Banking awareness and Finance terms Flashcards
What is a Co-Lending agreement?
What is the share of NBFC in the Co-Lending agreement between a Bank and NBFC?
Ans
• The Co-Lending model was released by the RBI in 2018. Co-lending allows two financial institutes to co-lend a credit to the customer and shares risk and profit. Under the Co-lending model of RBI, The Co-lending can be done among banks, NBFCs and Housing Finance Institutes
• 20% - The Minimum credit risk shared by an NBFC in a co-lending agreement between a Bank and NBFC is 20% and the remaining is shared by the bank. The profit is distributed accordingly
What is the name of the Entity that provides a minimum of 5 lakh₹ to the depositors of a bank if the bank liquidates or wind up its business and is unable to pay the depositors?
Ans:
DICGC (Deposit Insurance and Credit Guarantee Corporation).
DICGC is a specialised division of the RBI
Which entity suggests and recommend an appropriate person for the board of directors of the Public Sector financial institutes of India?
Ans:
BBB (Bank’s Board Bureau)
The Banks Board Bureau (BBB) is headquartered in RBI’s Byculla office in Mumbai. It is responsible for finding and suggesting appropriate person for the board of PSBs, Public sector Financial Institution and Public sector Insurance companies and it also suggests and recommends measures for improving the Corporate Governance in these institutions.
Which platform of NSE enables the MSMEs and Startups of India to get listed on the NSE without the Initial Public Offering (IPO)?
Ans:
NSE-EMERGE platform
The NSE-EMERGE platform was launched in 2012. It allows micro & small enterprises and startups to get listed on the National Stock Exchange without Initial Public Offering (IPO) and raise funds through investors.
What is Debt Investment and Equity Investment?i
Ans:
Debt investment and Equity Investment – Two types of market are debt market and equity market. The investment that provides very less investment risk or low risk is called debt market investment for example government securities like treasury bills, bonds and corporate bonds. Debt investment usually provides a fixed return on investment.
The equity investment market is a versatile market that contains high risk and versatile returns for example stock markets like NSE and Bombay stock exchange are equity market. Equity investment is issued by SEBI while debt investment is a borrowed capital by the government which is issued by the government or companies
What is the Interest equalisation scheme of the government for exporters?
Ans:
The RBI’s ‘Interest Equalisation scheme’ was launched by the government on 1 April 2015 to provide interest subsidies to the MSME exporters and merchants based on their category of export. The MSME exporters and merchants receive credit from the banks at a lower interest rate and banks later reimburse the amount from the RBI.
Exporters who are already beneficiaries of the PLI (Production Linked Incentive) scheme are not eligible under this scheme
What is the Difference between the Authorised Share Capital & Paid-Up capital/Subscribed Capital?
Ans:
Authorised Share Capital is the maximum amount of capital in (₹) a company can raise by issuing its shares to the public while Paid-Up capital is the actual amount of capital the company has raised by issuing its shares to the shareholders
For Example- A Company’s Authorised Share Capital is ₹100,000 and it issues 50000 shares of ₹10 each to the public then the company will have the remaining ₹50000 as Paid-Up capital that it can sell. Authorised share capital can be raised by the company through an online portal of the Ministry of Corporate Affairs (MCA).
Note!- Authorised Capital is not used to measure net worth but Paid-Up capital is used to measure the net worth of a company.
What are NPAs(Non-Performing Assets)?
Banks classify NPAs into which 3 categories?
Ans:
NPA (Non-Performing Assets)- Non Performing Assets are those loans given by a bank whose Premium or Interest in not been repaid for a period of more than 90 Days. Banks are required to further classify NPAs into 3 categories-
- Substandard Category- The NPAs (Non-Performing Assets) that are not due for less than or equal to 12 Months are under the Sub-Standard category
- Doubtful Assets- The NPAs that are due for more than 12 months are called Doubtful Assets
- Lost Asset- The NPAs that are identified by the bank or external auditor which cannot be recovered and whose amount should be written off are called Lost Assets.
What are Restructured Loans?
Restructured Loan- Restructured Loans are those loans whose terms or Conditions are modified for the borrower to avoid default or repayment stress for example
• Expanding the Re-payment of Loan
• Reducing the interest of the loan
• Reducing the remaining balance
• Converting the loan to equity
What are Written-Off Assets?
Ans:
Written-off assets are those debts that are not counted on the balance sheet and are compensated through some other means. But the borrower is not pardoned or exempted from repayment of the asset and attempts of recovery are still made for the debt recovery.
What are Stressed Assets?
Ans:
Stressed Assets is a broader term used for NPAs+Restructured Loan+ Written-Off assets
What are Dated Government Securities?
Ans:
Dated Government Securities- Dated Government Securities are the government securities issued by the RBI by conducting an auction on the NDS (Negotiated Dealing System) on behalf of the government. Dated Government Securities are long term securities with a tenure of 5 to 30 years and the interest charge in these type of securities is also called coupon rate and is either fixed or floating interest rate. It can be issued by the central or state government to generate funds. The central government uses these funds to finance a Fiscal Deficit. Types of Dated Government Securities are Zero-Coupon Bonds, Fixed Rate Bonds, Floating Rate bonds, Tap Stocks, Partly Paid Stocks, Capital Indexed Bonds and Inflation Index bonds.
Mostly Commercial Banks, insurance companies and other Financial institutes invest in Dated Government Securities. The RBI serves as a depository for the Dated Government Securities and also provides repayment of the investment made by the investors after maturity. Dated Government securities can also be used for trading in a stock market and can also be used as a collateral
What is Pledging of Shares?
Ans:
Pledging of Shares- When a company uses its share as collateral to avail of loans from banks or lenders it is called pledging. Companies Pledge their shares to meet the working capital requirements, funding other ventures, personal obligations etc.
The value of shares keeps changing in the market and so do the Pledged shares used as collateral to avail loans. If the company fails to repay the loan then the bank has the right to sell those shares in the open market.
What are the Upper Layer and Middle Layer NBFCs (Non-Banking Financial Institutes) in India as directed by the RBI?
Ans:
Upper Layer NBFCs- Are the NBFCs identified by the RBI
Middle Layer NBFCs- Includes three types of NBFCs – 1) All Deposit taking NBFCs irrespective of their Asset size 2) NBFCs with an asset size of ₹1000 crore & above 3) NBFCs that are working as a Housing Finance companies, Core investment companies, infrastructure finance companies or involved in activities like infrastructure debt funds or working as a standalone primary dealers
What was the value of switch operations or conversion operations executed on 28 Jan 2022 by the government?
The transaction of the switch operation was done using which entity?
Ans-
• ₹1,19,701 crores
• Financial Benchmark India Pvt Ltd.
The Switch operations or Conversion operations were the buying back of securities by the government from the RBI that was maturing on FY2023, FY2024 and FY2025 and issuing new securities of the same worth to make it cash neutral. The Switch operation was done for smoothening the liability profile of the RBI
