Professional Knowledge Quiz

Ques. 1 Database management systems are used to

A. eliminate data redundancy
B. establish relationships among records in different files
C. manage file access
D. none of above


Ques. 2 Ascending order of data hierarchy is
A. bit->byte->record->field->file->database
B. bit->byte->field->record->file->database
C. byte->bit->field->record->file->database
D. byte->bit->field->file->record->database

Ques. 3 Which among following is not a router function
A. Packet Switching
B. Packet Filtering
C. Internetwork communication
D. Forwarding broadcasts by default

Ques. 4 Framing is done on which layer
A. Datalink Layer
B. Physical Layer
C. Transport Layer
D. Application Layer

Ques. 5 Segments are made on which layer
A. Session Layer
B. Transport Layer
C. Application Layer
D. Network Layer

Ques. 6 Which layer deals with Flow control?
A. Session Layer
B. Network Layer
C. Transport Layer
D. Application Layer

Ques. 7 Which layer deals with TCP and UDP?
A. Transport Layer
B. Physical Layer
C. Network Layer
D. None of above

Ques. 8 Which of the following performs modulation and demodulation?
A. Modem
B. Fiber optic
C. satellite
D. coaxial cable

Ques. 9 X.25 standard specifies
A. technique for start-stop data
B. technique for dial access
C. DTE/DCE interface
D. data bit rate

Ques. 10 IPV6 is in which format?
A. Hexadecimal format
B. Octal format
C. Alphanumeric format
D. Numeric format




ANSWERS:
1. A
2. B
3. D
4. A
5. B
6. C
7. A
8. A
9. C
10. A

00:40 - By Unknown 0

BANKING AWARENESS: Credit Cards

Dear Reader,
In our previous post, we provided to you the brief about ATM. Today, we are presenting to you the brief about Credit Cards.


CREDIT CARDS: A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating.

1. Alternative to cash - Credit card is a better alternative to cash. It removes the worry of carrying various currency denominations to pay at the trade counters. It is quite easy and way fast to use a credit card rather than waiting for completion of cash transactions. As an alternative, credit card helps a cardholder to travel anywhere in the world without a need to carry an ample amount of cash. It also reduces the possible risk of money theft and gives its user a complete peace of mind.

2. Credit limit - The credit cardholder enjoys the facility of a credit limit set on his card. This limit of credit is determined by the credit card issuing entity (bank or NBFC) only after analyzing the credit worthiness of the cardholder.
The credit limit is of two types, viz.,
a. Normal credit limit is usual credit given by the bank or NBFC at the time of issuing a credit card.
b. Revolving credit limit varies with the financial exposure of the credit cardholder.

3. Aids payment in domestic and foreign currency - Credit card aids its cardholder to make payments in any currency of choice. In other words, it gives its holder a unique facility to make payments either in domestic (native) currency or if necessary, also in foreign (non-native) currency, that too as and when required.
Credit card reduces the cumbersome process of currency conversion. That is, it removes the financial complexities often encountered in converting a domestic currency into a foreign currency. It is because of this feature, a credit cardholder can possibly make payments to merchants present in any corner of the world.

4. Record keeping of all transactions - Credit card issuing entities like banks or NBFCs keeps a complete record of all transactions made by their credit cardholders. Such a record helps these entities to raise appropriate billing amounts payable by their cardholders, either on a monthly or some periodic basis.

5. Regular charges - Regular charges are basic routine charges charged by the credit card issuing entity on the usage of credit card by its cardholder. These charges are nominal in nature.
The regular charges are primarily classified into two types, viz.
Annual charges are collected on per annum or yearly basis.
Additional charges are collected for other supplementary services provided by the credit card issuing entity. Such services include, add-on-card (an additional credit card), issue of a new credit card, etc.

6. Grace period - The grace period is referred to those minimum numbers of additional days within which a credit cardholder has to pay his credit card bill without any incurring interest or financial charges.

7. Higher fees on cash withdrawals - Credit-card issuer makes charges on cash withdrawals made through credit card at the ATM outlets and other desks. Generally, cash withdrawal fees are quite higher than fees charged by the bank or NBFC for the other regular credit transactions. On cash withdrawn done through a credit card, interest is charged from the same day. That is, interest is charged since the day on which cash is withdrawn. Usually, no grace period is provided for cash transactions.

8. Additional charges for delay in payment - The credit card payment is supposed to be made within a due date as mentioned on the bill of a credit card. If payment is not paid on time, then a credit-card issuer charges some additional costs, which are resulted due to delay in payment. These charges are charged to compensate (recover) the interest cost, administration cost and any other related costs bared by the credit card issuing entity.

9. Service tax - Service tax is included in the total amount charged to the credit cardholder. This mandatory service tax imposed by the government also increases the final end cost bared by a credit cardholder. Many credit card providers (issuing entities) have policies of reversing the service tax charged on the purchase of gas, fuel and other similar goods.

10. Bonus points - The competition among the credit card providers is unbending (adamant). Offering various incentives is usually a trendy way to improve the sale of the products in the ordinary course of business.

11. Gifts and other offers - At a later stage, accumulated bonus points are redeemed either by converting them into gifts, cash back offers, or any other similar compelling offers.

ADVANTAGES: 

1. Purchase Power and Ease of Purchase - Credit cards can make it easier to buy things. If you don't like to carry large amounts of cash with you or if a company doesn't accept cash purchases (for example most airlines, hotels, and car rental agencies), putting purchases on a credit card can make buying things easier.

2. Protection of Purchases - Credit cards may also offer you additional protection if something you have bought is lost, damaged, or stolen. Both your credit card statement (and the credit card company) can vouch for the fact that you have made a purchase if the original receipt is lost or stolen. In addition, some credit card companies offer insurance on large purchases.

3. Building a Credit Line - Having a good credit history is often important, not only when applying for credit cards, but also when applying for things such as loans, rental applications, or even some jobs. Having a credit card and using it wisely (making payments on time and in full each month) will help you build a good credit history.

4. Emergencies - Credit cards can also be useful in times of emergency. While you should avoid spending outside your budget, sometimes emergencies may lead to a large purchase.

5. Credit Card Benefits - In addition to the benefits listed above, some credit cards offer additional benefits, such as discounts from particular stores or companies, bonuses such as free airline miles or travel discounts, and special insurances (like travel or life insurance.) While most of these benefits are meant to encourage you to charge more money on your credit card, the benefits are real and can be helpful as long as you remember your spending limits.

DISADVANTAGES

1. Blowing Your Budget - The biggest disadvantage of credit cards is that they encourage people to spend money that they don't have. Most credit cards do not require you to pay off your balance each month, so even if you only have Rs.100, you may be able to spend up to Rs.500 or Rs.1,000 on your credit card. While this may seem like 'free money' at the time, you will have to pay it off -- and the longer you wait, the more money you will owe since credit card companies charge you interest each month on the money you have borrowed.

2. High Interest Rates and Increased Debt - Credit card companies charge you an enormous amount of interest on each balance that you don't pay off at the end of each month. This is how they make their money and this is how most people get into debt (and even bankruptcy.)

3. Credit Card Fraud - Like cash, sometimes credit cards can be stolen. They may be physically stolen (if you lose your wallet) or someone may steal your credit card number (from a receipt, over the phone, or from a Web site) and use your card.

CONCLUSION:
Credit cards can make life easier and be a great tool, but if they aren't used wisely they can become a huge financial burden. If you do decide to use credit cards, remember these simple rules:
1. Keep track of all your purchases.
2. Don't spend outside your budget.
3. Pay off your balance on all of your credit cards at the end of each month.
4. Don't loan your credit or give out your credit card information to anyone but reliable companies.
5. Physical protection of the credit card as well as in the isolation (confidentiality) of the credit card number, card value number (CVV), personal identification number (PIN) and other sensitive credentials of the credit cardholder.

05:24 - By Unknown 0

Banking Awareness: CASA

In continuation to our Banking Awareness series, today we are providing you a brief about CASA.

Casa Ratio: Casa is basically the current and savings account deposits. The CASA ratio shows how much deposit a bank has in the form of current and saving account deposits in the total deposit. 

If the CASA ratio is higher than it means that a higher portion of the deposits have come from current and savings deposit.

This means that the bank is getting money at low cost, since no interest is paid on the current accounts and the interest paid on savings account is usually low.

Current and Saving Accounts are demand deposits and therefore pay lower interest rates compared to term deposits where the rates are higher.

In India, interest rates paid on current and savings account deposits is administered by banking regulator - the Reserve Bank of India.

Why are banks keen on gained a higher share of CASA?

Interest rate paid on Casa is much lower compared to other deposits like term deposits or recurring deposits. While banks do not pay any interest on current account, interest paid on savings account deposit is 4%.

Banks therefore make maximum effort to increase the share of Casa on their books to reduce their overall cost of deposits. HDFC Bank has the highest share of Casa to total deposits at 52%, followed by the State Bank of India at 48% and ICICI Bank at 45%.

What does Casa mean for customers?

Recently interest paid on savings account deposits is 4%. Banks pay interest on savings deposits on a daily basis rather than paying on the minimum balance maintained by them in six months.

As a result, savings account customers earn better returns compared to what they earned a year ago.

Further, interest earned on savings account deposits does not attract TDS (tax deduction at source). Interest income above 10,000 a year attracts TDS of 10% in case of term deposits. However, there is no major benefit for current account deposits, which is mainly maintained by corporates and traders.

What are the disadvantages of high CASA?

These deposits can move out of banks' books anytime, leading to asset-liability mismatches. While in case of term deposits, banks are almost certain that the depositor may not withdraw money before the maturity of the deposit and may also renew the deposit on maturity.

Further, to finance long-term projects, banks need to have long-term liabilities on their books to avoid mismatches. Banks cannot rely on Casa deposits to fund long-term loans.

05:19 - By Unknown 0

Banking Awareness: NBFC

NON BANKING FINANCIAL COMPANIES (NBFC) : Non-bank financial companies (NBFCs) are financial institutions that provide banking services without meeting the legal definition of a bank, i.e. one that does not hold a banking license. These institutions typically are restricted from taking deposits from the public depending on the jurisdiction. Nonetheless, operations of these institutions are often still covered under a countries banking regulations.

NBFCs do offer all sorts of banking services, such as loans and credit facilities, retirement planning, money markets, underwriting, and merger activites. The number of non-banking financial companies has expanded greatly in the last several years as venture capital companies, retail and industrial companies have entered the lending business.

Examples of NBFC in India - Fusion Microfinance Pvt Ltd, Svatantra Micofin Pvt. Ltd., S. V. Creditcare Network Pvt. Ltd.
Saija Finance Pvt. Ltd, LIC, GIC, UTI,

Difference between banks & NBFCs:
NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
i. NBFC cannot accept demand deposits;
ii. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
iii. deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of bank.

Different types/categories of NBFCs registered with RBI:
 NBFCs are categorized
a) in terms of the type of liabilities into Deposit and Non-Deposit accepting NBFCs,
b) non deposit taking NBFCs by their size into systemically important and other non-deposit holding companies (NBFC-NDSI and NBFC-ND) and
c) by the kind of activity they conduct.

Within this broad categorization the different types of NBFCs are as follows:
1. Asset Finance Company (AFC) : An AFC is a company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines.

2. Investment Company (IC) : IC means any company which is a financial institution carrying on as its principal business the acquisition of securities,

3. Loan Company (LC) : LC means any company which is a financial institution carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own but does not include an Asset Finance Company.

4. Infrastructure Finance Company (IFC) : IFC is a non-banking finance company
a) which deploys at least 75 per cent of its total assets in infrastructure loans,
b) has a minimum Net Owned Funds of Rs. 300 crore,
c) has a minimum credit rating of ‘A ‘or equivalent d) and a CRAR of 15%.

5. Systemically Important Core Investment Company (CIC-ND-SI) : CIC-ND-SI is an NBFC carrying on the business of acquisition of shares and securities.

6. Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC) : IDF-NBFC is a company registered as NBFC to facilitate the flow of long term debt into infrastructure projects.

7. Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI): NBFC-MFI is a non-deposit taking NBFC having not less than 85% of its assets in the nature of qualifying assets.

8. Non-Banking Financial Company – Factors (NBFC-Factors): NBFC-Factor is a non-deposit taking NBFC engaged in the principal business of factoring. The financial assets in the factoring business should constitute at least 75 percent of its total assets and its income derived from factoring business should not be less than 75 percent of its gross income.

Salient Features of NBFCs:
Some of the important regulations relating to acceptance of deposits by NBFCs are as under:
1. NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.
2. NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 12.5 per cent per annum. The interest may be paid or compounded at rests not shorter than monthly rests.
3. NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.
4. NBFCs (except certain AFCs) should have minimum investment grade credit rating.
5. The deposits with NBFCs are not insured.
6. The repayment of deposits by NBFCs is not guaranteed by RBI.
7. Certain mandatory disclosures are to be made about the company in the Application Form issued by the company soliciting deposits.

Supervision and Inspection of NBFCS by RBI:
The RBI conducts on-site inspection and off-site surveillance of NBFCs. Off-site surveillance is undertaken by calling for periodical returns. These are generally fortnightly, monthly or annual returns.
The on-site inspection is mainly used to ensure that the interest of the depositors is well protected and these funds are not in danger of vanishing through losses or otherwise.

For this purpose, the RBI ensures whether asset classification is done properly, whether provisioning and reserve requirements are done as per requirements, whether books of accounts truly reflect the financial health of the company, whether loan assessment has been made properly etc., and the inspection is carried on once a year or two depending upon the public deposit level of NBFC.

The RBI conducts the inspection under the system known as the alphabets of CAMELS. It stands for
C = Capital Adequacy requirements
A = Asset quality, like standard etc., assets
M = Management, the level and expertise and appraisal capacity of management.
E = Earning capacity of NBFC
L = Liquidity, the level of liquidity and the components of liquidity are verified.
S = Systems and control exist in the NBFC, its effectiveness etc.

05:07 - By Unknown 0

BANKING AWAREESS: Different Types of Bank

 

Dear Readers,
We were getting huge number of queries about the "types of bank" by our readers. So, keeping in view our readers demand, we are presenting today the brief of "Different types of Banks". Hope the post proves to be fruitful for you all. Happy Reading :)


Banks can be classified into various types on the basis of their functions, ownership, domicile, etc. The following are the various types of banks:

1. Commercial Banks:
The banks, which perform all kinds of banking business and generally finance trade and commerce, are called commercial banks. Since their deposits are for a short period, these banks normally advance short-term loans to the businessmen and traders and avoid medium-term and long-term lending.

However, recently, the commercial banks have also extended their areas of operation to medium-term and long-term finance. Majority of the commercial banks are in the public sector. However, there are certain private sector banks operating as joint stock companies. Hence, the commercial banks are also called joint stock banks.

2. Industrial Banks:
Industrial banks, also known as investment banks, mainly meet the medium-term and long-term financial needs of the industries. Such long-term needs cannot be met by the commercial banks, which generally deal with short-term lending.

The main functions of the industrial banks are:
(a) They accept long-term deposits.
(b) They grant long-term loans to the industrialists to enable them to purchase land, construct factory building, purchase heavy machinery, etc.
(c) They help selling or even underwrite the debentures and shares of industrial firms,
(d) They can also provide information regarding the general economic position of the economy.

3. Agricultural Banks:
Agricultural credit needs are different from those of industry and trade. Industrial and commercial banks normally do not deal with agricultural finance. The agriculturists require:
(a) short-term credit to buy seeds, fertilizers and other inputs, and
(b) long-term credit to purchase land, to make permanent improvements on land, to purchase agricultural machinery and equipment, etc. In India, agricultural finance is generally provided by co-operative institutions. Agricultural co-operatives provide short-term loans and Land Development Banks provide the long-term credit to the agriculturists.

4. Exchange Banks:
Exchange banks deal in foreign exchange and specialise in financing foreign trade. They facilitate international payments through the sale, purchase of bills of exchange, and thus play an important role in promoting foreign trade.

5. Saving Banks:
The main purpose of saving banks is to promote saving habits among the general public and mobilise their small savings. In India, postal saving banks do this job. They open accounts and issue postal cash certificates.

6. Central Bank:
Central bank is the apex institution, which controls, regulates and supervises the monetary and credit system of the country. Important functions of the central bank are:
(a) It has the monopoly of note issue;
(b) It acts as the banker, agent and financial adviser to the state;
(c) It is the custodian of member banks reserves;
(d) It is the custodian of nation's reserves of international currency;
(e) It serves as the lender of the last resort;
(f) It functions as the bank of central clearance, settlement and transfer; and
(g) It acts as the controller of credit. Besides these functions, India's central bank, i.e., the Reserve Bank of India, also performs many developmental functions to promote economic development in the country.

7. Classification on the Basis of Ownership:
On the basis of ownership, banks can be classified into three categories:
(a) Public Sector Banks: These arc owned and controlled by the government. In India, the nationalized banks and the regional rural banks come under these categories,
(b) Private Sector Banks: These banks are owned by the private individuals or corporations and not by the government or co-operative societies,
(c) Cooperative Banks: Cooperative banks are operated on the cooperative lines. In India, coopera¬tive credit institutions are organised under the cooperative societies law and play an important role in meeting financial needs in the rural areas.

8. Classification on the Basis of Domicile:
On the basis of domicile, the banks are divided into two categories:
(a) Domestic Banks: These are registered and incorporated within the country,
(b) Foreign Banks: These are foreign in origin and have their head offices in the country of origin.

9. Scheduled and Non-Scheduled Banks:
In India, banks have been broadly classified into scheduled and non-scheduled banks. A Scheduled Bank is that which has been included in the Second Schedule of the Reserve Bank of India Act, 1934 and fulfills the two conditions:
(a) it has paid-up capital and reserves of at least Rs. 5 lakhs. It ensures the Reserve Bank that its operations are not detrimental to the interest of the depositors;
(b it is a corporation or a cooperative society and not a partnership or a single owner firm.

The banks which are not included in the Second Schedule of the Reserve Bank of India Act are non-scheduled banks.

05:03 - By Unknown 0

CAD declined to 0.9 percent of GDP in Quarter 3 of 2013-14

Current Account Deficit (CAD) declined to 0.9 percent of Gross Domestic Product (GDP) in Quarter 3 (October - December) of 2013-14. This was revealed by the Report on Developments in India’s Balance of Payments released by Reserve Bank of India (RBI) on 5 March 2014. Also, as per the report CAD reached to its lowest in the past eight years.

Other highlights of the Report:

•    Rising exports and moderation in gold imports have pulled down India's current account deficit (CAD) sharply to 4.2 billion dollar in Quarter 3 of 2013-14.

•    The export was increased due to the significant growth especially in the exports of engineering goods, readymade garments, iron ore, marine products and chemicals.

•    On the other hand, merchandise imports recorded a decline of 14.8 per cent at 112.9 billion dollar in Q3 of 2013-14.

•    Decline in imports was primarily led by a steep decline in gold imports. This was amounted to 3.1 billion dollar as compared to 17.8 billion dollar in Q3 of 2012-13.

•    The declined in CAD was happened due to government imposed curbs on gold imports and the Reserve Bank of India's subsidy for Non-Resident Indian's US dollar deposits.

•    CAD narrowed to 31.1 billion dollar or 2.3 per cent of GDP in April-December 2013 from 69.8 billion dollar or 5.2 percent of GDP in April-December of 2012.

•    The CAD reflects the difference between inflow and outflow of foreign currency. It stood at 31.9 billion dollar or 6.5 per cent of GDP in October-December quarter of 2012-13.

•    On a Balance of Payment (BoP) basis, merchandise exports increased by 7.5 per cent at 79.8 billion dollar) in Q3 of 2013-14. The quantum of export was 3.9 per cent in Q3 of 2012-13.

About Current Account Deficit (CAD):
A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports.

The current account also includes net income, such as interest and dividends, as well as transfers, such as foreign aid, though these components tend to make up a smaller percentage of the current account than exports and imports.

The current account is a calculation of a country’s foreign transactions, and along with the capital account is a component of a country’s balance of payment.

04:59 - By Unknown 0

Advantages and Disadvantages of Online Trading / Direct Access Trading

Friends, in our last post we have discussed about the introduction of Online Trading and a few details about the online trading in India. In this post we shall discuss the advantages and some disadvantages of online trading.

The benefits enjoyed by an individual investor due to online trading have been summarized below :

1. Independent decisions due to direct access to the markets : An investor with an internet connection can track stock and commodity prices and take decisions independently without depending on the brokers for market information.
2. Elimination of the middle man : Investing online gives the investor a sense of control over his wealth. Buying and selling of stock no longer requires another individual to carry it out.
3. Prevents manipulation by brokers : Most brokers live on commissions, hence their tactics are in their own favor first, the brokerage house next and finally the client. In case of online trading trade transactions are transparent and clear, hence the brokers and financial investors cannot manipulate.
   
4. Inexpensive and affordable commission charges : Increased volume of transactions due to online trading has brought down the operational cost to minimum.
5. Internet as an information superhighway : Information related to stocks, company fundamentals, technical analysis, expert views, market news, etc., which were once only available to licensed brokers, are now at the fingertips of anyone and everyone. 
6. Diverse range of investment products and choices : Online brokerages are offering more products to the consumer, so as to give the consumer a wider choice.
7. Speed and accuracy of transaction execution : Speed and accuracy are the two most important features of online transactions.
8. Security Issues : Given all of the above, clients were skeptical to go online simply because of security reasons.

The disadvantages of online trading include fulfillment of certain conditions for availing online trading account, greater risk if traders are done extensively on margin, unsafe if it is done broadly on margin, fee of online brokers varies monthly software usage fees, chances of trading loss because of mechanical or platform failures and need of active speedy internet connection (which is not possible in rural areas) etc. Similarly, online investors are fully responsible for their trading decisions. 

00:59 - By Unknown 0

Characteristics Features of a Cheque

Friends, in our last post we have discussed about the introduction of Cheque. In this post we shall discuss some features / characteristics of a Cheque.

1. Instrument in writing : A cheque must be necessarily in writing. Oral orders to the bank to pay some money do not constitute a cheque. 
2. Contains an Unconditional Order : A cheque is an order to a particular bank to pay a particular sum of money. It should not contain any words of request like "please" or "kindly". It is also not necessary that the words 'order' must form a part of the writing because the word 'pay' itself denotes an order. The order must be unconditional. Any conditional order does not constitute a cheque.
3. Drawn on a Specified Banker : A cheque is always drawn on a particular banker only. Generally the full name and address of the bank is printed on the cheque. The cheque is encashable at the bank on which it is drawn. Even a cheque drawn on a particular branch cannot be encashed at another branch of the same bank unless there is an agreement between the parties.
4. Payee to be certain : To be a valid cheque, it must be payable to a certain specified person or to his agent or the bearer there off. Sir John Paget rightly pointed out in this regard that, "A normal cheque is one in which there is a drawer, a drawee banker and a payee or no "payee but bearer."
   
5. Order to Pay a Certain sum of Money " A cheque is usually drawn for a definite sum of money. Indefiniteness has no place in monetary transactions. That is the modern bankers insist on writing the amount both in fugures and words.
6. Payable on Demand only : A cheque is always payable only on demand. It is not necessary to use the word 'on demand' as in the case of demand bill. As per Sec. 19 of the Negotiable Instruments Act, unless a time factor is specified by the drawer, the cheque is alwayas payable on demand.
7. Signed by the Drawer : To be valid, a cheque should be signed by a customer who draws it. The drawer normally puts his signature at the bottom right hand corner of the cheque. When this signature differs from the specimen signature, the cheque will be dishonored. 

04:33 - By Unknown 0

Cheque - A Brief Introduction and Requisites

Sec.6 of the Negotiable Instruments Act defines a cheque as "A bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand". A cheque is defined as a bill of exchange. But it is different from a bill in many aspects. Chalmer rightly points out that, "All cheques are bills of exchanges but all bills of exchanges are not cheques".

Dr. Hard, in his Law of Banking defines a cheque as "an unconditional order in writing drawn on a banker signed by the drawer, requiring the banker to pay on demand a sum of certain in money to or to the order of a specified person or bearer and which does not order any act to be done in addition to the payment of money".

Simple Definition :In simple words we can say that "A Cheque is an order to a bank to pay a stated sum from the drawer's account, written on a specially printed form"

A cheque is also a bill of exchange with two additional features :

1. It is always drawn on a specified banker.
2. It is always payable on demand.

Here is a specimen of MICR Cheque

 

Requisites of Cheque :

1. Form of the Cheque : A cheque can take the form of an order written on an ordinary piece of paper. But generally the banks will supply printed cheque forms to the customer while opening the account and the customers as a rule must use only the printed cheque forms supplied only as that rule, if the order is made on piece of paper the bank will refuse payment.
2. Issue of Cheque : A cheque is said to be issued when the drawer parts it to another person. The issue of cheque is very important because the drawer is not liable on a cheque until he has issued it. Even if drawer is induced by fraud, it is deemed to be duly issued.
3. Dating of Cheque : A cheque is not invalid simply because it is not dated. But dating of a cheque is essential to find whether it is stale cheque or not. A stale cheque is one which is not presented for payment before three months from the date of issue of cheque. 
4. Payee : Where the cheque is payable to or order, it is essential to mention the name of the payee. If the drawer has not mentioned the payee's name, any holder of the cheque can insert the payee's name. Bank will dishonor a cheque presented without the name of the payee. 
5. Amount of the cheque : Amount of the cheque is to be stated clearly both in words and figures without leaving any space before and after teh amount stated to avoid any alteration of the amount.
6. Signature : The cheque must be properly signed by the drawer and it should tally with the specimen signature signed at the time of the opening account. If the drawer is illiterate, cheques can be drawn by; means of the thumb impression duly witnessed by a person known by the banker.
7. Delivery : Unless the cheque is properly delivered, the drawer does not become liable there on. Hence to make drawer liable, he must have delivered the cheque complete in all respects to the payee, with the intention that the amount is payable to payee or to his order. 

That's all for now friends. In our next post we shall discuss about the characters of cheques and the differences between cheques and bill of exchanges. Happy Reading :)

04:31 - By Unknown 5

Banking and Financial Awareness of September 2013 - Pdf Download

Friends, here is the pdf file of September Month's Banking and Financial Awareness (Economy) Updates. We tried our best to cover all the important economy updates occurred in the month of September in this pdf file. We are working on remaining months' you will get them by tomorrow. All the Best.

Download Banking and Financial Awareness of September from here

03:41 - By Unknown 0

Banking and Financial Awareness of August 2013 - Pdf Download

Friends, here is the Banking and Financial Awareness pdf file of August Month. We've covered all the important economy updates occurred in the month of August in this pdf file. We have already uploaded the Banking and Financial Awareness pdf files for September and July Months' you can download them too from below links. We will try to upload remaining pdf file s by tomorrow. Happy Reading :)

Download the pdf file of August Month's Banking and Financial Awareness from here

Download September Month's Banking and Financial Awareness pdf file from here

Download July Month's Banking and Financial Awareness pdf file from here 

Read Complete Banking Awareness Material form Here

03:41 - By Unknown 0

Banking and Financial Awareness Basics - Pdf Download

Friends, here is the pdf file of Banking Awareness and Financial Awareness Basics shared by our friend Mr. Murugan M. This file consists of all the necessary information of Banking and Financial sectors like Bank Accounts, advantages, types, Cheques, Demand Drafts, and their differences, Different Forms of Advances by Commercial Banks - Loan Types, ATMs, Credit and Debit Cards, Details of Cash etc. We hope this pdf file will help you getting a quick idea on the Banking and Financial sectors. You can read and download more banking related material from here. All the Best :)

Download Basics of Banking / Financial Awareness pdf file from here

Thanks to Murugan . M for the help

 Banking and Financial Awareness Basics  Pdf Download ,  Banking and Financial ,  Banking and Financial 2013

11:39 - By Unknown 0

Introduction to Capital Market - Functions Importance Roles

Unlike Money Market, which deals in the very short term loans, the capital market deals in medium and long term loans, the capital market deals in medium and long term loans. Business requires both types of loans short term and long term. The money market supplies short term finance where as capital market supplies medium and long term finance. Capital market contains financial instruments of maturity period exceeding one year. It involves long term financial transactions. Capital market in a broad sense encompasses all kinds of arrangements and financial institutions involved in long term financing. it is a market in which long-period securities having maturity financing. it is a market in which  long-period securities having maturity of more than a year are e3xchanged. It is divided into two parts,

1. The new securities market which deals with the sale of new securities and shares
2. The secondary market or stock exchange which deals in buying and selling of old securities, shares, stock, bonds debentures etc.

The Capital market consists of borrowers and suppliers of long term capital funds. The borrowers include mainly corporations for business purpose, the central and state government and local bodies, unincorporated businessmen, farmers, individuals etc. On the other hand suppliers include individuals financial institutions including commercial banks.

Thus, like all other markets, the capital market is also composed of those who demand long-term funds (borrowers) and those who supply long-terms funds (lenders). An ideal capital market attempts to provide adequate funds at reasonable cost to the borrowers and ensure fair return to the lenders.

Functions / Importance / Role of Capital Market 

Capital Market plays an important role in economic development of the country by providing term needs of industrialist and businessmen.

Following are the various functions and significance of capital market.

1. Provides Link Between Savers and Investors : The capital market acts as a connecting link between those who wants to save and those who wants to invest in business and industrial sector. Thus capital market plays a very important role in diverting the financial resources form surplus and wasteful areas to deficient and productive areas which increases the welfare and productivity of the economy.
2. Capital Formation : Capital Market helps in formulation of capital by encouraging saving habit among the public specially in underdeveloped countries. Capital market plays an important role by transferring the investment from unproductive and wasteful directions to productive lines.
3. Macroeconomic Financial Balancing : Macroeconomics financial balancing capital market mobilizes funds form surplus units to deficit units through appropriate financial inter-mediation.
4. Growth of Corporate Sector : Capital market facilitates the project financing and growth of corporate sector. 
5. Optimum Utilization of Resources : It channelizes the allocation of the funds from less profitable to more profitable channels. It thus helps in optimum utilization of resources. it enables surplus and idle funds to be used more effectively, efficiently and productively.  
6. Increased Investment : The capital market facilitates lending to the businessmen and government an d thus encourage investment. It provides long term finance through special institutions and banks with the development of financial institutions. Capital becomes more mobile, decreases interest rates and increases investment. 
7. Accelerate Economic Growth : Capital market by providing long term finance to industries helps for economic development of the country . It makes proper allocation of resources rationally in accordance with development needs of the country, which promotes economic growth of the country.
8. Stabilizes the Security Prices : Capital market stabilizes the security prices and avoids fluctuations of security prices by providing easy mobility of funds from place to place. 
9. Safeguards Interest of the Investors : Capital Market benefits the investors in various ways,
1. It links the busyers and sellers of securities,
2. Provides the information regarding the prices of various securities.
3. It safegurards the interest of the ivestors by compensating them from stock Exchange Compensation Fund in the even of failure or default.
4. It provides better returns to the investors by offering various alternatives in the portfolio investments.  

 Introduction to Capital Market  , Functions Importance Roles , Banking Awareness , Banking GK, Banking , Awareness, Questions , Socio , economic , bank,po , clerical , bank jobs , banking awareness books

23:33 - By Unknown 0

Reforms in the Money Market

The Reserve Bank of India has taken the following measures to implement the recommendatoins of the Working Group since 1987. 

1. Reduction of Interest Rate of Bill Discounting : With a view to make bill financing attractive to the borrowers, from April 1987 the effective interest rate on bill discounting for categories subject to the maximum lending rate has been fixed at a rate one percentage point lower than the maximum lending rate.
2. Raising of Ceiling on Bill Re-discounting Rate : In order to attract additional funds into re-discount market, the ceiling on the bill re-discounting rate has been raised from 11.5% 12.5%.
3. Increase in number of participants in the Market : Access to bill re-discounting market has been increased by selectively increasing the number of participants in the market.
4. Introduction of 182 and 364 Days Treasury Bills : 182 Day Treasury Bills have been introduced in the year 1987. In 1992-93, 364 Day Treasury Bills were introduced in and the auction of 182 Day Bill have been discounted. Like 182-Day Treasury bills, 364 Day Treasury bills can be held by commercial banks for meeting Statutory Ratio.
5. Remitting the Duty on Usance Bills : In August 1989, the government remitted the duty on usance bills. This step removed a major administrative constraint in the use of bill system.
6. Total Deregulation of Interest Rates : Total deregulation of money market interest rates with effect from May 1, 1989 is a significant step taken by RBI towards the activation of money market. Removing the interest ceiling on money rates would make them flexible and lend transparency to transactions in the money market.    
7. Introduction of Certificate of Deposits : Certificates of Deposits (CDs) were introduced in June 1989 to give investors greater flexibility in employment of their short-term funds.
8. Introduction of Commercial Paper : Another money market instrument, Commercial Paper (CP), was introduced in 1990-91 to provide flexibility to the borrowers rather than additionally of funds over and above the eligible credit limit.
   
9. Liberalization of Credit Authorization Scheme : Since July 1987, the Credit Authorisation Scheme (CAS) has been liberalized to allow for greater access to credit to meet genuine demand in production sectors without the prior sanction of the Reserve Bank.
10. Establishment of DFHI : In April 1988, the Discount and Finance House of India Limited (DFHI) was established with a view to increasing the liquidity of money market instruments.
11. Seting up Money Market Mutual Fund : In 1991, the scheduled commercial banks and their subsidiaries were permitted to set up Money Market Mutual Fund (MMMF) and bring money market instruments with in the reach of individuals and small bodies.

14:31 - By Unknown 0

Banking Awareness Material for IBPS POs and Clerks Exams

Important Banking Awareness Bits for IBPS Exams and

Multiple Choice Questions on Banking Awareness 

 

Banking Awareness is one of the important sections of IBPS PO III Exam. People often lose marks in this section because they may have some basic idea on other sections like Aptitude, Reasoning, English, Computers and Current Affairs because you might have prepared them for other competitive exams too. But the Banking Awareness section is completely new for them who are writing this exam for the first time. So people often feel tensed about this section. Trust us friends, no need to be tensed. With a little effort and hard work you easily can clear this section with good marks. After all, we are with you. All that you have to do is just to learn the basic concepts and functionalities of Indian Banking Industry and to prepare important events occurred in Indian Economy from January 2013 to September 2013. We will try our best to provide you with all the required material of Banking Awareness with some practice exercises (we are planing to update minimum 20 sets of practice exercises of Banking Awareness). Please use the comments section below if you have any questions / doubts.  Happy Reading :) 

https://drive.google.com/folderview?id=0B7NjKfYDYjX_b3pRS0hxaGlkUFU&usp=sharing

08:16 - By Unknown 0

Meet the First Woman to Head the State Bank of India (SBI) - Arundhati Bhattacharya

The State Bank of India (SBI) has today (Monday - 7th October 2013) announced that the central Government of India has appointed Ms.  Arundhati Bhattacharya as the chairperson of the India's largest bank. succeeding Pratip Chaudhuri who retired on September 30, she is the first ever lady chairman to head SBI in its 207-year history. The 57-year-old Bhattacharya, the front-runner for the post on account of years of service left, was managing director and chief financial officer of the bank prior to her elevation.  Bhattacharya's elevation leaves one MD post vacant. She will be the Chairperson of the bank for a period of three years from today.  

07:54 - By Unknown 0

Micro Finance in India - Features

Micro Finance is nothing but, Extending the credit and insurance services to socially and economically disadvantageous segment of the society especially rural people. In simple words we can say that Micro Finance is a form of financial services for entrepreneurs and small businesses lacking access to banking and related services. We can also call it as Micro Credit.

The recent task force on Micro Finance has defined it as "provision of thrift, credit and other financial services and products of very small amount6s to the poor in rural, semi-urban or urban areas, for enabling them to raise their income levels and improve living standards. Micro Credit institutions are those which provide these facilities". At present, a large part of micro finance activity is confined to credit only. In India he focus of the movement is on women who constitute a majority of users of micro finance services.

Features of Micro Credit / Micro Finance :

1. The fundamental objective of Micro-credit is to help the poor families to help themselves to overcome their poverty.
2. Most distinctive feature of such credit is that it not subject to any collateral, or legally enforceable contracts rather it is based on trust.
3. It is offered for creating self-employment for income-generating activities and housing for the poor, as opposed to consumption.
4. It was initiated as a challenge to the conventional banking which rejected the poor by classifying them to be "not creditworthy".
5. It provides service at the doorstep of the poor based on the principle that the people should not go to the bank, bank   should go to the people.
6. Generally, these loans are given through non-profit organizations or through institutions owned primarily by the borrowers.
7. In order to obtain loans a borrower must join a group of borrowers. It comes with both obligatory and voluntary savings programs for the borrowers.
8. All loans are to be paid back in installments. New loan becomes available to a borrower if previous loan is fully repaid.
9. Efforts are made to keep the interest rate at a level which is necessary for the sustainability of the programme rather than bringing alternative return.

Experience shows that micro-finance can help the poor to increase income, build viable business, and reduce their vulnerability to external shocks. It can also be a powerful instrument for self empowerment by enabling the poor, especially the poor, especially women, to become economic agents of change.  

00:36 - By Unknown 0

What are Basel I, Basel II and Basel III Norms / Accords ?

Basel Norms / Basel Accords. Friends you might have encountered these terms at least once during your preparation or while writing Bank Exams. You might have think that what is this Basel and what are these norms ? This post will give answers to all your questions. Read with little concentration, because its one of the very important topics for any banking exam.

What is this Basel ?

Basel is the name of a city in Switzerland. This city is is also the headquarters of Bureau of International Settlement which is popularly known as BIS. This BIS appointed a committee to supervise and to set some standards for International Banks. This bank is lazy enough to think about a new name for this committee. So it simply put the name of the city which the committee normally meets and works.  So this committee became Basel Committee on Bank Supervision (BCBS). Now this committee started issuing rules and regulations for Banks. These rules are called Basel Norms / Accords. There are three Basel Norms, namely Basel I, II and III.

Basel Norms / Accords (Basel I, II and III)

In simple words we can say that Basel Norm is a set of agreements set by the BCBS which provides recommendations on banking regulations based on three risks (capital risk, market risk and operational risk). The purpose of Basel Norms is to ensure that financial institutions have enough capital on account to meet obligations and absorb unexpected losses.

 Basel I Accord : This is the first Basel Accord, so we call it as Basel I. This was issued in 1988. This accord focused on the capital adequacy of financial institutions. The capital adequacy risk (the risk that a financial institution will be hurt by an unexpected loss), categorizes the assets of financial institution into five risk categories (%, 10%, 20%, 50% and 100%). Banks that operate internationally are required to have a risk weight of 8% or less. India adopted Basel I Norms in the year 1999.

Basel II Acord : This is the second of the Basel Accords, published in the year 2004. This consists of the recommendations on Banking Laws and Regulations issued by BCBS. The purpose of Basel II Acord is to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face. According to Basel II Norms Banks should maintain a minimum capital adequacy requirement of 8% of risk assets, banks were needed to develop and use better risk management techniques in monitoring and managing all the three types of risks that is  credit  and  increased disclosure requirements. This focuses on three main areas, those are Minimum capital Requirements, Supervisory Review and Market Discipline. This is to be fully implemented by the year 2015.

Read more about Basel I and Basel II norms here

Basel III Accord : Basel III guidelines were released in the year 2010. This is to enhance the banking regulatory framework. It builds on the Basel I and Basel II documents adn seeks to improve the banking sector's ability to deal with financial and economic stress, improve risk management and strengthen the banks' transparency. These guidelines were introduced in response to the financial crisis of 2008. So the main focus of Basel III accord is to foster greater resilience at the individual bank level in-order to reduce the risk of system wide shocks. In simple words we can say that these norms mainly targeted to make most banking activities such as their trading book activities more capital-intensive.All banks should become Basel III compliant. The organization has set deadlines for this. For international banks the deadline is 31st December 2018 and for Indian banks the dead line is 31st March 2018.

00:28 - By Unknown 0

Models to Deliver Micro Finance

Friends, in our last lesson we have discussed about the Micro Finance System in India along with its features. Today we shall discuss about its models.

Models to Deliver Micro Finance :

In India due to adoption of "Multi Agency Approach" for the development of micro Finance Programme. All the major financial institutions viz, Commercial Banks, Co-Operative Banks, Regional Rural Banks, along with NGOs and MFIs have been associated with the micro finance programme. These institutions made experiments with various models to deliver micro finance at the door steps of the rural poor. Of all the models, the SHG-Bank Linkage model and Joint Liability Group (JLG) model (popularly know as Grameen model) are the most prominent micro finance models in India.

1. SHG, Bank Linkage Model 

It is a small voluntary association of poor people having common socio-economic back ground coming together to solve their common problems through self help.

Programmes : The SHG promotes small savings among members and such savings will be deposited in bank on the name of SHG. This SHG does not have more than 20 members. The Banks issue loans to groups basing on their savings and internal credit behavior. The SHG Bank linkage model is emerged as a major micro finance business model in India. This model can be further classified into three groups.

1. SHG - Bank Linkage Model - I : Banks themselves take up the work of forming and nurturing the groups, their saving bank accounts and providing them bank loans. 
2. SHG - Bank Linkage Model - II :  SHGs are formed by NGOs and formal agencies but are directly financed by banks.
3. SHG - Bank Linkage Model - III : SHGs are financed by banks using NGOs and other agencies as financial intermediaries.

2. Joint Liability Group Model :  It is a small group of prospective borrowed with 4 or 5 Members - First instance only two members are eligible for loan from Micro Finance Institution. If the first two borrowers repay the principal plus interest over a period of fifty weeks so other member of the group become eligible themselves for a loan. Because of these restrictions there is substantial group pressure to keep individual records clear. In this sense, collective responsibility of the group serves as collateral on the loan. Grameena model propounded by Prof. Mohammed younus, the father of micro finance movement in Bangladesh and Nobel laureate, is the base for this model . Unlike the SHG, the sole purpose of existence of a JLGM is to receive a group loan from a MFI.

NABARD has taken a biased stand towards the SGH - Bank linkage model. Grameena model has not received proper attention so far. It is only after seeing the success in Bangladesh the RBI made up its mind in favor of the Grameen model .The situation has turned favorable for Grameen model of late and some banks have started interest. 

Evaluation of Micro Finance Sector in India 

Following are some of the features of Micro Finance in India, which is progressing rapidly.

1. SHB - Bank Linkage Model is popular in its scale, geographical coverage and out reach. Thsi model is started as a pilot project of NABARD. It has become a movement now. It brought name and fame to india in the world of micro finance.
2. Out of three SHG - Bank Linkage models, model II takes lion's shares.
3. Among financial institutions commercial banks have the highest share in linkage with SHGs followed by RRBs and co-operatives.
4. Southern region obtains better linkage and secured highest loans.
5. Among the states, Andhra Pradesh occupies first place in terms of linkage and credit disbursal. 

00:26 - By Unknown 0

Defects or Problems of Indian Mone Market

 Defects or Problems of Indian Mone Market

Friends, in our last post we have discussed the introduction and characteristics of Indian Money Market. In this post we shall discuss about Defects or Problems of Indian Money Market.

The money market in India is not only underdeveloped but it is also a heterogeneous entity. As we have already discussed in our last post, due to dichotomy of Indian money market into organized and unorganized sectors resulted in number of drawbacks. Some of which are given below.

1. Existence of Both Organized and Unorganized Markets : The first and foremost defect of Indian money market is existence of both organized and unorganized money markets. Indigenous bankers and money lenders plays an important role in unorganized money market. The main problem with indigenous bankers is that they don't distinguish bbetween short-term and long term credit. the unorganized money market is not controlled by R.B.I. These features of unorganized money market, makes the whole Indian money market weak.
2. Absence of Integration between Various Sectors :  There is no proper coordination between the various sectors of Indian money market. There is no mutual understanding between the banking institutions of organized sector and indigenous bankers of unorganized sector. with in the organized sector there is no proper coordination of activities of different banking institutions.
   
3. Predominance of Unorganized sector : The third important drawback of Indian money market is its predominance of unorganized sector. The indigenous bankers and money lenders occupies significant role in rural finance.  In this unorganized sector there is no clear cut distinction between short and long term credit.  They will not come under direct control of Reserve Bank of India and remains outside the organized sector. Therefore, they seriously restrict the Reserve Bank control over money market.
4. Differential Interest Rates : Due to lack of homogeneity in the composition of Indian Money Market there is wide range not only in the interest rates but also in lending policies, of the different institutions. Money lenders charges exorbitant rates of Interest ranging from 24 per cent to 40 pre cent. Even commercial banks also charges different rates of interest ranging from 12 percent to 18 percent. The interest rates also varies from place to place.
5. Inadequate Control by the Reserve Bank of India : The unorganized sector of Indian Money Market is not under direct control of Reserve Bank of India. The Reserve Bank of India has no adequate control on the functioning of unorganized sector financial institutions which is quite large in size playing very important role in financing short term funds.
6. Crunch of Loanable Funds : Indian money markets always experience a shortage of loanable funds, mainly due to less per capital income, low saving rate and higher consumption expenditure due to inflation and increase in standard of living. Specially with the invest of multichannel TVs with massive advertisements and the penetration of credit cards among the middle class had further increased consumption expenditure resulting in reduced savings.
7. Seasonal Scarcity of Funds : There is shortage of funds in money market during some seasons. Ours is an agricultural country requiring heavy finance during agricultural season. Due to lack of sufficient funds during particular season, the interest rates are growing.
8. Underdeveloped Bill Market : The bill market which plays an important role in organized sector of money market, is also underdeveloped in India as compared to developed countries. There is a lot of shortage of sound and first class commercial bills of exchange in our country. Most of the Indian traders resort to hundies rather than draw Bills of exchange. Further, there is lack of standardization in drawing of bills and hundies in India.
9. Underdeveloped Banking Habits : The banking habit is not much developed in India which is one of the most important characteristics of a developed money market. Cash transactions are more popular in India rather than bank transactions, as a consequence of this the banking system in India has not much developed.
10. Lack of Call Money Market : Call market means a market which provides money at call and short notice ranging a period 24 hours to one week. These loans are generally granted to stock brokers and discounting houses. In India very rarely such loans are granted.
11. Scarcity of Credit Instruments : Till late 1980's, the Indian money market was suffering from scarcity of credit instruments. The only instruments available were the money at call and short notice and treasury bills. Moreover, there were no specialists dealers and brokers to handle the function in different segments of money market and to handle different kinds of credit instruments.
12. Improper Care of Rural Finance : An important weakness of the Indian Banking system is that till recently agricultural finance was divorced from the organized sector of the money market.
13. No Banker's Acceptance : There is no development of bankers' acceptance or acceptance of credit by the banks in India.
14. Blending of Lending and Trading Activities : In the unorganized sector, the financial agencies do not resort to money dealings only. They usually carry on retail trade agriculture and other business activities, along with lending operations.
15. Banking Gap : Banking facilities are either entirely nonexistent or inadequate in the villiages of India. All though there has been rapid expansion of bank branches in recent years specially after nationalization of banks, yet vast rural areas still exists without banking facilities. Scientifically-run institutions like commercial banks have a largely urban-orientation in our country.
16. Absence of All-India Money Market : Indian money market has not been organized into a single integrated all-indian market. It is divided into small segments mostly catering to the local financial needs. 

05:52 - By Unknown 0