
Banks, across the world, use different techniques to evaluate the probable risks through sensitivity analysis, scenario analysis, break-even analysis etc. The most commonly used approach is the Risk Adjusted Return on Capital (RAROC). The banking as well as Non-banking financial institution and also large numbers of businesses are utilizing RAROC metric to calculate Return on…
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What is a contractionary Monetary Policy?
The contractionary monetary policy is the opposite of the expansionary monetary policy. It is used to fight inflation which involves decreasing the money supply to increase the cost of borrowing which in turn decreases GDP and dampens inflation. Once the Central Bank of the country (In India RBI) puts too much liquidity into the banking…
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How to measure Gross Domestic Product (GDP)?
The most well-known and frequently tracked metric used for measuring the economic growth of a country is the gross domestic product (GDP). The Gross Domestic Product measures the value of goods and services produced by a nation both for domestic sale and exports. However, GDP does not include imports for measurement, as imports are not…
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Banks are prohibited from levying foreclosure charges/ pre-payment penalties
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…
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RBI relaxes end use restrictions on ECB
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…
Dearness relief for the Bank Pensioners – August 2019 to February 2020
The average index number for April 2019 to June 2019 works out to 7172. Therefore Bank Pensioners would get 70 slabs to increase as dearness relief for the half-year August 2019 – February 2020. The following chart shows the rate of dearness relief applicable to bank pensioners who have retired on various dates. The percentage…
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