Showing posts with label Banking Concept. Show all posts

Friday, 26 February 2016

LIC AAO:Insurance sector in India

Insurance is an agreement in which a person makes regular payments to a company and the company promises to pay money if the person is injured or dies, or to pay money equal to the value of something (such as a house or car) if it is damaged, lost, or stolen or a risk-transfer mechanism that ensures full or partial financial compensation for the loss or damage caused by event(s) beyond the control of the insured party. Under an insurance contract, a party (the insurer) indemnifies the other party (the insured) against a specified amount of loss, occurring from specified eventualities within a specified period, provided a fee called premium is paid. In general insurance, compensation is normally proportionate to the loss incurred, whereas in life insurance usually a fixed sum is paid.

Some types of insurance (such as product liability insurance) are an essential component of risk management, and are mandatory in several countries. Insurance, however, provides protection only against tangible losses. It cannot ensure continuity of business, market share, or customer confidence, and cannot provide knowledge, skills, or resources to resume the operations after a disaster.

Brief history of insurance sector

The insurance sector in India has completed all the facets of competition - from being an open competitive market to being nationalized and then getting back to the form of a liberalized market once again. The history of the insurance sector in India reveals that it has witnessed complete dynamism for the past two centuries approximately.With the establishment of the Oriental Life Insurance Company in Kolkata, the business of Indian life insurance started in the year 1818.

Important milestones in the Indian life insurance business

1912: The Indian Life Assurance Companies Act came into force for regulating the life insurance business.

1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses.

1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that too from the Government of India.

The history of general insurance business in India can be traced back to Triton Insurance Company Ltd. (the first general insurance company) which was formed in the year 1850 in Kolkata by the British.

Important milestones in the Indian general insurance business

1907: The Indian Mercantile Insurance Ltd. was set up which was the first company of its type to transact all general insurance business.

1957: General Insurance Council, an arm of the Insurance Association of India, framed a code of conduct for guaranteeing fair conduct and sound business patterns.

1968: The Insurance Act improved for regulating investments and set minimal solvency levels and the Tariff Advisory Committee was set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India. It was with effect from 1st January 1973.

107 insurers integrated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC was incorporated as a company.

Insurance industry, as on 1.4.2000, comprised mainly two players:

(1) Life Insurance Corporation of India (LIC) General Insurers:

(2) General Insurance Corporation of India (GIC) (with effect from Dec'2000, a National Reinsurer) GIC had four subsidiary companies, namely

i) The Oriental Insurance Company Limited

ii) The New India Assurance Company Limited

iii) National Insurance Company Limited

iv) United India Insurance Company Limited.

(With effect from Dec'2000, these subsidiaries have been de-linked from the parent company and made as independent insurance companies)

The Insurance sector in India is governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972, Insurance Regulatory and Development Authority of India (IRDAI) Act, 1999 and other related Acts. With such a large population and the untapped market area of this population, insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the country's GDP .In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India. It was due to this immense growth that the regulations were introduced in the insurance sector and in continuation "Malhotra Committee" was constituted by the government in 1993 to examine the various aspects of the industry. The key element of the reform process was Participation of overseas insurance companies with 26% capital. Creating a more efficient and competitive financial system suitable for the requirements of the economy was the main idea behind this reform. Since then the insurance industry has gone through many sea changes .The competition that LIC started facing from these companies were threatening to the existence of LIC. Since the liberalization of the industry, the insurance industry has never looked back and today stand as the one of the most competitive and exploring industry in India. The entry of the private players and the increased use of the new distribution are in the limelight today. The use of new distribution techniques and the IT tools has increased the scope of the industry in the longer run.

Insurance sector reforms

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its future direction.

The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at "creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms.". In 1994, the committee submitted the report and some of the key recommendations included:

1) Structure

Government stake in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations.All the insurance companies should be given greater freedom to operate.

2) Competition

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry. No Company should deal in both Life and General Insurance through a single entity.Foreign companies may be allowed to enter the industry in collaboration with the domestic companies.

Postal Life Insurance should be allowed to operate in the rural market.Only One State Level Life Insurance Company should be allowed to operate in each state.

3) Regulatory Body

The Insurance Act should be changed. An Insurance Regulatory body should be set up. Controller of Insurance (Currently a part from the Finance Ministry) should be made independent.

4) Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time).

5) Customer Service

LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the insurance industry. The committee emphasized that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition.But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body.

Independent Regulatory Body - IRDAI

Insurance sector has been opened up for competition from Indian private insurance companies with the enactment of Insurance Regulatory and Development Authority Act, 1999 (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance Regulatory and Development Authority (IRDA) was established on 19th April 2000 to protect the interests of holder of insurance policy and to regulate, promote and ensure orderly growth of the insurance industry.

IRDA Act 1999 paved the way for the entry of private players into the insurance market which was hitherto the exclusive privilege of public sector insurance companies/ corporations. Under the new dispensation Indian insurance companies in private sector were permitted to operate in India with the following conditions: Company is formed and registered under the Companies Act, 1956;

The aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed 26%, paid up equity capital of such Indian insurance company. The company's sole purpose is to carry on life insurance business or general insurance business or reinsurance business.The minimum paid up equity capital for life or general insurance business is Rs.100 crores.The minimum paid up equity capital for carrying on reinsurance business has been prescribed as Rs.200 crores. The Authority has notified 27 Regulations on various issues which include Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance, Obligation of Insurers to Rural and Social sector, Investment and Accounting Procedure, Protection of policy holders' interest etc. Applications were invited by the Authority with effect from 15th August, 2000 for issue of the Certificate of Registration to both life and non-life insurers. The Authority has its Head Quarter at Hyderabad.

India Insurance Policies at a Glance

Indian insurance companies offer a comprehensive range of insurance plans, a range that is growing as the economy matures and the wealth of the middle classes increases. The most common types include: term life policies, endowment policies, joint life policies, whole life policies, loan cover term assurance policies, unit-linked insurance plans, group insurance policies, pension plans, and annuities. General insurance plans are also available to cover motor insurance, home insurance, travel insurance and health insurance. Due to the growing demand for insurance, more and more insurance companies are now emerging in the Indian insurance sector. With the opening up of the economy, several international leaders in the insurance sector are trying to venture into the Indian insurance industry.

Payment Bank

With a need of financial inclusion in the country, RBI and central government has taken many steps at different times. Taking a further step, RBI gave differentiated licenses for specific activities to new set of banks named Payment Banks and Small Banks.
What is a Payment Bank?
Payment Banks are banks which will reach their customers mainly through mobile phones rather than traditional bank branches. They can be thought of as mobile wallets.
Not anyone can ask for license for these banks. One has to fulfill some conditions; one of them being is that the minimum capital requirement is Rs 100 crore to open up a Payment Bank.
What is the need of these specific purposed banks?
The poorer citizens of the country who transact only in cash and do not have bank accounts are the targets of these Payment Banks. They will target India’s migrant labourers, low-income households and small businesses, offering savings accounts and remittance services with a low transaction cost.
Functions of Payment Banks:

They offer only current account and savings account in which deposit only up to Rs 1 lakh per customer is permitted.
The savings account will earn interest also like a normal savings bank account does.
Unlike a regular bank, they cannot lend money to people and cannot issue credit cards also. However ATM or debit card can be issued.
They can be integrated with your savings bank accounts via IMPS and NEFT transfers.
They cannot accept NRI deposits, which makes sense considering the goal of financial inclusion.
They can enable transfers and remittances through a mobile phone.
They can offer services such as automatic payments of bills, and purchases in cashless, chequeless transactions through a phone.

We read above that these banks cannot lend money, so from where will they get profit?
The payment banks are allowed to invest the customers deposit into government securities from which they can raise money.
How will Payment Bank reach their customers in far flung areas?

We studied above that Payment bank will reach through mobile phones. There is mobile phone coverage in every small place where a traditional bank is uneconomical to open, so mobile phones will provide a low-cost platform for the basic banking activities.
Further, bank correspondents can be employed to make reach the services of Payment Bank to every citizen in villages.
The recharge shops can play a crucial role in Payment bank expansion. For example: Anybody sitting in any area of country can add money to wallet and people can debit the money from recharge shop owner or can debit the money from ATMs (if they can) also.
So now a mobile wallet can be used for transactions like we do before and will earn interest also.

In August 2015, RBI gave nod to 11 entities to start Payment Bank. These are -Aditya Birla Nuvo Ltd, Airtel M Commerce Services Ltd, Cholamandalam Distribution Services Ltd, Department of Posts, Fino PayTech Ltd, National Securities Depository Ltd, Reliance Industries Ltd, Dilip Shantilal Shanghvi (Sun Pharmaceuticals), Vijay Shekhar Sharma (Paytm), Tech Mahindra Ltd, and Vodafone m-pesa Ltd.
In September 2015, Vijay Shekhar Sharma, Paytm founder announced to open country’s first Payment Bank.

District Office Chandigarh Recruitment 2015

District Office Chandigarh Recruitment 2015 announced Stenographer post.More detail like how to apply,salary detail,selection process,qualification,last date,official notification,application form etc is given below-

District Office Chandigarh Recruitment 2015 detail:

Job Organization/Provider:District & Sessions Office Chandigarh.
Total Number of Posts: 03 vacancies.
Location: Chandigarh,Punjab.

Name and Number of Post:

Steno – 03 posts.

Salary Detail: Pay scale is Rs. 18400 per month.
Selection Process: All eligible and applying candidates will be selected based on Interview and typing test.

Age Limit:

All applying candidates age should between 18 to 30 year as on 01-01-2015.

Qualification:

Educational Qualification:

All applying and interested should passed Any graduation from recognized board or university. Candidate Punjabi subject passed in middle class.

Experience:

How To Apply:

All applying and interested candidate should apply application form by offline mode. Official notification coming soon on official site.

Important Dates:

Last Date to application submit – 30-11- 2015.
Interview Date:- 05-12-2015.
Interview time:- 10:00 A.M.

Application Fee:

No application fee for District Office Chandigarh Recruitment 2015.

Application sending Address:

To
The office of the S.K. Aggarwal, District & Session, Judge,
Chandigarh Punjab.

Important Links:

Official Website of Authority is http://ecourts.gov.in/chandigarh.

RBI : Subsidiary Organizations

Our all powerful Reserve Bank of India has got 3 subsidiaries i.e. RBI paid the whole paid up capital for these organizations. They are:

National Housing Bank
Deposit Credit and Guarantee Corporation
Bharatiya Reserve Bank Note Mudran Private Limited

1. National Housing Bank:

The idea was first thought of during the period of Seventh five year plan (1985-90) and a committee was set up under the chairmanship of Dr C Rangrajan to develop the idea

NHB came into existence on 9^th July, 1988 as the apex body for housing finance in the country
It aims to provide long term finance to all segments of the society so that everybody can own a house
The organization is headquartered in New Delhi
Apart from finance for housing, it gives money buying for housing materials, regulates the housing finance institutions, facilitates acquisition of land from public organizations
Shri Sriram Kalyanraman has recently been appointed as the new MD & CEO of the bank

2. Deposit Insurance and Credit Guarantee Corporation:

Oldest of the three subsidiaries
DICGC came into existence in 1978 after the Credit Corporation of India (formed in 1971) and Deposit Corporation of India (formed in 1961) were merged together
It aims to provide insurance cover to all the deposits maintained in banks (both commercial and cooperative) up to a limit of 100000/- per individual.
State/central govt deposits, Foreign govt deposits, interbank deposits are excluded. The banks pay the premium for the insurance cover
It also provides credit guarantee to banks for giving loans to priority sector as notified by RBI (Housing loans are excluded)
The corporation is headed by a governing body consisting of chairman (usually a deputy governor of RBI) and directors from RBI, Central govt nominated members. At present, R Gandhi is the chairman

3. Bharatiya Reserve Bank Note Mudran Private Limited :

Established in 1995 by RBI
The objective is to supply bank notes according to the demand of the public
Headquartered in Bangalore and manages two presses: One in Mysore, Karnataka and another in Salboni, West Bengal
The chairman at present is R Gandhi who is assisted by Kaza Sudhakar who is the MD of the company. Apart from that, there are directors from various fields in the governing body

Strategy

First step you need to take now is - Make a list of questions which you are going to attempt. This is the most important time saving technique you can use now. You have just 20 minutes for this section, you can't use these 20 minutes in finding which questions to attempt.

Easy chapters that you attempt

Series (3-5 questions)
Simplifications (3-5 questions)
Simple and compound interest (1 questions)
Partnership (1 questions)
Ratio and proportions (1 questions)
Average (1 questions)
Profit and loss (1 questions)
Time and work (1 questions)
Time distance (1 questions)

Here I find Series and Simplification easy marks that you can fetch. These questions take less than 1 minute to solve.

Comparatively time consuming questions

Probability (1-2 questions)
Quadratic equations (0-5 questions)
DI set with complicated calculations (5-10 questions)

Data interpretation

One of the most common questions that readers ask in the comments section is - How to attempt a double diagram Data interpretation set within 5 minutes. That's a good questions. It's really difficulty to solve such questions within fraction of seconds. I recommend you to skip 1 DI set to save time.

Tips

Target 100% accuracy, you can avoid negative marking and this will help you allot more time per question.
Attempt Quantitative Aptitude at first
If a question is taking more than 2 minutes, skip it.
Learn tables upto 40 and squares upto 50, this will be most important tool during the exam.
Learn multiplication and division techniques.

Quantitative Aptitude Guide

Regional Rural Banks

Which committees recommended setting up RRBs?
An RRB Ordinance was promulgated in Sep 1975, which was replaced by the Regional Rural Banks Act 1976 on the recommendation of Narasimham Working Group set up in 1975.
In which category do RRBs fall?
Banks in India can be broadly classified under two heads — commercial banks and co-operative banks. The nationalised banks, State Bank group, private sector banks, foreign banks and RRBs are commercial banks.
When was the first RRB set up?
The first Regional Rural Bank, Prathama Grameen Bank, was set up on Oct 2, 1975.
What is the ownership ratio of stakeholders in the RRBs?
The RRBs are jointly owned by the Govt of India, the concerned State Govt and Sponsor Banks (27 Scheduled Commercial Banks and one State Cooperative Bank) in the following proportions: Central govt – 50 per cent State govt – 15 per cent Sponsor bank – 35 per cent
What is the operational area of RRBs?
The area of operation of the majority of RRBs is limited to a notified area comprising a few districts in the States. The RRBs grant loans and advances mostly to small and marginal farmers, agricultural labourers and rural artisans.
What is the function of sponsor banks?
The RRB Act, 1976 provides for RRBs to be sponsored by banks. These sponsor banks are required to: subscribe to the share capital of RRBs; train their personnel; and provide managerial and financial assistance.
Who regulates RRBs?
The RRBs are regulated by National Bank for Agriculture and Rural Development (NABARD).
What is the total number of RRBs as of now?
At present there are 56 RRBs and they are doing well.
The RRBs are NOT present in which states?
Goa and Sikkim have no RRBs as of now.
What are state-level RRBs?
In Nov 2011, the govt had said that geographically contiguous RRBs within a state could be amalgamated to form a single state level RRB. The amalgamation will create large state-level RRBs, which would help optimise resources, achieve economies of scale and common technology platform. The states in which the state-level RRBs are likely to be formed include Assam, Uttaranchal, Jharkhand, Chhattisgarh, Kerala, Tamil Nadu, Himachal Pradesh, Haryana, Jammu & Kashmir and Punjab. Typically, RRBs with less than 100 branches are being merged under the process of amalgamation. At present, seven states, which includes Tripura, Nagaland, Manipur, Mizoram, Arunachal Pradesh, Meghalaya and Puducherry, have state-level RRBs. Apart from this, states of Gujarat and Karnataka too have demanded formation of state level RRB.
What changes have been brought by Regional Rural Banks (Amendment) Bill, 2014?
The Regional Rural Banks (Amendment) Bill, 2014, was passed by the Lok Sabha on 22 Dec 2014 and by the Rajya Sabha on 28 Apr 2015. Changes are as follows:

The amendment raised the authorised capital of the RRBs from Rs 5 cr to Rs 2,000 cr to strengthen these institutions and further deepen financial inclusion.
The combined capital of the Centre, State Govt and Sponsor Banks will not come down below 51 per cent.
The State Govts would be free to raise their contribution in the RRBs to over 15 per cent, which is allowed under the existing provisions.
As per the provisions of the bill, the share capital of the RRBs could be split into 200 cr equity shares of Rs 10 each. As per the existing Act, the Rs 5 cr share capital of RRBs is split into 5 lakh shares of Rs 100 each.

Important news related to RRBs

The Govt on 16 Jul 2015 sanctioned an additional Rs 700 cr for the recapitalisation of weak RRBs and extended the validity period for fund infusion to 2016-17.
These banks are unable to maintain their minimum Capital to Risk weighted Assets Ratio (CRAR) of 9 per cent. Presently, there is a Budget provision of Rs 15 cr for recapitalisation of RRBs.
With a view to bringing the CRAR of RRBs to at least 9 per cent, the KC Chakrabarty Committee recommended recapitalisation support to the extent of `2,200 cr to 40 RRBs in 21 States. The recapitalisation process started in 2010-11.
National Payments Corporation of India (NPCI) on 27 Mar is said to have enabled all 56 regional rural banks under its central payment systems network with RuPay cards and access to National Automated Clearing House service.
With this, 12 cr customers at 19,000 bank branches of all 56 RRBs would be part of the national network of electronic payment systems.
Based on the recommendations of SK Mitra committee on HR policy for RRBs, the Central Govt has directed RRBs to become slim by cutting jobs and outsource noncore functions such as IT maintenance, cash remittance and house-keeping.
To ensure fair selection process in RRBs, the govt said the Institute of Banking Personnel Selection (IBPS) will handle all direct recruitments for these banks.
The govt also raised the age limit by two years from 28 to 30 for candidates applying for Officers Scale-I posts.
The South Malabar Gramin Bank (SMGB) based in Malappuram near Kozhikode is the first fully computerised RRB in the country. LEARNING WITH BSC Regional Rural Banks (RRBs)

Types of Cheques

Order Cheque:

A cheque which is payable to a particular person or his order is called an order cheque.

This is a cheque whereby the printed word “Bearer” on the cheque is cancelled. The cancellation of the word “Bearer” automatically makes the cheque an “order” cheque.
An order cheque can be paid to the named payee across the bank’s account if so presented.
Identification must be insisted on by the bank when encashing the order cheque for the presenter. The ID number and the named payee’s signature will be asked for on the back of the cheque.

Bearer Cheque :

A cheque which is payable to a person whosoever bears, is called bearer cheque.

The cheque sometimes can be made payable to “Cash” or bearer or made payable to a specific name, for example, “bujji sekhar or Bearer”.
This cheque is payable by the drawee bank over the counter to the Bearer or presenter of the cheque.
A Bearer cheque can be negotiated or pass to another person by mere delivery. In other words, the holder (or the Transferer), when giving it to another person need not endorse the cheque.
No identification is needed when a bearer cheque is presented for encashment. However, in normal banking practice, where the amount of the cheque is substantial, the identity of the encasher is insisted on.
A bearer cheque can be collected by the bank for the credit of anyone’s account
In banking practice, the need for the encasher’s signature on the back of the cheque is merely to evidence that the encasher has received the money from the bank.

Blank Cheque:

A cheque on which the drawer puts his signature and leaves all other columns blank is called a blank cheque.

A check that is signed by the payer but with no specific amount indicated, leaving this determination up to the drawee.

More generally, a term used for any situation in which an usually high level of trust is afforded by one party to another.

“ My wife must have a high level of trust for her sister, because when she asked to borrow some money my wife gave her a blank check. ”
4. Counter cheque:
Blank cheque was also commonly used as a synonym for counter cheque. requiring that cheque be MICR encoded in order to be handled by their clearing houses, it was fairly common for banks, especially in small towns, to issue cheque to customers which were not personalized other than the name of the bank.
Businesses would have pads of counter cheque which did not even have the bank specified on them – the customer had to not only fill in the value of the cheque, the date, and their signature, but also had to designate the bank on which funds were to be drawn.

Stale Cheque:

Check presented at the paying bank after a certain period (typically six months) of its payment date. A stale check is not an invalid check, but it may be deemed an ‘irregular’ bill of exchange. A bank may refuse to honor it unless its drawer reconfirms it payment either by inserting a new payment date or by issuing a new check. Also called stale dated check.
*NOW __The cheque which is more than three months old is a stale cheque.
Eg. If Mr.CooL issues cheque to Miss. Bujji, if Mr. CooL has issued cheque from his SBI A/c then SBI is a drawee bank.
The banking regulation Act has not define specific period after which the instrument (cheque) becomes stale. Some of the banks write specific instruction on the cheque where the validity period is mentioned. In such case the cheque will become stale after expiry of the period from the date of issue (date on the instrument)

Multilated Cheque:

If a cheque is torn into two or more pieces such cheque is Mutilated Cheque. If it presented for payment, such a cheque the bank will not make payment against such a cheque without getting confirmation of the drawer. In case, if a cheque is torn at the corners and no material fact is erased or cancelled, the bank may make payment against such a cheque.
If the payee is clear, signature and the MICR line intact – they can process it. There are sealable plastic carriers used to put such cheques through the high speed transports used in Clearing.

Post Dated Cheque:

If a cheque bears a date later than the date of issue, it is termed as post dated cheque.
Any check or draft that has a future date written upon it by the user. The amount of the check will not be drawn from the account until the date written on the check. For example, a check written on the 14th of the month but dated for the 28th will not be cashed for another two weeks.

Open Cheque:

A cheque that is not a crossed cheque. The person whose name appears on the cheque can write the name of another person on it, and the money will be paid to them.
An open cheque is a cheque that is not crossed on the left corner and payable at the drawee bank on presentation of the cheque.
The words ‘OPEN’ should not be struck off and the person issuing the cheque should sign on the reverse of the cheque also before giving it to another person; otherwise the bank may refuse payment. The latter can collect the money from any branch of the bank nowadays, depending on the bank. S/he should also sign at the back of the cheque while receiving the amount.

Crossed Cheque

A crossed cheque is one which has two short parallel lines marked across its face.

A cheque which carries too parallel transverse lines across the face of the cheque with or without the words “I and co”, is said to be crossed.
Crossed cheques are of two types. By simply crossing a cheque or with the words ” & Co”, by the payer, the payee can either deposit it in his/her account or endorse it in favour of another person on the reverse. This practice is nowadays not accepted by the banks.
The advantage of crossing is that it reduces the danger of unauthorised persons getting possession of a cheque and cashing it. A crossed cheque can only be cashed through a bank of which the payee of the cheque is a customer.
A cheque crossed generally will be paid to any bank through which it is presented.
A cheque crossed specially will be paid only when it is presented for collection by the bank named between the parallel lines. Such crossing affords a greater measure of protection against loss.

Gift Cheques

Gift cheque, it is a cheque forirted in decorative form issued for a small extra charge by the banks for use by customers who wish to give presents of money on special occasions.
Gift cheques may be purchased in unlimited numbers from every branch of the ‘X’ Bank.
Gift cheques may be used to give presents of money as

Birthday Gift
Wedding Gift
Honour Gift
EASI SMART Gift

Gift cheques are used for offering presentations on occasions like birthday, weddings and such other situations. It is available in various denominations.
Features and Benefits

Convenient
Pre-denominated
Elegant – Improve promotional impact with packaging customization and personalization options
Flexible – Provide redemption flexibility by offering the reward with no expiration date
Replaceable – Protect your investment and offer Reward Earners increased security and peace of mind with lost and stolen Cheque protection
Simple – Order and administer rewards easily for timely reinforcement
Reliable – Feel at ease with the American Express brand name — it conveys reliability, security and prestige

Traveller’s Cheques:

It is an instrument issued by a bank for remittance of money from one place to another.
Travelers Cheques are accepted almost everywhere and are available in many denominations. Plus, the no-expiration feature allows you to cash in leftover cheques or retain them for the next time you travel.
benefits

Convenience : Easy to use. Secured to protect your money when on the move.
Choice : Available in United States Dollars (USD), Great Britain Pounds (GBP), EURO, Japanese Yen (JPY), Australian Dollars (AUD) and Canadian dollars (CAD).
Acceptance : Accepted worldwide in over 400,000 locations spread across 200 countries. TCs can be encashed or used at Exchange bureaus, Banks, Hotels Shops, Restaurants and other establishments.
Security : Signature based security. If your cheques are lost or stolen, the 24 hour Call Centre is just a phone call away. Replacement of lost TCs is attended to on priority across the world.
Buy-Back : When you return back to India, you can encash any unused TCs issued by us, at any of the Axis Bank Branches.
Expiry : Valid forever! You can save any unused Travellers Cheques for future trips.

12. Self cheques:
A self cheque is written by the account holder as pay self to receive the money in the physical form from the branch where he holds his account.
If your friend wants to pay YOU the amount of 10000/-, he/she should have written YOUR NAME in the space provided for PAYEE on the cheque. If he/she has written SELF in that area, it is supposed to be used by him (or the bearer as written on the cheque) and whoever possess that cheque can go to the same branch and bank of the account holder to cash the cheque.
Some banks may honour cheques in their other branches than the account holder branch. However, this cannot be encashed in any other BANK.
You can either encash it by visitng the bank and the branch of your friend’s account or should return or tear this cheque off (If lost, the person who finds it can get it cashed from the bank and branch mentioned on the cheque) and ask for another cheque in your name that you can deposit in your account.
13. Bankers Cheque:
The banker’s cheque is an instrument issued by the bank on behalf of customer containing an order to pay a certain sum to a specified person within the city. The validity period of the Banker’s cheque is 3 months, however it can be re-validated subject to some legal formalities.

In Banker’s cheque the chances of dishonor is not possible because it is always prepaid. It is always pre-printed with the words ‘not negotiable’ which means it cannot be further negotiated.
Banker’s Cheque or Payment Order is a cheque issued for making payments within the same city.
Banker’s cheque is valid up to 3 months from the date of issue.
All banker’s cheque are pre-printed with “NOT NEGOTIABLE”.
It can be cleared in any branch of the same city.

14. Outstanding cheque:
A cheque which has been written and therefore has been entered in the company’s ledgers, but which has not been presented for payment and so has not been debited from the company’s bank account

Banking Concept: What is Teaser loan ??

What is a Teaser Loan?
If a bank offers a slightly lower rate in the initial years and higher rate in later years, it is called a teaser loan.
For this type of loan an introductory rate is offered. It is an interest rate charged to a customer during the initial stages of a loan. This rate, which can be as low as 0%, is not permanent. It has an expiration after a specified period of time.
Under the ‘teaser loan’ offer a bank charges lower interest rates for the first two or three years and later on from the fourth year the interest rate will automatically get reset to the then prevailing base rates.
For example, during 2010 State Bank of India offered 8 per cent rate of interest for the year and 9 per cent for the 2{+n}{+d}and 3{+r}{+d}year and assured of linking the rate to the base rate from the 4{+t}{+h}year onwards. The concept of teaser loan would also mean that the first couple of years the loan would be on fixed rate basis and eventually it gets converted to floating rate basis.
How it works
From a bank’s point of view though this could mean a strain on their profits, these type of strategies has worked positively for them which lures a customer who would be reeling under the raising loan rates and any sops like these would bring them to the bank’s premises.
From the customer’s point of view, a teaser loan can be a good beginning of a long term loan commitment for a customer because in a raising interest rate regime getting a loan sanctioned at a discount for the first couple of years makes a lot of sense.
But, why RBI is against it?
Because RBI sensed following implications with Teaser Loans:-
(a) The target segment for the banks is the low-income home buyers who are allured by the enticement by the banks. They would pay the first few years of the loan installments properly and eventually if there are any disturbances in the economy that could affect their jobs and/or income earning capacities the defaults could begin and in due course the entire banking system could be in disarray.
(b) The other obvious target are young people who would have just started their earning life, newly married and are looking to own a house (the biggest dream of a middle class family).
(c) RBI sensed an impending housing loan bubble on the lines of sub-prime that shattered the world financial system in 2008 and began issuing guidelines to banks on such offers (teaser loans

Foreign Investments and Indian Stock Market

The BSE and NSE
Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been in existence since 1875. The NSE, on the other hand, was founded in 1992 and started trading in 1994. However, both exchanges follow the same trading mechanism, trading hours, settlement process, etc. At the last count, the BSE had about 4,700 listed firms, whereas the rival NSE had about 1,200. Out of all the listed firms on the BSE, only about 500 firms constitute more than 90% of its market capitalization; the rest of the crowd consists of highly illiquid shares.
Almost all the significant firms of India are listed on both the exchanges. NSE enjoys a dominant share in spot trading, with about 70% of the market share, as of 2009, and almost a complete monopoly in derivatives trading, with about a 98% share in this market, also as of 2009. Both exchanges compete for the order flow that leads to reduced costs, market efficiency and innovation. The presence of arbitrageurs keeps the prices on the two stock exchanges within a very tight range.
Market Regulation
The overall responsibility of development, regulation and supervision of the stock market rests with the Securities & Exchange Board of India (SEBI), which was formed in 1992 as an independent authority. Since then, SEBI has consistently tried to lay down market rules in line with the best market practices.
Who Can Invest In India?
India started permitting outside investments only in the 1990s. Foreign investments are classified into two categories: foreign direct investment (FDI) and foreign portfolio investment (FPI). All investments in which an investor takes part in the day-to-day management and operations of the company, are treated as FDI, whereas investments in shares without any control over management and operations, are treated as FPI.
1.INVESTORS & TYPES
A.FIIs__foreign institutional investor (FII) is a person or a group of people operating or registered in a country that’s not their domicile. Foreign institutional investor groups often operate as hedge funds, pension funds, insurance companies, and mutual funds.
FIIs are mostly associated with India, which has had, until recently, very restrictive laws on foreign investment. FIIs in India are still regulated by India’s Securities and Exchange Board (which is similar to the Securities and Exchange Commission in the United States). Foreign investment in India by FIIs has played a substantial part in India’s economic growth. This was true even under India’s restrictive foreign investment laws. Until recently, FII’s were limited as how much equity they could purchase in a domestic Indian company. The interest was always less than 50%.
But recently, India has changed its foreign investor laws to allow FIIs to own up to 100% of Indian companies in certain industries. This change, made in 2014, brings India into conformance with other countries foreign investment policies. Because of the change, India expects FIIs to make investments in India that will help its economy double in size in 2015.
*Note_ FIIs need account on stock market to invest in india
B.FDI__FOREIGN DIRECT INVESTMENT
An investment made by a company or entity based in one country, into a company or entity based in another country. Foreign direct investments differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation’s stock exchange. Entities making direct investments typically have a significant degree of influence and control over the company into which the investment is made. Open economies with skilled workforces and good growth prospects tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.
*Note_An example of foreign direct investment would be an INDIAN company taking a majority stake in a company in China.
FDI Limititations__

Agriculture-100%
Asset Reconstruction Companies–100%
Civil Aviation–100%
Commodity Exchanges–49%
Courier Services–100%
Credit Information Companies–74%
Defence–49%
Insurance–49%
Multi Brand Retail–51%
Pension–26%
Petroleum and Natural Gas–49%
Power Exchanges–49%
Print Media–49%
Private Sector Banks–100%
Public Sector Banks–20%
Single Brand Retail–49%
Special Economic Zones–100%
Stock Exchanges/Clearing Corporations–49%
Tea Plantation–100%
Telecom–100%
Tourism–100%

*Note _ Railways — 49% & some categories -100% (Under proposal)
#RBI — Recently banned FDI in Tobacco.
NOTE
Automatic Route
FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.
Government Route
FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs.
C.ODI__OUTWARD DIRECT INVESTMENT
A business strategy where a domestic firm expands its operations to a foreign country either via a Green field investment, merger/acquisition and/or expansion of an existing foreign facility. Employing outward direct investment is a natural progression for firms as better business opportunities will be available in foreign countries when domestic markets become too saturated.
Note_The increase of a nation’s outward direct investment can be seen as a proxy that the nation’s economy is booming to the extent that sufficient risk capital is available for further ventures.
D.FPIs__Foreign portfolio investment
Foreign direct investment (FDI) involves establishing a direct business interest in a foreign country, such as buying or establishing a manufacturing business, while foreign portfolio investment (FPI) is investing in financial assets, such as stocks or bonds, in a foreign country. A number of other differences follow from the basic difference in the nature of the two types of investments.
FPI typically has a shorter time frame for investment return than FDI. As with any equity investment, FPI investors usually expect to quickly realize a profit on their investments. Unlike FDI, FPI doesn’t offer control over the business entity in which the investment is made. Because securities are easily traded, the liquidity of FPIs makes them much easier to sell than FDIs. FPIs are more accessible for the average investor than FDIs, since they require much less investment capital.
When making foreign investments, investors have to consider economic factors as well as other risk factors, such as political instability and currency exchange risk.
*Note _

Investment less than 10% –FPIs
greater than 10% — FDIs

E.QFIIs__QUALIFIED FOREIGN INSTITUTIONAL INVESTOR
A program that permits certain licensed international investors to participate in india stock exchanges.Prior to QFII, foreign investors were not able to buy or sell shares on india stock exchanges because of india’s tight capital controls. With the launch of the QFII program, licensed investors can buy and sell RUPPEE-denominated “A” shares. Foreign access to these shares is limited by specified quotas that determine the amount of money that the licensed foreign investors are permitted to invest in india’s capital markets.
F.Participatory Notes_p-notes
Financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India to invest in Indian securities. Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors.
2.Depositary Receipt
Say if an Indian company wants to mobilize capital from abroad, can it do it? Even a novice will instantaneously come up with an answer like ‘NO’. We have too many controls which will not allow raising of capital abroad easily. This is what we ‘perceive.’ As we are liberalizing our economy, raising of capital from outside the country is slowly enabled by the government. ADRs and GDRs are the result of such liberalization.
A.ADR_American Depositary Receipt_
A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction.
This is an excellent way to buy shares in a foreign company while realizing any dividends and capital gains in U.S. dollars. However, ADRs do not eliminate the currency and economic risks for the underlying shares in another country. For example, dividend payments in euros would be converted to U.S. dollars, net of conversion expenses and foreign taxes and in accordance with the deposit agreement. ADRs are listed on either the NYSE, AMEX or Nasdaq as well as OTC.
B.GDR_Global Depositary Receipt_
A bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank. The shares trade as domestic shares, but are offered for sale globally through the various bank branches.
A financial instrument used by private markets to raise capital denominated in either U.S. dollars or euros.
C.IDR__Indian Depository Receipts_
Indian Depository Receipt (IDR) is a financial instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with the Securities and Exchange Board of India) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities Markets
D.EDR_European Depositary Receipt _
A negotiable security (receipt) that is issued by a European bank, and that represents securities which trade on exchanges outside of the bank’s home country. Abbreviated as “EDRs”, these securities are traded on local exchanges and used by banks – and issuing companies in the U.S. and other countries – to attract investment capital from the European region.
3.CITIZEN’s TYPES IN ABROAD
A.NRI_non-resident Indian_
NRI is a citizen of India who holds an Indian passport and has temporarily immigrated to another country for six months or more for employment, residence, education or any other purpose.
the term non-resident refers only to the tax status of a person who, as per section 6 of the Income-tax Act of 1961, has not resided in India for a specified period for the purposes of the Income Tax Act.The rates of income tax are different for persons who are “resident in India” and for NRIs. For the purposes of the Income Tax Act, “residence in India” requires stay in India of at least 182 days in a calendar year or 365 days spread out over four consecutive years. According to the act, any Indian citizen who does not meet the criteria as a “resident of India” is a non-resident of India and is treated as NRI for paying income tax.
B.PIO__Person of indian origin is a person of Indian origin or ancestry but who is not a citizen of India and is the citizen of another country. A PIO might have been a citizen of India and subsequently taken the citizenship of another country, or have ancestors born in India or other states.
Other terms with vaguely the same meaning are overseas Indian and expatriate Indian. In common usage, this often includes Indian-born individuals (and also people of other nations with Indian ancestry) who have taken the citizenship of other countries.
Government of India considers anyone of Indian origin up to forty generations removed to be a PIO, with the exception of those who were ever nationals of Afghanistan, Bangladesh, Bhutan, Nepal, Pakistan, or Sri Lanka.The prohibited list periodically includes Iran as well.
The government issues a PIO Card to a PIO after verification of his or her origin or ancestry and this card entitles a PIO to enter India without a visa. The spouse of a PIO can also be issued a PIO card though the spouse might not be a PIO. This latter category includes foreign spouses of Indian nationals, regardless of ethnic origin, so long as they were not born in, or ever nationals of, the aforementioned prohibited countries.PIO Cards exempt holders from many restrictions that apply to foreign nationals, such as visa and work permit requirements, along with certain other economic limitations.
C.OCI_Overseas Citizenship of India_
In response to persistent demands for “dual citizenship” particularly from the Diaspora in North America and other developed countries and keeping in view the Government’s deep commitment towards fulfilling the aspirations and expectations of Overseas Indians.
The Overseas Citizenship of India (OCI) Scheme was introduced by amending the Citizenship Act, 1955 in August 2005. The Scheme was launched during the Pravasi Bharatiya Divas convention 2006 at Hyderabad. The Scheme provides for registration as Overseas Citizen of India (OCI) of all Persons of Indian Origin (PIOs) who were citizens of India on 26th January, 1950 or there after or were eligible to become citizens of India on 26th January, 1950 except who is or had been a citizen of Pakistan, Bangladesh or such other country as the Central Government may, by notification in the Official Gazette.
OCI is not to be misconstrued as ‘dual citizenship’. OCI does not confer political rights. The registered Overseas Citizens of India shall not be entitled to the rights conferred on a citizen of India under article 16 of the Constitution with regard to equality of opportunity in matters of public employment

Foreign Currency (Non-Resident) Account (Banks) Scheme _FCNR
NRIs (individuals / entities of Bangladesh / Pakistan nationality / ownership require prior approval of RBI)
Non-Resident (External) Rupee Account Scheme [NRE Account]
NRIs (individuals / entities of Bangladesh / Pakistan nationality/ownership require prior approval of RBI)

Non-Resident Ordinary Rupee Account Scheme [NRO Account]

Any person resident outside India (other than a person resident in Nepal and Bhutan). Individuals / entities of Pakistan nationality / ownership, entities of Bangladesh2 ownership and erstwhile Overseas Corporate Bodies5 require prior approval of the Reserve Bank.
4.ACCOUNTS
A.NOSTRO ACCOUNT_
A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts are used to facilitate settlement of foreign exchange and trade transactions. The term is derived from the Latin word for “ours.” Conversely, accounts that are held by the domestic bank in its home country for foreign banks are called vostro accounts
For example, a U.S. bank may have nostro accounts with one or more Canadian banks. These accounts will be denominated in Canadian dollars, which enables efficient settlement of transactions that are Canadian dollar denominated. Nostro accounts also minimize the exposure of the U.S. bank to undue exchange rate risk.
*Note_A nostro is our account of our money, held by the other bank
B.VOSTRO ACCOUNT_
The account that a correspondent bank, usually located in the United States or United Kingdom, holds on behalf of a foreign bank. A vostro account is one in which the domestic bank (from the point of view of the currency in which the account is held) acts as custodian or manages the account of a foreign counterpart. Also known as a loro account.

Base Year Concept

A base year is the year used for comparison for the level of a particular economic index. The arbitrary level of 100 is selected so that percentage changes (either rising or falling) can be easily depicted.
*BASE YEAR also know as rebasing
why base year changes _
*By every 10 years there is change will be minimum 4% rise in price of items so base year has to be changed .
How can we calculate base year

GDP growth rate = change in gdp/initial GDP * 100
GDP of any of the previous years is chosen as the intial GDP and the eyar that is chosen is known as the base year.
Suppose India’s GDP is Rs. 100 and base year is 2000. Now, in 2015, many sectors such as IT, e-commerce, mobile telephony etc contributes to our economy, which were not present in 2000. Thus, India might be showing wrong GDP figures, since majority of economic activities driving sectors are not represented in Rs. 100. So, our govt. decides to change the base year to 2010. The revised base year will lead to all such sectors coming into play, and the GDP number will increase as the total output from these sectors will be added, which was not the case in 2000 base year.

Example __
India GDP is rs-100 and the base year is 2000
now it has been changed now in 2015 — the IT ,economy ,infra ,e-commerce are contributed more to base year need change
The change in base year__
The govt of india will also coincide with other surveys that act as inputs in assigning weights in the National Income Accounts. In 2011-12, the five-yearly survey on employment and consumer expenditure will be repeated. They were carried out in 2009-10, but since bad monsoons would have affected employment and income growth, the surveys will need to be done again. The change in the base year of the GDP series is considered to be very important, as the other two major data series, IIP and WPI, are also expected to be changed to the same base year. This is a step in the right direction.
Economists say high inflation in the current year could mean lower inflation figures in future while the present spell of slowdown could mean higher growth rates later. Till now, 2011-12 has been a choppy year with a slowdown in growth and high inflation.
government, engineering an economic rebound with a slew of reforms, on Friday unveiled a new statistical method to calculate the national income with a broader framework that turned up a pleasant surprise: GDP in the past year 2013-14 grew 6.9% instead of the earlier 4.7%.
Note _ ** with in upcoming 5 years the indian gdp will be around 9%
Base Year Concept

BASE YEARS OF LATEST INDEX__

RESIDEX — —————————-2007– real estate , housing
BANKEX ——————————-2002—- banking
STOCK MARKET ——————–1978-79— stock market
IIP—————————————-2004-05—industries
CPI-IIW(industrial workers)———-2001-02
CPI-AL (agricultural labours)———1986-87
CPI-RL (rural labours)—————–1986-87
CPI-UNME(urban non manual)——-1984-85
CPI-RURAL —————————2010
CPI-URBAN—————————-2010
RUPEE BASE YEAR—————–1971
IAP(index of agricultural )————2007-08
NSE ————————————-1983-84
BSE– ———————————–1989-90
FTI—————————————1999-2000– foreign trade
NEER — REER ————————1993-94
WPI—————————————2004-05
CPI—————————————2009-10(latest)
GDP————————————–2011-12

How base year influence gdp & global economic growth rate __
GDP_ Gross Domestic Product, is the measure of a country’s economic growth.
1.GDP is typically measured by reference to the shape of the economy in a “base year”. Statisticians sample businesses in different industries to see how fast they are growing. The weight they give to each sector depends on its importance to the economy in the base year. However, as time passes the base year become less and less accurate due to the emergence of new sectors which drives the country’s economy, and which are not represented in the previously decided base year. Thus, countries changes their base years once they think that it has become irrelevant. This process of changing the base year for calculating GDP is commonly known has rebasing
2.The change in the base year and also the conceptual framework, the release said, will improve ease of understanding (data) for analysis and facilitate international compatibility.
The new series, it said, will also affect a wide range of indicators like trends in public expenditure, taxes and public sector debt that are conventionally analysed in terms of their ratios to nominal GDP. However, the release said, the level of revision in the present base revision “is not large enough to affect any of these ratios significantly.
WHO SAYS WHAT ?

INDIA GDP estimates __ 2015-16
IMF- 7.5%
IBRD- 7.5%
MOODY’s-7.5%
OECD-7.7%
ADB-7.8%
FITCH-8%
NOMURA -6.7%
ECONOMIC SURVEY- 8.1-8.5%

Concerns over risk in Algorithm trading: Explained

The Financial Stability Report (FSR) June 2015, released by the Financial Stability and Development Council, which includes all financial market regulators, has raised concerns over the increasing clout of algorithm trading or high frequency trading (HFT).
What is Algorithm trading?
It is a trading system that utilizes very advanced mathematical models for making transaction decisions in the financial markets.
High-Frequency Trading is a subset of Algorithm trading. In HFT the focus is on transacting a large number of orders at very fast speeds. Typically, the traders with the fastest execution speeds will be more profitable than traders with slower execution speeds.
Algo trading was introduced in India in April 2008 with the advent of direct market access (DMA).
The global debate on this issue was triggered by Michael Lewis’s best-selling book, Flash boys: A Wall Street Revolt, published in March last year, which discusses the rise of high frequency trading in U.S. equity markets and argues that the U.S. equity markets are rigged by the HFT traders.
Problems with Algorithm trading:

Algorithm trading or algo trading is leading to stock price manipulation. The report pointed fingers at certain instances of abnormal market movements in Indian stocks which have been attributed, by market experts, to algo trading/HFT.
While huge institutional investors will be able to take advantage of arbitrage of micro and nano-seconds, by engaging in high frequency trades, the interest of retail investors could be jeopardised.

List Of Maharatna, Navratna And Miniratna CPSEs

The Complete list of Maharatna, Navratna and Miniratna CPSEs (Central Public Sector Enterprises) and their status criteria are as of date October 26, 2014 are as follows.

Maharatna CPSEs

The following are the criteria required to procure a Maharatna status for CPSEs.

The company should possess Navratna status.
Its should be listed on Indian stock exchange with minimum prescription of public shareholding under SEBI regulations.
Average annual turnover of more than Rs. 25,000 crore, during the last 3 years.
Average annual net worth of more than Rs. 15,000 crore, during the last 3 years.
Average annual net profit after tax of more than Rs. 5,000 crore, during the last 3 years.
The entity should have significant global presence/international operations.

Seven CPSEs possess Maharatna status which are as follows

Bharat Heavy Electricals Limited
Coal India Limited
GAIL (India) Limited
Indian Oil Corporation Limited
NTPC Limited
Oil & Natural Gas Corporation Limited
Steel Authority of India Limited

Navratna CPSEs

The following are the criteria required to procure a Navaratna status for CPSEs.

And a composite score of 60 or above out of possible 100 marks in the six selected performance parameters which are as follows
At least three ‘Excellent’ or ‘Very Good’ Memorandum of Understanding (MoU) ratings during the last five years.
The entity must have Miniratna Category – I status alongwith Schedule ‘A’ listing.

Net Profit to Net Worth
Manpower cost to cost of production or services
Gross margin as capital employed
Gross profit as Turnover
Earnings per Share
Inter-Sectoral comparison based on Net profit to net worth.

Seventeen CPSEs possess Navratna status which are as follows

Bharat Electronics Limited
Bharat Petroleum Corporation Limited
Container Corporation of India Limited
Engineers India Limited
Hindustan Aeronautics Limited
Hindustan Petroleum Corporation Limited
Mahanagar Telephone Nigam Limited
National Aluminium Company Limited
National Buildings Construction Corporation Limited
NMDC Limited
Neyveli Lignite Corporation Limited
Oil India Limited
Power Finance Corporation Limited
Power Grid Corporation of India Limited
Rashtriya Ispat Nigam Limited
Rural Electrification Corporation Limited
Shipping Corporation of India Limited

Miniratna Category – I CPSEs

The following are the criteria required to procure a Miniratna category – I status for CPSEs.
The CPSEs that have made profits in the last three years in a row and should have net worth. The pre-tax profit should be Rs. 30 Crores or more in atleast one of the three years.
Fifty four CPSEs possess Miniratna Category – I status which are as follows

Airports Authority of India
Antrix Corporation Limited
Balmer Lawrie & Co. Limited
Bharat Coking Coal Limited
Bharat Dynamics Limited
BEML Limited
Bharat Sanchar Nigam Limited
Bridge & Roof Company (India) Limited
Central Warehousing Corporation
Central Coalfields Limited
Chennai Petroleum Corporation Limited
Cochin Shipyard Limited
Dredging Corporation of India Limited
Kamarajar Port Limited
Garden Reach Shipbuilders & Engineers Limited
Goa Shipyard Limited
Hindustan Copper Limited
HLL Lifecare Limited
Hindustan Newsprint Limited
Hindustan Paper Corporation Limited
Housing & Urban Development Corporation Limited
India Tourism Development Corporation Limited
Indian Rare Earths Limited
Indian Railway Catering & Tourism Corporation Limited
IRCON International Limited
KIOCL Limited
Mazagaon Dock Limited
Mahanadi Coalfields Limited
Manganese Ore (India) Limited
Mangalore Refinery & Petrochemical Limited
Mishra Dhatu Nigam Limited
MMTC Limited
MSTC Limited
National Fertilizers Limited
National Seeds Corporation Limited
NHPC Limited
Northern Coalfields Limited
North Eastern Electric Power Corporation Limited
Numaligarh Refinery Limited
ONGC Videsh Limited
Pawan Hans Helicopters Limited
Projects & Development India Limited
Railtel Corporation of India Limited
Rail Vikas Nigam Limited
Rashtriya Chemicals & Fertilizers Limited
RITES Limited
SJVN Limited
Security Printing and Minting Corporation of India Limited
South Eastern Coalfields Limited
State Trading Corporation of India Limited
Telecommunications Consultants India Limited
THDC India Limited
Western Coalfields Limited
WAPCOS Limited

Miniratna Category-II CPSEs

The following are the criteria required to procure a Miniratna category – II status for CPSEs.
The CPSEs that have made profits in the last three years in a row and should have net worth.
Eighteen CPSEs possess Miniratna Category – II status which are as follows

Bharat Pumps & Compressors Limited
Broadcast Engineering Consultants (I) Limited
Central Mine Planning & Design Institute Limited
Central Railside Warehouse Company Limited
Ed.CIL (India) Limited
Engineering Projects (India) Limited
FCI Aravali Gypsum & Minerals India Limited
Ferro Scrap Nigam Limited
HMT (International) Limited
HSCC (India) Limited
India Trade Promotion Organisation
Indian Medicines & Pharmaceuticals Corporation Limited
M E C O N Limited
Mineral Exploration Corporation Limited
National Film Development Corporation Limited
National Small Industries Corporation Limited
P E C Limited
Rajasthan Electronics & Instruments Limited

Totally 7 Maharatna, 17 Navaratna and 72 Miniratna (54 -category – I & 18 – Category – II)CPSEs are present in India.

What is a Bank?

A financial institution licensed as the receiver of deposits and lends them to the prospective borrowers as well as allows the depositors to withdraw their money from the accounts by cheque is a bank. There are two types of banks. They are

Commercial Banks
Investment Banks

What are Commercial Banks?

Commercial banks manage deposit accounts, such as checking and savings accounts, for individuals and businesses. They make loans to the public using the money held on deposit.

What are Investment Banks?

Investment banks differ strongly; these institutions facilitate the buying and selling of stocks, bonds and other investments, as well as helping companies to go public with initial public offerings (IPO).

What is a Non-Banking Financial Company?

Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares or stocks or bonds or debentures or securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale or purchase or construction of immovable property.

What is difference between banks & NBFCs?

NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:

NBFC cannot accept demand deposits.
NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself.
Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

What is meant by Priority Sector?

Priority sector refers to those sectors of the economy which may not get timely and adequate credit in the absence of this special dispensation. Typically, these are small value loans to farmers for agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.

What are the different categories under Priority Sector?

Priority Sector includes the following categories:

Agriculture
Micro and Small Enterprises
Education
Housing
Export Credit
Others

What is meant by MSME?

MSME stands for Micro, Small and Medium Enterprises.
The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh.
A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore.
A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

What is meant by Basis Points?

A basis point is a unit of measure to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent). In most cases, it refers to changes in interest rates and bond yields.
For example, if the RBI has announced that it reduced current SLR 22 by 25 basis points, it means the new SLR will be 21.75.

What is meant by NPA?

NPA stands for Non-Performing Assets. An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.
The net non-performing assets (NPAs) of banks had gone up 51% in FY13 to RS.92825/- crores. According to a recent CRISIL report, the gross NPAs of banks are slated to increase from 3.3% in March 2013 to 4% by March 2014.

Who is a Wilful Defaulter?

A person is declared “Wilful Defaulter” when he defaults in repayment obligations by him to the lender even though he has the capacity to honour the said obligations or when he diverted the funds for other purposes or when he siphoned off the funds so that the funds have not been utilized for the specific purpose for which finance was availed of, nor are the funds available with the person in the form of other or when he disposed off or removed the movable fixed assets or immovable property given by it for the purpose of securing a term loan without the knowledge of the bank/lender.

What is meant by SARFAESI Act?

SARFAESI stands for Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest. The Act was passed on 2002.
This Act empowers banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans. This Act helps the bank to recover the bad loans.
SARFAESI Act was based on recommendation of two Committees.
1. Committee on Banking Sector Reforms – Narasimhan Committee II.
2. Restructuring of weak Public Sector Banks – Verma Committee.

What is meant by Fiscal Policy?

Fiscal Policy is a part of a Government’s economic policy which deals with taxation, expenditure, borrowing, and the management of public debt in the economy. It primarily concerns itself with the flow of funds in the economy.

What is a Hot Money?

‘Hot Money‘ is the flow of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. Hot Money can move very quickly in and out of markets, potentially leading to market instability.

What is Soft Currency?

A currency with a value that fluctuates as a result of the country’s political or economic uncertainty is called Soft Currency. As a result of the of this currency’s instability, foreign exchange dealers tend to avoid it.

What is Hard Currency?

A currency, usually from a highly industrialized country, that is widely accepted around the world as a form of payment for goods and services is called Hard Currency.
A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the FOREX market.

What is meant by Security?

Security refers to a share, bond or Government stock that can be bought and sold, usually on the stock exchange or on a secondary market. The company or entity that issues the security is known as the issuer.
Security is divided into two types.

Debt Security
Equity

A debt security is a type of security that represents money that is borrowed that must be repaid, with terms that define the amount borrowed, interest rate and maturity/renewal date.
Equities represent ownership interest held by shareholders in a corporation, such as a stock. Unlike holders of debt securities who generally receive only interest and the repayment of the principal, holders of equity securities are able to profit from capital gains.

What is meant by Prime Lending Rate (PLR)?

Prime Lending Rate is the rate of interest at which bank gives loan to its most reliable customers. Generally a bank’s best customers consist of large corporations. It is also known as Prime Interest Rate.

What is Monopoly?

Monopoly refers to a market structure where there is only one seller who controls the entire market and no substitute of that product is available in the market.

What is Monopsony?

Monopsony is also termed as ‘Buyer’s Monopoly‘. It means there is only one buyer of the product in the market.

What is meant by Autarchy?

Autarchy refers to a country which is self sufficient and does not require any kind of imports from other countries to meet the needs of the people.

What is meant by Buoyancy?

When the Government fails to check inflation, it raises the income tax as well as corporate tax to generate revenue. Such a tax is called as Buoyancy. It concerns with the revenue from taxation in the period of inflation.

Banking Awareness (Part II)

What is meant by Amortization?

Payment of a loan in installments by the borrower. It is usually done in an agreed period and every installment includes a part of the total loan plus the interest.The term is used for two separate processes. They are,

Amortization of loans
Amortization of intangible assets.

What is meant by Asset?

Any item of economic value owned by an individual or corporation, especially that which could be converted to cash. Asset can be divided into three types.

Tangible Asset – The assets which are in the material form such as land, machinery, building etc.
Intangible Assets – All non-physical/immaterial assets such as brand names, knowledge etc.
Financial Assets – All financially valid valuables other than tangibles and intangibles such as currencies, bank deposits, bonds, securities, shares, etc.

What is meant by Crony Capitalism?

An economy that is nominally free-market, but allows for preferential regulation and other favorable government intervention based on personal relationships. In such a system, the false appearance of “pure” capitalism is publicly maintained to preserve the exclusive influence of well-connected individuals.
A description of capitalist society as being based on the close relationships between businessmen and the state.

What is meant by Market Capitalization?

The total market value of all of a company’s outstanding shares is called Market Capitalization and it can be calculated by multiplying a company’s shares outstanding by the current market price of one share. It is also referred as Market Cap.
If a company has 35 thousand shares outstanding, each with a market value of Rs 100, the company’s market capitalization is Rs. 35.00,000/- (Rs Thirty Five Lakh)

What is meant by Free Trade?

The international trade among an agreed-upon group of countries without any barriers (such as tariffs, quotas, forex controls, etc.), promoted with the objective of securing international specialisation and an edge in their foreign trade. Free trade is exemplified by the European Union / European Economic Area and the North American Free Trade Agreement, which have established open markets.

What is Macro and Micro Economics?

Macroeconomics (‘macro’ means ‘large’) looks at the behaviour of the economy as a whole such as the issues like inflation, rate of unemployment, economic growth, balance of trade,
etc.
Microeconomics (‘micro’ means ‘small’) looks on the behaviour of the units i.e. the individual, the households, the firms, a specific industry–which together make up the economy.

What is meant by Usury?

The practice of lending money and charging the borrower interest, especially at an exorbitant or illegally high rate is called as Usury. It is common on all parts of India and Government has imposed many laws to restrict this practice.

What is meant by Animal-Spirit?

The term “animal spirits” is used to describe human emotion that drives consumer confidence. This term used by John Maynard Keynes used in one of his economics books.

What is meant by Balance of Payments?

Balance of Payments or BOP is a statement that summarizes an economy’s transactions with the rest of the world for a specified time period. The BoB encompasses all transactions between a country’s residents and its nonresidents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts.

What is meant by Liquidity?

The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price is called Liquidity. It is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets.
In simple words, Liquidity is the ability to convert an asset to cash quickly. It is also known as “marketability“.