Investment policy of banks b.v.raghunandan

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Investment policy of banks b.v.raghunandan

  1. 1. Chapter 3Investment Policy of Banks
  2. 2. Risk of Bankers banker’s dependence on public deposits Instability and risk compared to a moneylender U.K.Banks are organised as Partnership firms- unlimited liability of partners provides a bigger cushion than corporate forms Low capital base of banks all over the world
  3. 3. Criteria of Investment Policy Liquidity Profitability StatutoryCompliance Capital Adequacy Social Banking Credit Rating
  4. 4. Liquidity Vs Profitability “The secret of successful banking is to distribute resources between various forms of assets in such a way as to get a sound balance between liquidity and profitability” - Geoffrey Crowther
  5. 5. Investment Portfolio Call Money Market Money at Short Notice Collateralised Borrowing & Lending Obligation: introduced in 2003 by CCIL, it’s Secured and wide- based -1day to 364 days Liquidity Adjustment Facility: introduced in 2000, comprises Repo and Reverse Repo-1 day to 14 days Other Money Market & Capital Market Instruments
  6. 6. Loan Portfolio of a Banker Prioritysector lending-40 % of lendable funds Consumer loans Business loans SME loans Housing loans Industrial loans
  7. 7. Portfolio Management: Asset-LiabilityManagement (ALM) LiquidityManagement Market Risk management Credit Risk Management Interest Rate Risk Management Exchange Risk Management Operational Risk Management
  8. 8. Principles of Investment/LendingPolicy Diversification  Stability Safety of Investment  Solvency Shiftability  Debtor Evaluation Return on the Portfolio  Growth Productivity  Sharing Credit Information
  9. 9. THANK YOU
  10. 10. THANK YOU

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