Banking and insurance
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share

Banking and insurance

  • 350 views
Uploaded on

Banking and Insurance Mangement

Banking and Insurance Mangement

More in: Business
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
No Downloads

Views

Total Views
350
On Slideshare
350
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
37
Comments
0
Likes
1

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide
  • M E: The term is fixed corresponding to the likely period when the daughter may get married.

Transcript

  • 1. Introduction to Bank and Insurance Lecture 01 Deepesh Mahajan
  • 2. Risk & Its Relation with Insurance Lecture 02 Deepesh Mahajan
  • 3. Insurance • A system to protect persons, groups, or businesses against the risks of financial loss; • by transferring the risks to a large group who agree to share the financial losses in exchange for premium payments. Deepesh Mahajan
  • 4. Insurance • A written contract between two parties; • providing a promise of reimbursement; • in the case of loss; • for goods or services or contingency covered by contract of insurance; • for which premium is duly paid. Deepesh Mahajan
  • 5. Universe of Risk Deepesh Mahajan
  • 6. Risk Management • Insurance works as a tool for Risk Management, it involves; –Identifying the source of risk. –Measurement of risk. –Treatment of risk. –Selection of suitable method. –Implementing the method. –Evaluation. Deepesh Mahajan
  • 7. Methods of Risk Mgmt. • Avoiding the risk. • Preventing the risk. • Assumption of risk. • Shifting of risk. • Insurance of risk. Deepesh Mahajan
  • 8. Risk Mgmt. & Insurance • Risk Management: • systematic way of ensuring protection of business resources and income against losses • so that the aim, goals and vision of the company can be reached. • Thus Risk Management creates stability and contributes to growth and assures profitability of the Organization. Deepesh Mahajan
  • 9. Risk Mgmt. & Insurance • Insurance guarantees; –Peace of mind –Asset protection –Balance sheet protection • Requirement of: –Lender –Regulatory Body –Lease –Contracts Deepesh Mahajan
  • 10. Insurance • All Risks are not Insurable • Essentials of Insurance • Insurable Interest • Utmost good faith Deepesh Mahajan
  • 11. Procedure for Insurance • Identification of Risks • Quantify the Insurable value • Evaluate the choices • Proposal • Payment of premium • Policy Documentation • Claims • Administration System Deepesh Mahajan
  • 12. Insurable Risks • Property Risk • Damage to Physical Assets • Acts of God • Accidents • Break down • Financial Risks • Monetary Loss from • Theft and Burglary • Business interruption • Bad credit Deepesh Mahajan
  • 13. Insurable Risks • People Risks • Loss to Employees • Ill Health and accident • Death • Overseas travel • Liabilities risks • Loss from Operations • Product liabilities • Public liability • Directors & Officers liabilities • Errors & Omissions liabilities Deepesh Mahajan
  • 14. Focus Areas • Identification of Internal & External Pure Risks –Existing Risk Control Measures Review –Risk inspection –Risk Audit • Scrutiny of Existing Insurance Covers –Coverage –Rates & Deductibles (Compulsory self insurance) • Defining Standard SOP for Claims Control –Guidelines on documentation Deepesh Mahajan
  • 15. Key Areas of Consideration • Choice of Insurer –Industry Rating, Claims Settlement ability –Sustainability of the company –Service levels & infrastructure • Choice of Intermediary –Representation of the insurance market –Knowledge of insurance amongst all industry segments –Service levels & infrastructure Deepesh Mahajan
  • 16. Emerging Challenges • De regulation of Indian Insurance market. • Global markets impact on Local market. • Options for self insurance. • Market driven pricing. • Cyber Risk. Deepesh Mahajan
  • 17. Concept and Significance of Insurance Lecture 03 Deepesh Mahajan
  • 18. Functional Concept • Insurance is a cooperative device to spread the risk. • System to spread risk among the persons insured against risk. • The principle to share the risk of loss of each member of the society on the basis of probability of loss to their risk. • A method to provide security against loss. Deepesh Mahajan
  • 19. Contractual Concept • A contractual agreement among the parties to contract of indemnity against payment of premium. • To pay management expenses. • To pay agency commission. • To pay the claims. • To invest the surplus money in Government Security. Deepesh Mahajan
  • 20. Functions of Insurance Deepesh Mahajan
  • 21. Characteristics Deepesh Mahajan
  • 22. Role of Insurance in Economy Deepesh Mahajan
  • 23. Principles of Insurance • Principle of utmost good faith. • Principle of insurable interest. • Principle of causa proxima. • Principle of indemnity. • Principle of subrogation. • Principle of contribution. Deepesh Mahajan
  • 24. Elements of Insurance • Insurance as a Transfer System - transferring of risks from Insured to IC which is financially sound and has capacity and willingness to take risks. • A Loss exposure can give rise to three types of losses, namely: • Property loss (including net income loss), • Liability loss, and • Human and personnel loss. Deepesh Mahajan
  • 25. Elements of Insurance • Insurance as a Business - insurance primarily attempts to meet its costs and expenses from premium that it earns and also make a reasonable margin of profit for its own sustainability. • Other benefits to society as a whole such as: • Payments for the costs of covered losses • Reduction of the insured’s financial uncertain Deepesh Mahajan
  • 26. Elements of Insurance • Efficient use of resources • Support for credit • Satisfaction of legal requirements • Satisfaction of business requirements • Source of investment funds for infrastructure development • Reduction of social burden Deepesh Mahajan
  • 27. Elements of Insurance • Insurance as a Contract - an insurance policy is a legally enforceable contract. The contract is between IC and the Insured. • An insurance contract must meet these four requirements: • Offer and acceptance. • Consideration. • Capacity. • Legal purpose. Deepesh Mahajan
  • 28. Advantages • Transfer of risk from one person (Insured) to another (Insurer) • Sharing (Pooling) of losses on some equitable basis such that • fortuitous (random) losses will be indemnified (paid) • Reduction in tension and fear • Credit multiplication • Avenue for investment Deepesh Mahajan
  • 29. Classification of Insurance Lecture 04 Deepesh Mahajan
  • 30. Classification INSURANCE INDUSTRY IN INDIA Public Sector Private Sector Life General Life ( 16 Companies) General (09 Companies) GIC and its Four subsidiaries LIC of India Post Office Insurance
  • 31. Life Insurance • Contract of Insurance: A contract of insurance is a contract of utmost good faith technically known as uberrima fides. • Protection: • Savings through life insurance guarantee full protection against risk of death of the saver. • In case of demise, life insurance assures payment of the entire amount assured (with bonuses applicable) or amount agreed is payable. Deepesh Mahajan
  • 32. Economics of Life Insurance Deepesh Mahajan
  • 33. Types of L.I. Policies Deepesh Mahajan
  • 34. Types of L.I. Policies Deepesh Mahajan
  • 35. According to Premium 1. Single premium policy- whole premium is paid at the beginning of the policy. 2. Level premium policy- regular and equal premiums are paid at a definite interval. ACCORDING TO PARTICIPATION IN PROFIT: 1. Without profit or non-participating policies.- 2. With profit or participating policies- Deepesh Mahajan
  • 36. As per number of Persons 1. Single Life Policy- life of one individual is covered. 2. Multiple life policies- more than one life is insured. 3. Joint life policy- covers two or more lives. 4. Last survivorship policy- policy amount is payable at the last death. Deepesh Mahajan
  • 37. As per mode of Payment 1. Lump Sum policies- sum assured is paid in one installment. 2. Installment or annuity policies- policy amount paid in several installments. Deepesh Mahajan
  • 38. Non-Conventional Policies • These policies generally gives more features of investment. They are also termed as structured products. Deepesh Mahajan
  • 39. Classification of Insurance Lecture 05 Deepesh Mahajan
  • 40. Non Life Insurance • Started in 13 th Century by a person LombardLombard. • Fire Insurance came in force in 16681668 in LondonLondon. • In India in 1850 Triton Insurance Calcutta started business in non life segment. • In 1972 Government of India Nationalized th General Insurance Business. • All 106 Insurers were merged in to Big 4. Deepesh Mahajan
  • 41. Big 4 Companies Deepesh Mahajan
  • 42. Non Life Business Deepesh Mahajan
  • 43. Miscellaneous Insurance Deepesh Mahajan
  • 44. Insurance Business Growth IRDA 2011-12
  • 45. Advantages Deepesh Mahajan
  • 46. Weaknesses Deepesh Mahajan
  • 47. Vital Aspects of GI • Who can Insure? • Documents: –Proposal –Cover Note. –Certificate of Insurance. –Policy. • Warranties. Deepesh Mahajan
  • 48. Vital Aspects of GI • Construction of Policy. • Duration of contract. • Alterations. • Assignment. • Termination of contract. • Refund of premium. • Claim & its settlement. Deepesh Mahajan
  • 49. Life Insurance Plans Lecture 06 Deepesh Mahajan
  • 50. Agenda Deepesh Mahajan
  • 51. Basic Concepts • Life Insurance can be termed as an agreement between the policy owner and the insurer, • Where the insurer for a consideration agrees to pay a sum of money upon • The occurrence of the insured individual's death or • Any other event, such as terminal illness, critical illness or the maturity of the policy. Deepesh Mahajan
  • 52. Life Insurance – Reasons for Deepesh Mahajan
  • 53. Term Life Insurance • Increasing/Decreasing term policies • Convertible Term Assurance Policy • Level Term Life Insurance • Renewable term life Insurance Deepesh Mahajan
  • 54. Endowment Insurance • Joint life endowment plan • Money back endowment plan • Marriage endowment plan Deepesh Mahajan
  • 55. Permanent Life Insurance • Ordinary whole life plan • Limited payment whole life plan Unit Linked Plans Deepesh Mahajan
  • 56. Term Life Insurance • Sum assured is payable only in the event of death during the term. • In case of survival, the contract comes to an end at the end of term. • Term Life Insurance can be for period as long as 40 years and as short as 1 year. • No refund of premium • Non-participating policies • Low premium as only death risk is covered. Deepesh Mahajan
  • 57. Types of Term Insurance Increasing Term Insurance • Life insurance cover under this plan goes on increasing periodically over the term in a predetermined rate. (Riders) Deepesh Mahajan
  • 58. Types of Term Insurance Decreasing Term Insurance • The sum assured decreases with the term of the policy. • Normally decreasing term assurance plan is taken out for mortgaged protection, under which outstanding loan amount decreases as time passes as also the sum assured. Deepesh Mahajan
  • 59. Types of Term Insurance • Convertible term assurance policy Under this plan a policyholder is entitled to exchange the term policy for an endowment insurance or a whole life policy. Conversion can be done at any time during the term except last 2 years. • Level Term Life Insurance The sum assured throughout the term of the policy does not change. Deepesh Mahajan
  • 60. Types of Term Insurance Renewable Term Life Insurance • With renewable term insurance, the insurance company automatically allows you to renew your coverage after the term of the policy is over (generally 5 to 20 years) Deepesh Mahajan
  • 61. Endowment Insurance • Endowment insurance plans is an investment oriented plan which not only pays in the event of death but also in the event of survival at the end of the term. • Is a contract underwritten by a life insurance company to pay a Fixed term plus Accumulated profits that are declared annually. Deepesh Mahajan
  • 62. Endowment Insurance • Premium includes 2 elements -mortality element & investment element • Minimum age at entry : 12years • Maximum age at entry: 65years • Maximum age at maturity : 75years Deepesh Mahajan
  • 63. Types of Endowment Ins. Joint Life Endowment Plan: • Under this plan, two lives can be insured under one contract. • The sum assured is payable at the end of the endowment term or death of either of the two. Deepesh Mahajan
  • 64. Types of Endowment Ins. Money Back Endowment Plan: • In this plan, there is an additional advantage of receiving a certain amount of money at periodic intervals during the policy term. Deepesh Mahajan
  • 65. Types of Endowment Ins. Marriage Endowment Plan: • This plan has the specific condition that the sum assured is payable only after the expiry of the term even if death of the life assured takes place earlier. Deepesh Mahajan
  • 66. Types of Endowment Ins. Educational Endowment Plan: • These plans are specially designed to meet educational expense of children at a future date. • If the insured parent dies before the date of maturity the installment is paid in lump sum with immediate effect which helps to meet the educational expenses. Deepesh Mahajan
  • 67. (Whole) Life Insurance • Whole life plans are another type of endowment plan, which cover death for an indefinite period. • When the policy holder dies, the face value of the policy, known as a death benefit, is paid to the person or persons named in the life insurance policy (the beneficiary or beneficiaries). Deepesh Mahajan
  • 68. (Whole) Life Insurance • It can be with or without profits. • If you cancel the policy after a certain amount of time has passed, the insurance company will surrender the cash value to you. Deepesh Mahajan
  • 69. Types of Whole Life Insurance • Ordinary Whole Life Plan: This is a continuous premium payment plan. The insured pays premium throughout his life. It provides dual facility of protection plus savings. • Limited Payment Whole Life Plan: It provides the same benefit as above but premiums are paid for a limited period. Premiums are sufficiently higher to cover the risk. Deepesh Mahajan
  • 70. Children’s Life Insurance • Since last few years insurance companies have started offering risk cover plans like limited payment whole life, and endowment assurance plan from the age of 12years and money back plan from age of 13 years(completed). • New plans have been specifically designed for children where the risk of the child starts much earlier say 7 years. Deepesh Mahajan
  • 71. Children’s Life Insurance • Policies on the lives of children are taken out by other elders. • After some time when the child becomes major and is competent to contract, the child may assume the ownership of the policy. The policy is then said to ‘vest’ in child. • The date on which this happens is called the ‘testing date’. Deepesh Mahajan
  • 72. Children’s Life Insurance • The risk begins when the child attains 18 years of age. • This is called the ‘deferred date’ and the period between the deferred date and the date of commencement of policy is called the ‘deferred period’. Deepesh Mahajan
  • 73. Unit Linked Plans • It has emerged as one of the fastest growing insurance products. • It is a combination of an investment fund (such as mutual fund) and an insurance policy. • The premium amount is invested in the stock market and returns better income on the maturity period. Deepesh Mahajan
  • 74. Unit Linked Plans • Better for long-term investment option. • ULIPs generally provide higher returns as large portion of the funds are invested in equities. • There is also flexibility and the assured can choose levels and extent of cover needed. • There is also option of switching over from one fund to another if it does not seem to be profitable. Deepesh Mahajan
  • 75. Unit Linked Plans • ULIPs can be classified as –Unit linked – equities, bonds, real estate & money market instruments –Equity linked – only in equities –Index linked – equity, bonds or money market instruments. Deepesh Mahajan
  • 76. Pensions, Group Insurance, Lecture 07 Deepesh Mahajan
  • 77. Pension….. Why…?
  • 78. Pension
  • 79. Retire …….Rich….
  • 80. • Tax benefitTax benefit on such plans is limited to Rs. 10,000. • Pension plans (also referred to as retirement plans) are offered by insurance companies to help individuals build a retirement corpusretirement corpus. • On maturity this corpus is invested for generating a regular income streamregular income stream, which is referred to as pension or annuitypension or annuity. Pension
  • 81. • Pension plans are distinct from life insurance plans, which are taken to cover risk in case of an unfortunate event. • Conventional pension plans invest a major portion of the premium monies in bonds and government securities (G-Secs). That is why the returns are on the lower side. Pension
  • 82. • And if one were to factor into the equation an annual inflation figure of approximately 5%- 6% per annum, then the real return figures look even more unimpressive. • This is where ULIPsULIPs can play an important role in the retirement planning exercise. • ULIPs have a mandate to also invest a portion of the premium in the stock market apart from bonds and G-Secs. Pension
  • 83. • Studies have shown that from a long-term perspective, equities are equipped to give a higher return vis-à-vis other fixed income instruments like Bonds and G-SecsBonds and G-Secs. • And since retirement planning is a long-term exercise, individuals would do well to consider investing a portion of their retirement money in pension ULIPs. Pension
  • 84. • The 'with cover' pension plans offer an assured life cover (i.e. sum assuredi.e. sum assured) in case of an eventuality. • Under the 'without cover' pension plan, the corpus built till date (net of deductions like expenses and premiums unpaid) is given out to the nominees in case of an eventuality. There is no sum assured in this case.There is no sum assured in this case. ‘With and Without Cover’ Plans
  • 85. • In case of immediate annuity plans, the annuity/pension commences within one year of having paid the premium (which is usually a one-time premium). • The premium paid for the immediate annuity policy is also known as the purchase price. Currently in India, very few life insurance companies offer immediate annuity plans. LIC's Jeevan Akshay IILIC's Jeevan Akshay II 'Immediate Annuity’ Plans
  • 86. • In case of deferred annuity, the annuity/ pension does not commence immediately; it is 'deferred' up to a time, which is decided upon by the policyholder ‘Deferred Annuity' Plans
  • 87. • Lifetime annuity without return of purchase price. • Annuity for life with a return of the purchase price. • Lifetime annuity guaranteed for a certain number of years. • Joint life/ Last survivor annuity. Options Available in PP
  • 88. • “An arrangement to provide insurance coverage • for a group of persons under a single contract, • without individual risk selection, and • under terms and conditions more favorable than those otherwise obtainable by these persons as individuals.” Group Insurance
  • 89. • Nobody expects to be injured, or become ill tomorrow or expects a fire loss tomorrow. • However, if this does occur it can causeHowever, if this does occur it can cause aa catastrophic financial losscatastrophic financial loss.. • A comprehensive employee benefits program is a low cost solution • that can provide protection for the Employee and Employer from catastrophic financial losses due to illness or injury Concept of Group Insurance
  • 90. Typical Group Benefits • Employee and dependant term life insurance • Accidental death & dismemberment • Critical Illness • Short term disability • Long term disability • Medical reimbursement plan (tax loop hole) • Employee Assistance Program (Contact) • Healthcare • Dental care • Vision care Deepesh Mahajan
  • 91. Advantages Advantages for EmployerAdvantages for Employer • Attract & Retain key People • Establish a company policy in the event of the death or disability of an employee • Tax effective compensation Advantages for EmployeeAdvantages for Employee • Basic protection for the EE & family • Less expensive than individual insurance • Higher standard of healthcare than otherwise possible • Cover for “uninsurable” Deepesh Mahajan
  • 92. • Effective management of benefit costs • Tailored plan design • Streamlined administration • Clear communication material • Accessible and responsive customer service • 1-800 Claims Service • Administrative Support Meeting Employer Needs
  • 93. Insurance Regulatory Development Authority Lecture 08 Deepesh Mahajan
  • 94. IRDA • IRDA was setup in 2000 as an autonomousautonomous bodybody. • The object was to regulate and develop the business of insurance and reinsurance in the country as per the Insurance Regulatory andInsurance Regulatory and Development Authority Act,1999Development Authority Act,1999. • The main objective of setting up IRDA was to promote market efficiencymarket efficiency and ensure consumer protectionconsumer protection. Deepesh Mahajan
  • 95. IRDA • IRDA is the controlling and regulatory apex body in the country for Insurance sector. • Its ChairmanChairman and MembersMembers are appointed by Government of India. • IRDA’s HQ is located at HyderabadHyderabad. Deepesh Mahajan
  • 96. IRDA The Authority is a ten member team of I. A Chairman and every other whole-time member – 5YRS (Maximum age is 60yrs) II.Five whole-time members (Maximum age is 62yrs) III.Four part-time members (not more than 5yrs) (all appointed by the Government of India)(all appointed by the Government of India) Deepesh Mahajan
  • 97. Regulatory Framework
  • 98. Duties & Responsibilities • According to the Section 14 of IRDA Act ,1999Section 14 of IRDA Act ,1999 there are certain duties: • To regulate, promote and ensure orderly growth of the insurance business and re- insurance business. • To issue a certificate of registration and powers to renew, modify, withdraw, suspend or cancel the registration. Deepesh Mahajan
  • 99. Duties & Responsibilities • Protection of the interests of the policy holders. • To specify qualifications, code of conduct and practical training for intermediaries. • To specify the code of conduct for surveyors and loss assessors. • Exercising such other powers as may be prescribed. Deepesh Mahajan
  • 100. Duties & Responsibilities • To promote the efficiency in the conduct of insurance business. • To promote and regulate the organizations connected with the insurance and re- insurance business. • Levying fees and other charges for carrying out the purposes of this Act. Deepesh Mahajan
  • 101. Duties & Responsibilities • To conduct enquiries and investigations for insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business • To control and regulate the rates, advantages, terms and conditions that may be offered by insurers. Deepesh Mahajan
  • 102. Duties & Responsibilities • To specify the form and manner in which books of account shall be maintained. • To regulate the investment of funds by insurance companies. • To regulate the maintenance of margin of solvency. • Adjudication of disputes between insurers and intermediaries. Deepesh Mahajan
  • 103. Duties & Responsibilities • Supervising the functioning of the Tariff Advisory Committee. • To specify the percentage of premium income of the insurer to finance schemes. • To specify the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector. Deepesh Mahajan
  • 104. Removal from Office 1. The Central Government may remove from office any member who- – is act as an insolvent. –has become physically or mentally incapable of acting as a member. –has been convicted of any offence which, in the opinion of the Central Government, involves moral turpitude. Deepesh Mahajan
  • 105. Removal from Office 2. Has acquired such financial or other interest as is likely to affect prejudicially his functions as a member. 3. Has so abused his position as to render his continuation in office detrimental to the public interest. 4. No such member shall be removed under clause (d) or clause (e) of sub-section (1) unless he has been given a reasonable opportunity of being heard in the matter. Deepesh Mahajan
  • 106. Functions of IRDA: 1. Ensure orderly growth of Insurance industry. 2. Protection of interest of policy holders. 3. Issue consumer protection guidelines to insurance companies. 4. Grant, modify, and suspend license for insurance companies. 5. Lay down procedure for accounting policies to be adopted by the Insurance companies. Deepesh Mahajan
  • 107. Functions of IRDA: 6. Inspect and audit of Insurance companies and other related agencies. 7. Regulation of capital adequacy, solvency, and prudential requirements of Insurance business. 8. Regulation of product development and their pricing including free pricing of products. Deepesh Mahajan
  • 108. Functions of IRDA: 9. Promote and regular self regulating organizations in the insurance industry. 10.Re-insurance limit monitoring. 11.Monitor investments. 12.Vetting of accounting standards, transparency requirements, in reporting. 13.Ensure the health of the industry by preventing sickness through appropriate action. Deepesh Mahajan
  • 109. Functions of IRDA: 16.Publish information about the industry. 17.Prescribe qualification and training needs of agent. 18.Monitor the charges for various services by Insurance companies. 19.Regulating intermediaries like; – Agents, Brokers ,Surveyors , TPA HealthAgents, Brokers ,Surveyors , TPA Health services, Web aggregatorsservices, Web aggregators Deepesh Mahajan
  • 110. Objective • The objective of this course is to develop an understanding of the Insurance and Banking sector in India. Deepesh Mahajan
  • 111. • Defining risk, • Nature and types of risk, • Risk management process, • Risk and its relation with insurance. • Concept and significance of insurance. • Classification of insurance - life and non-life. • General insurance principles. UNIT I
  • 112. • A probability or threat of • damage, • injury, • liability, • loss, or other negative occurrence that is caused by external or internal vulnerabilities, and that may be neutralized through preemptive action. Definition of Risk
  • 113. • Speculative (dynamic) risk is a situation in which either profit OR loss is possible. • Pure (static) risk is a situation in which there are only the possibilities of loss or no loss, as oppose to loss or profit with speculative risk. Definition
  • 114. • Insurable interest. • Calculable risk. • Pure risk. • Accidental in nature. • Legal object. • Not against Public Policy. • Not great calamity in nature. • Wide spread risk. Features of Insurance Risk
  • 115. • Speculative or Dynamic risk. • Pure or static risk. –Or • Systematic Risk. • Unsystematic Risk. Types of Risk
  • 116. • Another classification:Another classification: • Individual & Group risk. • Financial & Non Financial risk. • Pure & Speculative risk. • Static & Dynamic risk. • Quantifiable & Non quantifiable risk. Types of Risk
  • 117. • Personal risk. • Property risk. • Liability risk. • Business risk. Types of Pure (Static) Risk
  • 118. • Premature death. • Sickness or disability. • Old age. • Poor health. • Unemployment. Personal risk
  • 119. • Property risk is the risk of having property damaged or loss from numerous perils. • Property includes movable and immovable property. • The loss may be direct or indirect. • Direct loss includes physical damage. • Indirect loss includes loss in value. Property risk
  • 120. • Internal Risk: –Loss by fire. –Business environment. –Liability of business. –Mismanagement of business. Business Risk
  • 121. • External Risk: –Natural Calamities. –Competition. –Price Fluctuation. –Change in Demand. –Government Policy. Business Risk
  • 122. • Liability risks are another important type of pure risk that many people face. • The risk which create financial liability. • The risk arise out of intentional or un intentional injury to the person or damage to the property. Liability Risks
  • 123. Overview of Banking Industry, Banking structure in India Lecture 09 Deepesh Mahajan
  • 124. Bank • A bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money. • An institution where one can place and borrow money and take care of financial affairs. • The first modern bank was founded in Italy in Genoa in 1406, its name was Bank of St. George. Deepesh Mahajan
  • 125. Classification of Banking
  • 126. Functions of Banks • Accepting Deposits from public/others (Deposits). • Lending money to public (Loans). • Transferring money from one place to another (Remittances). • Acting as trustees. • Keeping valuables in safe custody. • Government business. Deepesh Mahajan
  • 127. Acting as Trustees • Banks also act as trustees for various purposes. • They have expertise in financial matters and generate confidence in the minds of potential subscribers. Bank must possess : • A track record of sufficient length. • Facilities for safe keeping. • Legal skills to take necessary steps for the trusteeship. Deepesh Mahajan
  • 128. Types of Banks Deepesh Mahajan
  • 129. Public Sector Banks • SBI • Central Bank of India • Corporation Bank • Dena Bank • Bank of India • Indian Overseas Bank • Oriental Bank of Commerce • Punjab & Sind Bank Deepesh Mahajan
  • 130. Private Sector Banks Deepesh Mahajan
  • 131. Co-operative Banks • The Co-operative banks in India started functioning almost 100 years ago.( COSMOS) • They are very important constituent of the Indian Financial System. • They are setup to provide easy loans to farmers or other persons to set up his business. • They are not-for-profit banks. Deepesh Mahajan
  • 132. Functions of Coop. Banks Cooperative banks in India finance rural areasCooperative banks in India finance rural areas under:under: – Farming – Cattle – Milk – Hatchery – Personal finance Deepesh Mahajan
  • 133. Dev. Banks / Fin. Institutions These banks are mainly used for developingThese banks are mainly used for developing industries and countriesindustries and countries Some Examples- •HDFC •IFCI •LIC HFC •LIC •GIC HFC Deepesh Mahajan
  • 134. Reserve Bank of India • History:- • Became operational on April 1,1935 • Nationalized in the Year 1949. • Major objectives:- • Regulate the issue of banknote. • Maintain reserves with a view to securing monetary stability. • To operate the credit and currency system of the country to its advantage. Deepesh Mahajan
  • 135. Functions of RBI Deepesh Mahajan
  • 136. Traditional Functions • Monopoly of currency notes issue. • Banker to the Government (both the central and state). • Fight against economic crisis and ensures stability of Indian economy. • Controller of FOREX and credit. • Maintaining the external value of domestic currency. Deepesh Mahajan
  • 137. Promotional Functions • Extension of the facilities for the small scale industries • Innovating the new banking business transactions. • Extension of the facilities for the provision of the agricultural credit through NABARD. Deepesh Mahajan
  • 138. Supervisory Functions Deepesh Mahajan
  • 139. Controlling Economy TOOLS:- • CRR( CASH RESERVE RATIO): 4% • REPO RATES(RR):7.25% • REVERSE REPO RATE(RRR): 6.25% • STATUTORY LIQUIDTY RATIO (SLR):23% • BANK RATE: 10.25.0% Deepesh Mahajan
  • 140. Glimpse of Banking Sector • Phase-1 • Early phase from 1786 to 1969 of Indian Banks • Phase-2 • Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms • Phase-3 • New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991 Deepesh Mahajan
  • 141. Phase-1 Deepesh Mahajan
  • 142. Phase-2 Deepesh Mahajan
  • 143. Phase-3 Deepesh Mahajan
  • 144. Challenges • Lack of product expertise –Traditionally focused on limited range of products • Primarily for corporate clients –Need for acquiring skills in • Retail, structured finance Deepesh Mahajan
  • 145. Challenges • Lack of distribution expertise –Reliance on branch channel and human intervention –Relatively high unit cost of delivery given small transaction sizes • Limited use of technology –Across both customer-facing and internal functions Deepesh Mahajan
  • 146. Challenges • Inefficient capital allocation • Competition in market –Post office – Insurance –Financial Institution –Foreign Banks Deepesh Mahajan
  • 147. Opportunities Deepesh Mahajan
  • 148. Highlights • Indian banking sector has 6th rank in all over the world. • SBI is the largest PSU Bank. • The growth rate of ATM`s is 28% • India has 23+ ATMs per million people, China has 55+ ATMs and South Korea has 1600+ ATMs per million people. • ICICI bank has largest no. foreign branches. Deepesh Mahajan
  • 149. RBI, Its Role , Significance & Functions Lecture 10 Deepesh Mahajan
  • 150. Reserve Bank of India (RBI) • It is the central bank of India. • Established in the year 1935, RBI was nationalized in the year 1949 • Its headquarters is located in Mumbai. • It monitors, formulates and implements India’s monetary policy. • Owned fully by the Government of India. • 22 regional offices in the various state capitals Deepesh Mahajan
  • 151. History of RBI • It was set up on the recommendations of Hilton Young Commission. • It was started as share-holders bank with a paid up capital of 5 crores. • Initially it was located in Kolkata. • It moved to Mumbai in 1937. • Initially it was privately owned. • Since 1949, the RBI is fully owned by the Government of India. Deepesh Mahajan
  • 152. Main Functions Deepesh Mahajan
  • 153. Functions • Monetary Authority • Main monetary authority of the country. • It formulates, implements and monitors the monetary policy as well as it has to ensure an adequate flow of credit to productive sectors. • Objectives are maintaining price stability and ensuring adequate flow of credit to productive sectors. Deepesh Mahajan
  • 154. Functions • The RBI controls the; –monetary supply, –monitors economic indicators like the gross domestic product; –and has to decide the design of the rupee banknotes as well as coins. Deepesh Mahajan
  • 155. Functions • Manager of exchange control • The central bank manages to reach the goals of the Foreign Exchange Management Act, 1999. • Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. Deepesh Mahajan
  • 156. Functions • Issuer of currency • The bank issues and exchanges or destroys currency and coins not fit for circulation. • The objectives are giving the public adequate supply of currency of good quality and to provide loans to commercial banks to maintain or improve the GDP. Deepesh Mahajan
  • 157. Functions • The basic objectives of RBI are to issue bank notes, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves. • Minimum Reserve System - Principle of Currency Note Issue. Deepesh Mahajan
  • 158. Functions • RBI can issue currency notes as much as the country requires, provided it has to make a security deposit of Rs. 200 crores, out of which Rs. 115 crores must be in gold and Rs. 85 crores must be FOREX Reserves. • This principle of currency notes issue is known as the 'Minimum Reserve System'. Deepesh Mahajan
  • 159. Functions • Development • The central bank has to perform a wide range of promotional functions to support national objectives and industries. • The RBI faces a lot of inter-sectoral and local inflation-related problems. Some of this problems are results of the dominant part of the public sector. Deepesh Mahajan
  • 160. Related Functions • The RBI is also a banker to the government and performs merchant banking function for the central and the state governments, acts as their banker. • There is now an international consensus about the need to focus the tasks of a central bank upon central banking. • RBI is far out of touch with such a principle, owing to the sprawling mandate described above. Deepesh Mahajan
  • 161. Roles of RBI Deepesh Mahajan
  • 162. Credit Creation • The most important function of the central bank is to control credit by commercial banks as they have become the important source of money . • Money and credit represent a powerful force for good evil in the economy. • It is the duty of the central bank to ensure that money and credit is properly managed so that inflation and deflationary pressures can be controlled in the economy. Deepesh Mahajan
  • 163. Quantitative Credit Control • The quantitative methods aim to control the total quantity and cost of re-created by banks. • The quantitative methods are traditional and indirect. • This include bank rate policy, open market operations and variable reserve ratio. Deepesh Mahajan
  • 164. Qualitative Credit Control • The qualitative controls are direct which constitute; –regulation of consumer credit, –margin requirements, –rationing of credit, –direct action, –moral suasion and publicity. Deepesh Mahajan
  • 165. Rural and Co-operative Banks, Lecture 11 Deepesh Mahajan
  • 166. Rural Banks • The RRBs came to be set up under the act of 1976. • A RRB is sponsored by a public sector bank which also subscribes to its share capital. • The RRBs meet the credit requirements of weaker sections, small and marginal farmers, landless laborers, and small entrepreneurs. • RRBs have been excellent in meeting the credit needs of rural poor. Deepesh Mahajan
  • 167. Service Requirements Loans Savings Risk Mitigation Products Risk Mitigation Products RemittancesRemittances pensionspensions Financial Counseling Credit Cards Insurance
  • 168. Features and Significance • Wide network among rural areas. • Spreading local and rural credit. • Crop finance and insurance. • Kissan credit and card system. • Easy loans and aid to farmers. • Farming and equipment loans. • Subsidy and seed loans. • Agriculture credit and loans. Deepesh Mahajan
  • 169. Cooperative Banks • Cooperative Banks in India are registered under the Co-operative Societies Act. • The cooperative bank is also regulated by the RBI. • These banks are governed by the Banking Regulations Act 1949 and Banking Laws (Co- operative Societies) Act, 1965. Deepesh Mahajan
  • 170. Principles of Co-Op. Banking • Voluntary and open membership. • Democratic member control. • Member economic participation. • Autonomy and independence. • Education, training and information. • Co-operation among Co-operatives. • Concern for Community. Deepesh Mahajan
  • 171. Features of Co-Op. Banking • Customer's owned entities. • Democratic member control. • Profit sharing by members. • Concept of mutual benefit. • Local governance. • Serves at micro finance level. • Promotes the banking culture. Deepesh Mahajan
  • 172. Critical Factors • Supply Side factors: • Pressure of un bankable according to bankers. • Small loan amount. • Long distance for services/ branches. • High transaction cost. • Lack of collateral. • Information asymmetry. • Human resource constraints. Deepesh Mahajan
  • 173. Critical Factors • Demand Side factors: • High transaction cost for clients. • Documentation. • Lack of awareness. • Lack of social capital. • Non availability of specialty products. • Convenience of informal lending. • Prior rejection by formal banking system. Deepesh Mahajan
  • 174. Cooperative Banks • Cooperative banks in India finance rural areas under: –Farming –Cattle –Milk –Hatchery –Personal finance Deepesh Mahajan
  • 175. Cooperative Banks • Cooperative banks in India finance urban areas under: –Self-employment –Industries –Small scale units –Home finance –Consumer finance –Personal finance Deepesh Mahajan
  • 176. Challenges…. • There are many challenges like; –Literacy. –Technological infrastructure. –Basic infrastructure. –Belief in the system. –Dependence of agro industry on monsoon. –Lack of innovative farming. Deepesh Mahajan
  • 177. Challenges…. –Poor communication. –Increasing NPA. –Structured and region specific reforms. –Macro irrigation system. –Resource conservation system. Deepesh Mahajan
  • 178. SLR, CRR, Banking Ratios Lecture 12 Deepesh Mahajan
  • 179. SLR • OBJECTIVE 1) To restrict expansion of bank credit. 2) To augment investment of the banks in Government securities. 3) To ensure solvency of banks. • Commonly used to contain inflation and fuel growth, by increasing or decreasing it respectively Deepesh Mahajan
  • 180. SLR • MAINTAINED IN THE FORM OF : a) Cash b) Gold – marked to market (M2M) c) Unencumbered approved securities or Gilts - valued at a price as specified by RBI • CURRENT SLR – 23% • SLR RATE = Total Demand/Time Liabilities x 100% Deepesh Mahajan
  • 181. CRR • Banks required to hold a certain proportion of their deposits in the form of cash, deposited with RBI/currency chests • Considered as equivalent to holding cash with themselves. • This minimum ratio (that is the part of the total deposits to be held as cash) is stipulated by RBI and is called Cash Reserve Ratio. • Also known as - Cash Asset Ratio or Liquidity Ratio. Deepesh Mahajan
  • 182. CRR • PURPOSE – • Higher the ratio (i.e. CRR), lower is amount that banks will be able to use for lending and investment. • EXISTING CRR is 4% (2013) Deepesh Mahajan
  • 183. REPO Rates • Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks against securities. • When the repo rate increases borrowing from RBI becomes more expensive. • When the repo rate decreases borrowing from RBI becomes cheaper. Deepesh Mahajan
  • 184. Reverse REPO Rates • This is the rate at which banks park their short- term excess liquidity with the RBI. • Banks use this tool when they feel that they are stuck with excess funds and are not able to invest anywhere for reasonable returns. • An increase in the reverse repo rate means that the RBI is ready to borrow money from the banks at a higher rate of interest. As a result, banks would prefer to keep more and more surplus funds with RBI. Deepesh Mahajan
  • 185. Vital Banking Ratios • Loan Growth. • Deposit Growth. • Loan Deposit Ratio. • Efficiency Ratio. • Capital Adequacy Ratio. • Return on Assets. –Return on Average Assets = ( Net Operating Income/ Total Assets ) Deepesh Mahajan
  • 186. Banking Ratios • Return on Equity = ( Net Income/Stockholder Equity ) • Credit Quality (NPA) • Interest Cover Ratio. • Rate Paid on Funds = Total Interest Expense / Total Earning Assets • Net Interest Margin = Net Interest income/ Average Earning Assets Deepesh Mahajan
  • 187. Banking Ratios • Long Term Debt to Total Liabilities and Equity = ( Long Term Debt / Total Liabilities plus Equity ) • Loans to Assets = ( Loans / Total Assets). • Leverage Ratio = ( Stockholders Equity / Average Total Assets ) • Tier 1 Capital = ( Stockholder Equity/ Risk- Adjusted Assets ) Deepesh Mahajan
  • 188. Banking Ratios • Capital adequacy ratio: A bank's capital ratio is the ratio of qualifying capital to risk adjusted (or weighted) assets. • The RBI has set the minimum capital adequacy ratio at 9% for all banks. • A ratio below the minimum indicates that the bank is not adequately capitalized to expand its operations. • The ratio ensures that the bank do not leverage without having adequate capital. Deepesh Mahajan
  • 189. SLR, CRR, Banking Ratios Lecture 12 Deepesh Mahajan
  • 190. SLR • OBJECTIVE 1) To restrict expansion of bank credit. 2) To augment investment of the banks in Government securities. 3) To ensure solvency of banks. • Commonly used to contain inflation and fuel growth, by increasing or decreasing it respectively Deepesh Mahajan
  • 191. SLR • MAINTAINED IN THE FORM OF : a) Cash b) Gold – marked to market (M2M) c) Unencumbered approved securities or Gilts - valued at a price as specified by RBI • CURRENT SLR – 23% • SLR RATE = Total Demand/Time Liabilities x 100% Deepesh Mahajan
  • 192. CRR • Banks required to hold a certain proportion of their deposits in the form of cash, deposited with RBI/currency chests • Considered as equivalent to holding cash with themselves. • This minimum ratio (that is the part of the total deposits to be held as cash) is stipulated by RBI and is called Cash Reserve Ratio. • Also known as - Cash Asset Ratio or Liquidity Ratio. Deepesh Mahajan
  • 193. CRR • PURPOSE – • Higher the ratio (i.e. CRR), lower is amount that banks will be able to use for lending and investment. • EXISTING CRR is 4% (2013) Deepesh Mahajan
  • 194. REPO Rates • Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks against securities. • When the repo rate increases borrowing from RBI becomes more expensive. • When the repo rate decreases borrowing from RBI becomes cheaper. Deepesh Mahajan
  • 195. Reverse REPO Rates • This is the rate at which banks park their short- term excess liquidity with the RBI. • Banks use this tool when they feel that they are stuck with excess funds and are not able to invest anywhere for reasonable returns. • An increase in the reverse repo rate means that the RBI is ready to borrow money from the banks at a higher rate of interest. As a result, banks would prefer to keep more and more surplus funds with RBI. Deepesh Mahajan
  • 196. Vital Banking Ratios • Loan Growth. • Deposit Growth. • Loan Deposit Ratio. • Efficiency Ratio. • Capital Adequacy Ratio. • Return on Assets. –Return on Average Assets = ( Net Operating Income/ Total Assets ) Deepesh Mahajan
  • 197. Banking Ratios • Return on Equity = ( Net Income/Stockholder Equity ) • Credit Quality (NPA) • Interest Cover Ratio. • Rate Paid on Funds = Total Interest Expense / Total Earning Assets • Net Interest Margin = Net Interest income/ Average Earning Assets Deepesh Mahajan
  • 198. Banking Ratios • Long Term Debt to Total Liabilities and Equity = ( Long Term Debt / Total Liabilities plus Equity ) • Loans to Assets = ( Loans / Total Assets). • Leverage Ratio = ( Stockholders Equity / Average Total Assets ) • Tier 1 Capital = ( Stockholder Equity/ Risk- Adjusted Assets ) Deepesh Mahajan
  • 199. Banking Ratios • Capital adequacy ratio: A bank's capital ratio is the ratio of qualifying capital to risk adjusted (or weighted) assets. • The RBI has set the minimum capital adequacy ratio at 9% for all banks. • A ratio below the minimum indicates that the bank is not adequately capitalized to expand its operations. • The ratio ensures that the bank do not leverage without having adequate capital. Deepesh Mahajan
  • 200. General Insurance Lecture 13 Deepesh Mahajan
  • 201. General Insurance • Definition: Insurance contracts that do not come under the ambit of life insurance are called general insurance. • The different forms of general insurance are fire, marine, motor, accident and other miscellaneous non-life insurance. Deepesh Mahajan
  • 202. G. I. explained…… • Usually tangible assets are susceptible to damages and a need to protect the economic value of the assets is needed. • General insurance products are bought as they provide protection against unforeseeable contingencies like damage and loss of the asset. • General insurance products come at a price in the form of premium. Deepesh Mahajan
  • 203. Features & Challenges • Simple products catering to basic needs. • Low market penetration. • More direct business and lesser dependence on intermediaries. • Ever growing middle class component in population. • Growth of consumer movement with an increasing demand for better insurance products. Deepesh Mahajan
  • 204. ….Continued • Inadequate application of Information Technology for business. • Government support in the form of tax incentives to the insured. • Majority of the current demand for general insurance comes from the corporate segment. • Some products are made mandatory like vehicle insurance. Deepesh Mahajan
  • 205. ….Continued • Enhanced awareness through education and publicity. • Greater use of information technology • Better products. • Better service to customers. • Benchmarking with global standards. Deepesh Mahajan
  • 206. Principles of Gen. Insurance 1. Principle of Uberrimae fidei (Utmost Good Faith). 2. Principle of Insurable Interest. 3. Principle of Indemnity. 4. Principle of Contribution. 5. Principle of Subrogation. 6. Principle of Loss Minimization. 7. Principle of Causa Proxima (Nearest Cause). Deepesh Mahajan
  • 207. Types of General Insurance Lecture 14 Deepesh Mahajan
  • 208. Auto Insurance • Auto Insurance is the most popular and demanded insurance all over the world. • Insurance company covers all vehicle or motor with insurance against theft, loss or accident. • In cases of claim, insurance company will pay back the insured amount to the owner of the vehicle or motor. Deepesh Mahajan
  • 209. Health Insurance • Health is the main concern these days as people have to spend big part of their income on the medical and hospital expenses. • Insurance companies cover an individual or a group of individuals (such as a family or employees) against health concern. • This cover guarantees to bear total hospital and medical expenses incurred by the insured individual or the group. Deepesh Mahajan
  • 210. Liability Insurance • This insurance is specially designed for corporate organizations. • Under this insurance plan, insurer covers the liability of the insured corporate. • In case of bankruptcy, insurer is liable to clear all the debts and liabilities of the company or individual. Deepesh Mahajan
  • 211. Home Insurance • Under this insurance plan, insurer provide cover or protection to the insured person’s house against disaster and hazards such as fire and natural hazards. • In case of destruction of house under proclaimed norms, the insurer is liable to pay the cost of house reestablishment. Deepesh Mahajan
  • 212. Marine Insurance • Marine Insurance is generally taken by such corporate organizations who operate on seas such as cargo, logistics and many other. • This insurance cover, insurer guarantees to pay the amount of loss due to voyage or water while shipment to the insured company or individual. Deepesh Mahajan
  • 213. Fire Insurance • Fire Insurance is one such insurance plan which one can commonly find in any organization or home. • This insurance plan, insurer is liable to pay the compensation for losses due to fire to the insured house or organization. Deepesh Mahajan
  • 214. Property Insurance • This is a new insurance plan which defines to offer protection to the insured person’s property against natural hazard, theft, mishap or accidents. • This plan is for both movable and immovable properties. Deepesh Mahajan
  • 215. Pecuniary Insurance • In this plan, an individual or group get insured for his wealth or money against any such loss, theft, mishap. • Insurer guarantees to pay for the value of his insured wealth in such mishaps in future. Deepesh Mahajan
  • 216. Aviation Insurance • Aviation Insurance could be for • an individual or for an organization. • Under this plan for an individual, one gets insured for his or her air travel and insurer pays the insured amount against the loss in case of any mishaps during the air travel. • As an organization, aviation companies gets the insurance for their flights against any accident in air or land. Deepesh Mahajan
  • 217. Cattle Insurance • Cattle insurance is for the agricultural or rural individuals who get this insurance for the cattle such as cow, bull, sheep and many other against their losses in future. • It helps them to minimize their loss due to the loss of their productive cattle. Deepesh Mahajan
  • 218. Accidental Insurance • Accident insurance is another most popular and demanding insurance in market. • Under this insurance plan, insurer guarantees to bear all the expenses occurred on medical and pathological of the insured person due to accident. Deepesh Mahajan
  • 219. Group & Burglary insurance Lecture 15 Deepesh Mahajan
  • 220. Group Insurance • A group insurance is a product designed to provide life insurance to a group of people under a single master policy. • It can be taken by any group of people, big or small, that comes together for any reason, apart from that of specifically benefitting from an insurance scheme. Deepesh Mahajan
  • 221. Group Insurance • It extends to anyone irrespective of their age, gender, profession, social background and such factors. • Group insurance is not limited to only employer-employee groups, but is extended to other homogenous groups too. Deepesh Mahajan
  • 222. Functions • Gratuity. • Superannuation. • Term. • Savings. • Credit Protection. • Low cost impact. Deepesh Mahajan
  • 223. Benefits • Default insurance cover. • Employer benefit. • Ease of premium payment. • Employee welfare. • Experienced fund management. • Tool of social welfare. • Tax benefit to employer. Deepesh Mahajan
  • 224. Burglary Insurance • Burglary Insurance policy covers property contained in business premises, stocks owned, or for which insured is responsible or held in trust and/or commission. • It also covers cash, valuables, securities kept in a locked safe or cash box in locked steel cupboard on specific request. Deepesh Mahajan
  • 225. Benefits • Policy provides protection against: • Loss of or damage to insured property due to burglary and housebreaking. • Loss or damage due to theft following upon an actual, forcible and violent entry to or exit from the insured premises. • Damage to the premises themselves by burglars and such incidents. Deepesh Mahajan
  • 226. Coverage of Policy • In Burglary Policy, the Sum Insured should be fixed on current market prices for stocks. • For other items such as furniture, fixture, equipments etc., it can be fixed either on Market Value or on Reinstatement Value basis. • Floater options are also available for variation in the value of assets due to the business or economic cycles. Deepesh Mahajan
  • 227. Features • Useful for individuals as movable items are included. • For goods held in trust unless specifically insured are not covered. • Due to shop lifting, acts involving individual or his family members / employees not included. • Loss caused by using a key or duplicate key, and on additional premium unless it is obtained by violence or threat not covered. Deepesh Mahajan
  • 228. Banking Risk and Recent Development Lecture 20 Deepesh Mahajan
  • 229. The Technology Revolution • The impact of technology on the real & financial world around the central banks  E-governance .  Choice of Channels , Confidence and Convenience to the end-user.  Efficiency .  Facilitating growth of products and services. Deepesh Mahajan
  • 230. Impact of Technology Wide Branch Network Global Operations Complex Credit Calculations Innovative Risk Management Banking and Technology Mass Transaction & Items Processing
  • 231. Technology & Central Banks Technology Has Affected every Core Central Banking Function The potential Technology Offers to improve Internal processes Deepesh Mahajan
  • 232. Core Central Banking FunctionsBanking Supervision Financial & Monetary Stability CurrencyManagement Deepesh Mahajan
  • 233. Technology & Central Banks • The widespread adoption of technology by the banking industry. • The impact of technology on every single core central banking function. • Supervision and Regulation. • Currency Management. • Monetary & Financial Stability. • The potential technology offers to central banks for rendering more effective its internal processes and functions. Deepesh Mahajan
  • 234. Technology and Banking • Harmonization of mass transaction & items processing – Pervasive branch network. – Global Operations. – Complex credit calculations. – Innovative Risk Management. Deepesh Mahajan
  • 235. RBI Initiatives •Offsite Supervision & Monitoring (OSMOS) •COSMOS (Non banking Financial Companies / Development Financial Institutions) • UBD Soft ( Urban Bank Dept.) •Credit Information Bureau (CIBIL) Deepesh Mahajan
  • 236. • Currency Management is a formidable task in India given. • The Clean Note Policy (1999). • ECS System. • RTGS. • NEFT. • Central Depositary System. Deepesh Mahajan
  • 237. Challenges of Regulation • Technology has; –opened up new markets, products, services, delivery channels. –opened up a market for “risks” derivatives. –thrown up the challenge of financing tech firms & IT innovation and not without implications for the stability of banks and of the economy. Deepesh Mahajan
  • 238. Contd…. • Technology has also; –provided regulators with the wherewithal to meet the challenge. –been the cornerstone of all recent financial sector reforms. –enabled the emergence of non-intrusive, focused supervision with a view to prevent frauds and disturbances to financial stability. Deepesh Mahajan
  • 239. Monetary Policy Challenge • The spread of IT has… –redefined the toolkit of economic indicators used in implementing monetary policy. –Rendered more complex, the task of compiling statistical information. –rendered difficult the task of capturing the impact of IT on price levels. –raised issues in respect of the possible proliferation of digital money. Deepesh Mahajan
  • 240. Monetary Policy Challenge –Faster payment and settlement mechanism. –Development of Government Security market. –Elimination of risk in financial system. Deepesh Mahajan
  • 241. Monetary Policy Opportunity • The proliferation of IT has also set the stage for improving and managing risks in payment systems –Electronic Trading Systems. –RTGS. –Secured Netting Systems. –Continuous Linked Settlement. Deepesh Mahajan
  • 242. IT and Payment and Settlement DematerializationOf Securities DeliveryVersusPayments PaymentVersusPayment ContinuousLinked Settlement ElectronicDealingPlatforms RealTimeGrossSettlement CentralCounterparty SecuredNettingSystems
  • 243. RBI Initiatives • The IDRBT – Network Externalities • The Indian Financial Network (INFINET) – Messaging Solutions • The Structured Financial Messaging System (SFMS) – Security • Public Key Infrastructure Deepesh Mahajan
  • 244. Technology Vision of the RBI Centralised Database Management System EnterpriseEnterprise Knowledge Management System Integrated Accounting System Integrated Government Accounting System Currency Operations System Desk Top Decision Making Capability Desk Top Analytical Capability Desk Top Transactional Capability Securities Settlement System Integrated Establishment System Offsite Supervisory Systems Integrated Forex Management System Human Resource Information System Deepesh Mahajan
  • 245. Credit, Liquidity, Market Operations, Interest Rate, Solvency Lecture 21 Deepesh Mahajan
  • 246. Credit • Credit has to do with the amount of funds that an individual or a business may be able to borrow from one or more lending institutions. • In effect, it is a measure of how much in the way of cash loans may be issued, based on the credit history and the assets of the company or person. • It is useful in making financial decisions. Deepesh Mahajan
  • 247. Liquidity • Liquidity is an organization’s ability to meet its short-term obligations. • In business, economics or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value. • Money or cash are the best form of liquidity. Deepesh Mahajan
  • 248. Open Market Operations • OMOs are the market operations conducted by the Reserve Bank of India for; • Sale and purchase of securities. • Controlling liquidity. • As a strategic move. • For raising funds. • For controlling inflation. Deepesh Mahajan
  • 249. Interest Rates • It is the rate which is usually charged for borrowings. • Interest-rate targets are a vital tool of monetary policy and are taken into account when dealing with variables like; • investment, • inflation, and • unemployment. Deepesh Mahajan
  • 250. Interest Rates • The central banks of countries generally tend to reduce interest rates when they wish to increase investment and consumption in the country's economy. Deepesh Mahajan
  • 251. Factors influencing • Liquidity preference. • Inflation concern. • Alternative investments. • Taxation. • Short term gains. • Seasonal variations. • Festive seasons. • Investment opportunity. • Foreign investments. Deepesh Mahajan
  • 252. Solvency • Solvency is the ability of an organization to meet its long-term financial obligations. • Solvency is essential to staying in business, but a company also needs liquidity to thrive. • Business risk directly affects solvency. • Cash rich business usually have high degree of solvency. Deepesh Mahajan
  • 253. Business Risk • Credit Risk • Market Risk • Operational Risk Deepesh Mahajan
  • 254. Universal Banking Lecture 22 Deepesh Mahajan
  • 255. Types
  • 256. Universal Banking • A 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. Deepesh Mahajan
  • 257. Definition • A system of banking where banks are allowed to provide a variety of services to their customers. • In universal banking, banks are not limited to just loans, checking and savings accounts, and other similar activities, but are allowed to offer investment services as well. • It is a concept of Banking Supermarket. Deepesh Mahajan
  • 258. Services offered • Private Banking • Merchant Banking Products and Services • Investment Banking • Traditional Banking • Economies of Scale. • Profitable Diversions. • Resource Utilization. Deepesh Mahajan
  • 259. Benefits • Investors' Trust. • Economics of Scale. • Resource Utilization. • Profitable Diversification. • Easy Marketing. • One-stop Shopping. • Participation in Investments • Savings and Loans Deepesh Mahajan
  • 260. Benefits • Development of Private Sector • Cutting the Costs Deepesh Mahajan
  • 261. Limitations • Different Rules and Regulations. • Effect of failure on Banking System. • Monopoly. • Conflict of Interest. • No Expertise in Long term lending. • NPA Problem Remained Intact. Deepesh Mahajan
  • 262. E - Banking Lecture 23 Deepesh Mahajan
  • 263. E- Banking • E-banking refers to electronic banking. • It is like e-business in banking industry. E- banking is also called as "Virtual Banking" or "Online Banking". • E-banking is a result of the growing expectations of bank's customers. Deepesh Mahajan
  • 264. E-banking Services • Automated Teller Machines, • Credit Cards, • Debit Cards, • Smart Cards, • Electronic Funds Transfer (EFT) System, • Cheques Truncation Payment System, • Mobile Banking, • Internet Banking, • Telephone Banking, etc. Deepesh Mahajan
  • 265. Advantages • The operating cost per unit services is lower for the banks. • It offers convenience to customers as they are not required to go to the bank's premises. • There is very low incidence of errors. • The customer can obtain funds at any time from ATM machines. Deepesh Mahajan
  • 266. Advantages • The credit cards and debit cards enables the Customers to obtain discounts from retail outlets. • The customer can easily transfer the funds from one place to another place electronically. Deepesh Mahajan
  • 267. Challenges • Managerial challenges. • Business challenges. • Macroeconomic challenges. • Demographic challenges. Deepesh Mahajan
  • 268. Mobile Banking • Mobile banking is the performing of finance related functions on a mobile device like a Smartphone or Tablet. • With the use of a mobile device, the user can perform mobile banking via call, text, website, or application support banking provided by the banks. Deepesh Mahajan
  • 269. • Mobile banking gives your customers the privilege of managing their finances anytime they need to no matter their location. Deepesh Mahajan
  • 270. Features • Portable device or small device is required. • Least power consumption. • Instant utility. • Perfect mobility. • Cost efficient. • 24 x 7 availability. • Easy to operate. • Number of security layers. Deepesh Mahajan
  • 271. Challenges • Literacy issues. • Network security. • Device security. • Connectivity or network issues. • Requirement of smart phone. • Server side issues. • Operating system issues. Deepesh Mahajan
  • 272. ALM Asset Liability Management Lecture 24 Deepesh Mahajan
  • 273. Bank Balance Sheet Liabilities Assets 1. Capital 2. Reserve & Surplus 3. Deposits 4. Borrowings 5. Other Liabilities 1. Cash & Balances with RBI 2. Bal. With Banks & Money at Call at Short Notices 3. Investments 4. Advances 5. Fixed Assets 6. Other Assets Deepesh Mahajan
  • 274. Banks P/L Account A bank’s profit & Loss Account has the following components: I.Income: This includes Interest Income and Other Income. II. Expenses: This includes Interest Expended, Operating Expenses and Provisions & contingencies. Deepesh Mahajan
  • 275. Evolution • In the 1940s and the 1950s, there was an abundance of funds in banks in the form of demand and savings deposits. Hence, the focus then was mainly on asset management. • But as the availability of low cost funds started to decline, liability management became the focus of bank management efforts. Deepesh Mahajan
  • 276. • In the 1980s, volatility of interest rates in USA and Europe caused the focus to broaden to include the issue of interest rate risk. • ALM began to extend beyond the bank treasury to cover the loan and deposit functions • Banks started to concentrate more on the management of both sides of the balance sheet. Deepesh Mahajan
  • 277. Reasons for ALM • The process by which an institution manages its balance sheet in order to allow for alternative interest rate and liquidity scenarios • Banks and other financial institutions provide services which expose them to various kinds of risks like credit risk, interest risk, and liquidity risk Deepesh Mahajan
  • 278. • Asset-liability management models enable institutions to measure and monitor risk, and provide suitable strategies for their management. Deepesh Mahajan
  • 279. • An effective Asset Liability Management Technique aims to manage the volume, mix, maturity, rate sensitivity, quality and liquidity of assets and liabilities as a whole so as to attain a predetermined acceptable risk/reward ratio. Deepesh Mahajan
  • 280. • It is aimed to stabilize short-term profits, long-term earnings and long-term substance of the bank. The parameters for stabilizing ALM system are: 1. Net Interest Income (NII) 2. Net Interest Margin (NIM) 3. Economic Equity Ratio Deepesh Mahajan
  • 281. Tools used by Banks for ALM Deepesh Mahajan
  • 282. ALM Information Systems • ABC Approach : – analysing the behaviour of asset and liability products in the top branches as they account for significant business – then making rational assumptions about the way in which assets and liabilities would behave in other branches – The data and assumptions can then be refined over time as the bank management gain experience Deepesh Mahajan
  • 283. • The spread of computerisation will also help banks in accessing data. Deepesh Mahajan
  • 284. ALM Organization • The board should have overall responsibilities and should set the limit for liquidity, interest rate, foreign exchange and equity price risk • The Asset - Liability Committee (ALCO) – ALCO, consisting of the bank's senior management (including CEO) should be responsible for ensuring adherence to the limits set by the Board. Deepesh Mahajan
  • 285. ALM Organization – Is responsible for balance sheet planning from risk - return perspective including the strategic management of interest rate and liquidity risks – The role of ALCO includes product pricing for both deposits and advances, desired maturity profile of the incremental assets and liabilities, Deepesh Mahajan
  • 286. ALM Organization – It will have to develop a view on future direction of interest rate movements and decide on a funding mix between fixed vs. floating rate funds, wholesale vs. retail deposits, money market vs. capital market funding, domestic vs. foreign currency funding. – It should review the results of and progress in implementation of the decisions made in the previous meetings. Deepesh Mahajan
  • 287. ALM Process Lecture 25 Deepesh Mahajan
  • 288. ALM Process Deepesh Mahajan
  • 289. Categories of Risk • Risk is the chance or probability of loss or damage Deepesh Mahajan
  • 290. ALM Risk Management Deepesh Mahajan
  • 291. Liquidity Risk • Liquidity risk arises from funding of long term assets by short term liabilities, thus making the liabilities subject to refinancing. • Bank’s liquidity management is the process of generating funds to meet contractual or relationship obligations at reasonable prices at all times. • Liquidity Management is the ability of bank to ensure that its liabilities are met as they become due. Deepesh Mahajan
  • 292. Liquidity Risk Management • Liquidity positions of bank should be measured on an ongoing basis. • A standard tool for measuring and managing net funding requirements, is the use of maturity ladder and calculation of cumulative surplus or deficit of funds as selected maturity dates is adopted. Deepesh Mahajan
  • 293. Deepesh Mahajan
  • 294. Statement -Structural Liquidity • All Assets & Liabilities to be reported as per their maturity profile into 8 maturity Buckets: 1. 1 to 14 days. 2. 15 to 28 days. 3. 29 days and up to 3 months. 4. Over 3 months and up to 6 months. Deepesh Mahajan
  • 295. Structural Liquidity 5. Over 6 months and up to 1 year. 6. Over 1 year and up to 3 years. 7. Over 3 years and up to 5 years. 8. Over 5 years. Deepesh Mahajan
  • 296. Statement -Structural Liquidity • Places all cash inflows and outflows in the maturity ladder as per residual maturity. • Maturing Liability: cash outflow. • Maturing Assets : Cash Inflow. • Classified in to 8 time buckets. • Mismatches in the first two buckets not to exceed 20% of outflows. • Shows the structure as of a particular date. • Banks can fix higher tolerance level for other maturity buckets. Deepesh Mahajan
  • 297. Example 1-14Days 15-28 Days 30 Days- 3 Month 3 Mths - 6 Mths 6 Mths - 1Year 1Year - 3 Years 3 Years - 5 Years Over 5 Years Total Capital 200 200 Liab-fixed Int 300 200 200 600 600 300 200 200 2600 Liab-floating Int 350 400 350 450 500 450 450 450 3400 Others 50 50 0 200 300 Total outflow 700 650 550 1050 1100 750 650 1050 6500 Investments 200 150 250 250 300 100 350 900 2500 Loans-fixed Int 50 50 0 100 150 50 100 100 600 Loans - floating 200 150 200 150 150 150 50 50 1100 Loans BPLR Linked 100 150 200 500 350 500 100 100 2000 Others 50 50 0 0 0 0 0 200 300 Total Inflow 600 550 650 1000 950 800 600 1350 6500 Gap -100 -100 100 -50 -150 50 -50 300 0 Cumulative Gap -100 -200 -100 -150 -300 -250 -300 0 0 Gap % to Total Outflow-14.29 -15.38 18.18 -4.76 -13.64 6.67 -7.69 28.57
  • 298. Addressing the mismatches • Mismatches can be positive or negative. • Positive Mismatch: M.A.>M.L. and Negative Mismatch M.L.>M.A. • In case of +ve mismatch, excess liquidity can be deployed in money market instruments, creating new assets & investment swaps etc. • For –ve mismatch, it can be financed from market borrowings (Call/Term), Bills rediscounting, Repos & deployment of foreign currency converted into rupee. Deepesh Mahajan
  • 299. Currency Risk • The increased capital flows from different nations following deregulation have contributed to increase in the volume of transactions. • Dealing in different currencies brings opportunities as well as risk. • To prevent this banks have been setting up overnight limits and undertaking active day time trading. Deepesh Mahajan
  • 300. • Value at Risk approach to be used to measure the risk associated with forward exposures. Value at Risk estimates probability of portfolio losses based on the statistical analysis of historical price trends and volatilities. Deepesh Mahajan
  • 301. Interest Rate Risk • Interest Rate risk is the exposure of a bank’s financial conditions to adverse movements of interest rates. • Though this is normal part of banking business, excessive interest rate risk can pose a significant threat to a bank’s earnings and capital base. • Changes in interest rates also affect the underlying value of the bank’s assets, liabilities and off-balance-sheet item. Deepesh Mahajan
  • 302. • Interest rate risk refers to volatility in Net Interest Income (NII) or variations in Net Interest Margin(NIM). • NIM = (Interest income – Interest expense) / Earning assets. Deepesh Mahajan
  • 303. Sources of Interest Rate Risk Deepesh Mahajan
  • 304. • Re-pricing Risk: The assets and liabilities could re-price at different dates and might be of different time period. For example, a loan on the asset side could re-price at three-monthly intervals whereas the deposit could be at a fixed interest rate or a variable rate, but re- pricing half-yearly. • Basis Risk: The assets could be based on LIBOR rates whereas the liabilities could be based on Treasury rates or a Swap market rate. Deepesh Mahajan
  • 305. • Yield Curve Risk: The changes are not always parallel but it could be a twist around a particular tenor and thereby affecting different maturities differently. • Option Risk: Exercise of options impacts the financial institutions by giving rise to premature release of funds that have to be deployed in unfavourable market conditions and loss of profit on account of foreclosure of loans that earned a good spread. Deepesh Mahajan
  • 306. Risk Measurement Techniques • Various techniques for measuring exposure of banks to interest rate risks – Maturity Gap Analysis. – Duration. – Simulation. – Value at Risk. Deepesh Mahajan
  • 307. Maturity gap method (IRS) THREE OPTIONS: • A) Rate Sensitive Assets>Rate Sensitive Liabilities= Positive Gap • B) Rate Sensitive Assets<Rate Sensitive Liabilities = Negative Gap • C) Rate Sensitive Assets=Rate Sensitive Liabilities = Zero Gap Deepesh Mahajan
  • 308. Gap Analysis • Simple maturity/re-pricing Schedules can be used to generate simple indicators of interest rate risk sensitivity of both earnings and economic value to changing interest rates - If a negative gap occurs (RSA<RSL) in given time band, an increase in market interest rates could cause a decline in NII - conversely, a positive gap (RSA>RSL) in a given time band, an decrease in market interest rates could cause a decline in NII Deepesh Mahajan
  • 309. • The basic weakness with this model is that this method takes into account only the book value of assets and liabilities and hence ignores their market value. Deepesh Mahajan
  • 310. Duration Analysis • It basically refers to the average life of the asset or the liability. • It is the weighted average time to maturity of all the preset values of cash flows. • The larger the value of the duration, the more sensitive is the price of that asset or liability to changes in interest rates. Deepesh Mahajan
  • 311. • As per the above equation, the bank will be immunized from interest rate risk if the duration gap between assets and the liabilities is zero. Deepesh Mahajan
  • 312. Simulation • Basically simulation models utilize computer power to provide what if scenarios, for example: What if: – The absolute level of interest rates shift. – Marketing plans are under-or-over achieved. – Margins achieved in the past are not sustained/improved. Deepesh Mahajan
  • 313. – Bad debt and prepayment levels change in different interest rate scenarios. – There are changes in the funding mix e.g.: an increasing reliance on short-term funds for balance sheet growth. • This dynamic capability adds value to this method and improves the quality of information available to the management. Deepesh Mahajan
  • 314. Value at Risk (VAR) • Refers to the maximum expected loss that a bank can suffer in market value or income: – Over a given time horizon, – Under normal market conditions, – At a given level or certainty • It enables the calculation of market risk of a portfolio for which no historical data exists. VAR serves as Information Reporting to stakeholders. Deepesh Mahajan
  • 315. • It enables one to calculate the net worth of the organization at any particular point of time so that it is possible to focus on long- term risk implications of decisions that have already been taken or that are going to be taken. Deepesh Mahajan
  • 316. BASEL I Lecture 26 Deepesh Mahajan
  • 317. About the BIS Established on 17 May 1930. The BIS is the world’s oldest international financial organization. Head office is in Basel, Switzerland and representative offices in Hong Kong SAR and in Mexico City. The BIS currently employs around 550 staff from 50 countries. Deepesh Mahajan
  • 318. BCBS • Basel committee on Banking Supervision: • A set of agreements. • Regulations and recommendations on Credit risk , market risk and operational risk. • Purpose – to have enough capital on account to meet obligations and absorb unexpected losses. Deepesh Mahajan
  • 319. BASEL - I • In 1988, the Basel Committee(BCBS) in Basel, Switzerland, published a set of minimal capital requirements for banks, known as 1988 Basel Accord or Basel I. • Primary focus on credit risk • Assets of banks were classified and grouped in five categories to credit risk weights of zero ‘0’, 10, 20, 50 and up to 100%. Deepesh Mahajan
  • 320. • Assets like cash and coins usually have zero risk weight, while unsecured loans might have a risk weight of 100%. Deepesh Mahajan
  • 321. Capital Adequacy Ratio (CAR) • Expressed as a percentage of a bank's risk weighted credit exposures. • Also known as "Capital to Risk Weighted Assets Ratio (CRAR). • CAR = Capital / Risk. • Ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. Deepesh Mahajan
  • 322. Capital Base
  • 323. Purpose of Basel I • Strengthen the stability of international banking system. • Set up a fair and a consistent international banking system in order to decrease competitive inequality among international banks. • Achievement : To set up a minimum risk- based capital adequacy applying to all banks and governments in the world. Deepesh Mahajan
  • 324. Basel & Indian Banking System • Basel Accord I was established in 1988 and was implemented by 1992 in India. • over 3 years – banks with branches abroad were required to comply fully by end March 1994 and the other banks were required to comply by end March 1996. Deepesh Mahajan
  • 325. Basel & Indian Banking System • RBI norms on capital adequacy at 9% are more stringent than Basel Committee stipulation of 8%. • Commercial Banks , Cooperative Banks and Regional rural banks s have different RBI guidelines. Deepesh Mahajan
  • 326. Pitfalls of Basel I Limited differentiation of credit risk (0%, 20%, 50% and 100%) Static measure of default risk The assumption that a minimum 8% capital ratio is sufficient to protect banks from failure does not take into account the changing nature of default risk. No recognition of term-structure of credit risk The capital charges are set at the same level regardless of the maturity of a credit exposure. Deepesh Mahajan
  • 327. Simplified calculation of potential future counterparty risk The current capital requirements ignore the different level of risks associated with different currencies and macroeconomic risk. In other words, it assumes a common market to all actors, which is not true in reality. Deepesh Mahajan
  • 328. • Lack of recognition of portfolio diversification effects In reality, the sum of individual risk exposures is not the same as the risk reduction through portfolio diversification. Therefore, summing all risks might provide incorrect judgment of risk. Deepesh Mahajan
  • 329. Conclusion • Basel 1- Milestone in Finance and Banking History. • It launched the trend toward increasing risk modeling research. • However, its over-simplified calculations, and classifications have simultaneously called for its disappearance, paving the way for the Basel II Capital Accord. • It led to further agreements as the symbol of the continuous refinement of risk and capital. Deepesh Mahajan
  • 330. BASEL II Lecture 27 Deepesh Mahajan
  • 331. Basel II Norms • Basel II was intended : –to create an international standard for banking regulators. –to maintain sufficient consistency of regulations. –protect the international financial system. • Addition of operational risk in the existing norms. • Defined new calculations of credit risk • Ensuring that capital allocation is more risk sensitive. Deepesh Mahajan
  • 332. First Pillar • The first pillar sets out minimum capital requirement. The new framework maintains minimum capital requirement of 8% of risk assets. Deepesh Mahajan
  • 333. Second Pillar • Supervisory review process has been introduced to ensure not only those banks have adequate capital to support all the risks, but also to encourage them to develop and use better risk management techniques in monitoring and managing their risks. Deepesh Mahajan
  • 334. Third Pillar • Market discipline imposes strong incentives to banks to conduct their business in a safe, sound and effective manner. • It is proposed to be effected through a series of disclosure requirements on capital, risk exposure etc. so that market participants can assess a bank’s capital adequacy. • This is not introduced in India. Deepesh Mahajan
  • 335. Risk Approaches
  • 336. Market Risk Approach
  • 337. Operational Risk Approach
  • 338. Objectives of BASEL II 1.Better Evaluation of Risks. 2.Better Allocation of resources. 3.Supervisors should review each bank’s own risk assessment and capital strategies. 4.Improved Risk management. 5.To strengthen international banking systems. Deepesh Mahajan
  • 339. BASEL II FRAMEWORK Deepesh Mahajan
  • 340. Failure of BASEL II • Banks defined their own risk metrics and derivative investments. • Depends on good underlying data. • Most of the institutional cogs in the credit crisis aren’t covered. • No independent standard. • Wrong assumptions in case of mortgage- related risk calculations. • Inadequate level of capital required by the new discipline. Deepesh Mahajan
  • 341. BASEL Issues & Challenges Lecture 28 Deepesh Mahajan
  • 342. Issues & Challanges • Capital Requirement. • Profitability. • Risk Management Architecture. • Rating Requirement. • Choice of Alternative Approaches. • Absence of historical requirement. • Incentive to Remain Unrated. • Supervisory Framework. Deepesh Mahajan
  • 343. Issues & Challenges • Corporate Governance Issues. • National Discretion. • Disclosure Regime. • Disadvantageous for smaller banks. • Discriminatory against Developing Countries. • External and Internal Auditors. Deepesh Mahajan