The document discusses para banking and universal banking. It defines para banking as financial services permitted by RBI that are undertaken by scheduled commercial banks. Universal banking allows getting various financial products like loans and deposits under one roof. It then discusses various para banking activities commercial banks can engage in, such as equipment leasing, hire purchase, factoring, and primary dealership. It provides guidelines and eligibility criteria for these activities.
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The document discusses para banking and universal banking. It defines para banking as financial services permitted by RBI that are undertaken by scheduled commercial banks. Universal banking allows getting various financial products like loans and deposits under one roof. It then discusses various para banking activities commercial banks can engage in, such as equipment leasing, hire purchase, factoring, and primary dealership. It provides guidelines and eligibility criteria for these activities.
The document discusses para banking and universal banking. It defines para banking as financial services permitted by RBI that are undertaken by scheduled commercial banks. Universal banking allows getting various financial products like loans and deposits under one roof. It then discusses various para banking activities commercial banks can engage in, such as equipment leasing, hire purchase, factoring, and primary dealership. It provides guidelines and eligibility criteria for these activities.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
The document discusses para banking and universal banking. It defines para banking as financial services permitted by RBI that are undertaken by scheduled commercial banks. Universal banking allows getting various financial products like loans and deposits under one roof. It then discusses various para banking activities commercial banks can engage in, such as equipment leasing, hire purchase, factoring, and primary dealership. It provides guidelines and eligibility criteria for these activities.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
It provides a framework of rules/regulations/instructions to the Scheduled Commercial Banks for undertaking certain financial services or para-banking activities as permitted by RBI.
• What is ‘Universal Banking’?
Universal Banking is a superstore for financial products under one roof. Corporate can get loans and avail of other handy services, while can deposit and borrow. It includes not only services related to savings and loans but also investments.
• Relationship between Para-Banking & Universal Banking?
PARA BANKING Most of the rationales for regulating banks fall into broad categories:
• Subsidiary Companies • Equipment leasing, Hire purchase business and Factoring services • Banks undertaking PD (Primary Dealer) business • Mutual Fund Business • Insurance business • Underwriting of Corporate Shares and Debentures & bonds of Public Sector Undertakings • ‘Safety Net’ Schemes Commercial Banking
Retail Banking Merchant
Banking
What Is Merchant Banking?
A merchant bank deals with the commercial banking needs of a)international finance, b)long term company loans, and c) stock underwriting UNDERWRITING OF CORPORATE SHARES & DEBENTURES • The statutory provision contained in Section 19(2) & (3) of the Banking Regulation Act, 1949 regarding holding of shares in any company as pledgee / mortgagee or absolute owner, should be strictly adhered to.
• The banks have to ensure that underwriting commitments should comply with the ceiling prescribed for the banks’ exposure to the capital markets. I. Ensure that the portfolio is diversified II. Sub-underwriting III. Carefully evaluate the proposals • Banks should not underwrite issue of Commercial Paper by any Company or Primary Dealers
• Banks should not extend Revolving Underwriting Facility to short term
Floating Rate Notes/Bonds or debentures issued by corporate entities. UNDERWRITING OF CORPORATE SHARES & DEBENTURES (CONTINUE)
• An annual review covering the underwriting operations taken up during the year, with company-wise details of such operations, the shares/debentures devolved on the banks, the loss (or expected) from unloading the devolved shares/debentures indicating the face-value and market value thereof, the commission earned, etc. may be placed before their Boards of Directors within 2 months of the close of the fiscal year.
• Banks/Merchant banking subsidiaries of banks undertaking underwriting activities
are also required to comply with the guidelines contained in the SEBI (Underwriters) Rules and Regulations, 1993, and those issued from time to time. www.ManagementFunda.com UNDERWRITING OF BONDS OF PUBLIC SECTOR UNDERTAKINGS 1. Banks should subject the proposals for underwriting to proper scrutiny having regard to all the relevant factors and accept such commitments only on well- reasoned commercial considerations with the approval of the appropriate authority.
2. The banks should formulate their own internal guidelines as approved by their Boards of Directors on investments in and underwriting of PSU bonds, including norms to ensure that excessive investment in any single PSU is avoided.
3. Banks should undertake an annual review of the underwriting operations relating
to bonds of the public sector undertakings, with PSU-wise details of such operations, bonds devolved on the banks, the loss (or expected loss) from unloading the devolved bonds indicating the face-value and market value thereof, the commission earned, etc. and place the same before their Boards of Directors within two months from the close of the fiscal year. www.ManagementFunda.com GUIDELINES FOR 'SAFETY NET' SCHEMES • Under such schemes, large exposures are assumed by way of commitments to buy the relative securities from the original investors at any time during a stipulated period at a price determined at the time of issue, irrespective of the prevailing market price.
• In some cases, such schemes were offered without any request from the company whose issues are supported under the schemes.
• Apparently, there was no undertaking in such cases from the issuers to
buy the securities. There is also no income commensurate with the risk of loss built into these schemes, as the investor will take recourse to the facilities offered under the schemes only when the market value of the securities falls below the pre-determined price. Investment ceiling in financial service companies. As pledgee or a mortgagee 30 per cent of the paid-up share capital of that company . OR 30 per cent of its own paid-up share capital and reserves.
In a subsidiary company, financial institutions, stocks &
other exchanges. 10 per cent of the bank’s paid-up share capital and reserves. 20 per cent of the bank’s paid-up share capital and reserves.
Investments which are classified as 'Held for Trading'
category.
Banks participation in the equity subject to RBI
approval. www.ManagementFunda.com Equipment leasing, Hire purchase business and Factoring services.
a)Factoring
Types of Factoring
•Maturity Factoring – Maintains sales ledger.
•Finance Factoring – Advances Funds against produce.
•Discount Factoring – Advances between 70 to 85%.
www.ManagementFunda.com b) Leasing www.ManagementFunda.com
• Finance Leasing : The leasing company recovers the full cost of the equipment, plus charges, over the period of the lease.
• Operating Leasing : The leasing company will lease the equipment, expecting to sell it secondhand.
c) Hire purchase agreement
After all the payments have been made, the business customer becomes the owner of the equipment
www.ManagementFunda.com Para banking Guidelines for Leasing, HP & Factoring
• Changes in income recognition and provisioning for
loans/advances be implemented. www.ManagementFunda.com
MUTUAL FUND BUSINESS
• Approval
• Compliance
• Bank-sponsored mutual funds
www.ManagementFunda.com TERMS AND CONDITIONS FOR MARKETING MUTUAL FUND • Banks should only act as an agent of the customers.
• Banks should not acquire units of mutual funds from the
secondary market.
• Banks cannot buy back units of mutual funds from their
customers.
• Proposal to extend any credit facility to individuals against the
security of units of mutual funds.
• Banks holding custody of mutual fund units on behalf of their
customers. www.ManagementFunda.com
MONEY MARKET MUTUAL FUNDS
www.ManagementFunda.com TERMS AND CONDITIONS TO OFFER CHEQUE WRITING FACILITIES TO INVESTORS
• Commercial arrangement
• In the nature of a drawing account
• Pre-funding of the drawing account
www.ManagementFunda.com
PARA BANKING:- PRIMARY DEALERSHIP
•Meaning
•Business Sense
www.ManagementFunda.com ELIGIBILITY CRITERIA
• Owned Capital of Rs 1000 crores
• Minimum CAR of 9 %
• Net NPA of less than 3 %
PRUDENTIAL NORMS
• Investment will be counted as a part of SLR.
• Separate SGL for their PD Subsidiaries with minimum
balance of Rs 100 crores.
• Investment valuation of PD Portfolio.
• A proper MIS has to be maintained.
www.ManagementFunda.com
PRIMARY DEALERS IN INDIA
1. ABN AMRO BANK
2. KOTAK MAHINDRA BANK 3. BANK OF BARODA 4. HDFC BANK LTD 5. HSBC BANK LTD 6. JP MORGAN CHASE BANK 7. CITI BANK LTD 8. CANARA BANK 9. CORPRATION BANK LTD
www.ManagementFunda.com PARA BANKING NORMS FOR INSURANCE (BANCASSURANCE)
• Meaning and My Experience
• Business Scope
Revenue from Non Core Activity.
Risk Free.
Better Utilization of Infrastructure.
Synergies (Insurance & Banking).
RBI NORMS FOR INSURANCE BUSINESS BY BANKS
• Joint Venture or Subsidiary
• Application Approval
• Employee Qualification CURRENT SCENARIO • Subsidiaries Eg:- SBI LIFE INSURANCE LTD
• Tie up with insurance companies
Eg:- ICICI PRUDENTIAL , HDFC STANDARD, KOTAK OLD MUTUAL
• Group of banks forming a subsidary
Eg:- CANARA HSBC ORIENTAL BANK OF COMMERCE LIFE INSURANCE www.ManagementFunda.com
NEWS www.ManagementFunda.com POST-2011, BANK BOOKS TO CARRY REAL NUMBERS
Bank will have to value assets on current rather
than on historic cost.
Banks will have to adopt the international financial
reporting standards (IFRS) by 2011.
State bank of India has already taken the initiative
to shift from the current Indian standard of accounting to IFRS. STANCHART TO HIRE 850 PEOPLE FOR PRIORITY BANKING
RRBs embrace core banking solutions
In step with RBI's direction to implement 100% core banking solutions (CBS) by September 2011, United Bank of India (UBI)-sponsored regional rural banks in four states have started working on their IT-systems.
ICICI Bank to focus on home, car loans,
says CEO IDBI Bank-led consortium of lenders, have raised $ 1.1 bn loan for national carrier Air India to purchase aircraft. www.ManagementFunda.com
SUUTI eyes Rs 7K cr from sale of 17% in
Axis Bank
The government has made the first move to
use the surplus funds of commercial banks to meet its short-term cash needs RBI allows cash withdrawal from merchant banker terminals
IDBI Bank lowers interest rates on deposit,
auto loans www.ManagementFunda.com IndusInd Bank raises US$ 100 million through Qualified Institutional Placement (QIP)
Housing Development Finance Corp, India's top
mortgage lender, said on Tuesday it planned to raise Rs 40 billion ($820 million) through two- and three-year bonds.
Banks want curbs on free ATM use
IDBI Bank revives plan to sell mortgage subsidiary
India’s top 12 banks log 55% jump in Q1 profit: CARE
www.ManagementFunda.com SBI launches 'My Home' campaign for home loans
Retired teachers, Traders can make to Banks
Business Correspondent list.
JPMorgan profits a strong sign for banking sector.
State-rescued Royal Bank of Scotland reported a
five-fold jump in bad debts.
Australia and New Zealand Banking Group Ltd.
said on Tuesday it had agreed to buy some Asian businesses of the Royal Bank of Scotland in a $550 million deal. www.ManagementFunda.com www.ManagementFunda.com
BIBLOGRAPHY • PARA BANKING NORMS BY RBI (CIRCULAR) • www.rbi.co.in • www.dfhi.co.in • AXIS BANK ANNUAL REPORT 2008-09 • ECONOMIC TIMES • MINT • INDIAINFOLINE NEWSLETTER
And Unsecured Promises of Trade and Industrial Units. Their Incremental Deposit Liabilities in Shares and Debentures in The Primary and Secondary Markets. Securities
And Unsecured Promises of Trade and Industrial Units. Their Incremental Deposit Liabilities in Shares and Debentures in The Primary and Secondary Markets. Securities
