SOURCES &APPLICATION OF BANK
FUNDS
1.What Is Capital Adequacy?
CA
framework is that a bank should have sufficient capital to provide a stable
resources to absorb any losses arising from the risk in its business
2.Write a note on application of
bank funds.
The
application of funds is part of the funds statement which shows the various
uses of the firms working capital or other funds easily converted into cash.
3.What is deposit?
It is a
sum of money paid into a bank (or) building society account.
4.What are the types of
non-deposit sources
Call & notice money
External commercial borrowings(ECB)
Export refinance
5.What is call & notice
money?
Call
money is short-term finance repayable on demand, with a maturity period of one
to fifteen days, used for inter-bank transactions. The money that is lent for
one day in this market is known as "call money" and, if it exceeds
one day, is referred to as "notice money.
6.What is ECB?
Commercial
loan in the form of bank loan,buyer‟s credit,supplier‟s credit,fixed rate of
bonds taken from non-resident lenders with a minimum maturity period of 3years.
7.What is mean by cost plus
margin pricing?
Banks
determine deposit rateCost of offering services plus small profit of margin
formula: operating expenses per unit of deposit service Estimated overhead
expenses allocated to deposit function planned profit from each deposit unit.
8.What is mean by market
penetration deposit pricing?
Based on
market share (or) Growth of market,the rate is fixed
9.What are the types of lending?
Fund based lending,
Non fund based lending,
Asset based lending.
10.What do you mean by lending?
It is a
primary functions of bank and as well as receive the deposits and provide the
loan to their customers
11.What is off balance sheet?
Some
assets or debt is not appeared in the balance sheet.items that are considered
off balance sheet are generally ones in which the bank does not have legal
claim or responsibility for
12.What is unsecured loan?
They are
the monetary loans that are not secured against the borrowers assets.
13.Write a short note on
bankruptcy.
Bankruptcy
is a legal status of a person or other entity that cannot repay the debts it
owes to creditors
14.What is project financing?
The
raising of funds required to finance an economically separable capital
investment proposal in which the lenders mainly rely on the estimated cashflow
from the project to service their loans.Ex: highways
15.What is credit analysis?
It is the
quantitative and qualitative analysis of a bank which help to determine the
banks debt service capacity.
16.What are mean by fund based
lending and its types?
Bank
commits Physical outflow offunds.
Types of FBL:
Loans
Cash credit
Overdraft
Purchase of bills of exchange
17.What is Overdraft or BOD or
bank over draft
An
arrangement whereby the bank allows the customers to overdraw from its current
deposit account.Security (assets& personal)&Charging of interest.
18.Meaning -Letter of credit
A binding
document that a buyer can request from his bank in order to guarantee that the
payment for goods will be transferred to the seller
19.What is asset based lending.
Which the
asset being bought (inventory, land or machine) is used as collateral.
Quality of the collateral
Off balance sheet financing
20.What is project financing?
The
raising of funds required to finance an economically separable capital
investment proposal in which the lenders mainly rely on the estimated cash flow
from the project to service their loans.Ex: highways
21.What is securitization
It means
to covert an asset into marketable securities for the purpose of raising cash
or funds.
22.What are the different types
of loans
Loans for working capital
Loan for capital expenditure
&industrial credit
Loan for syndication
Loan for agriculture
Loans for infrastructure – Profit
finance
Loans for customers(or) retail lending
23.Major components of typical
loan policy document.
Loan objectives
Volume &mix of loans
Loan evaluation Procedure
Credit administration
Credit files&Lending rates
24.What is mean by Credit
management
Credit
risk management process should cover the entire credit cycle starting from the
organization of the credit in a financial institution to the point the credit
is extinguished.
25.What is credit delivery and
administration
Credit
delivery: it involves the tradeoff between the perceived default risk of the
credit applicant and potential returns from granting requested credit.
Creditadministration
(Preparation of loan agreement, Renewal notices are sent
systemmatically&Updation of credit files)
26.Pricing of loans process
Step: 1
Arrive at cost of funds
Step: 2
Determine servicing cost for the customers
Step:
3assess the default risk &enforceability of risks
Step:
4fixing the profit margin
27.What is customer profitability
analysis
It is a
loan pricing method that takes into account the lender‟s entire relationship
with the customer when pricing the loan
28.Types of investment
SLR investment
Non SLR investment
29.Write a note on application of
bank funds.
The
application of funds is part of the funds statement which shows the various
uses of the firms working capital or other funds easily converted into cash.
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