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Banking financial service management

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Banking financial service management

  1. 1. LOGO www.themegallery.com Banking Financial Service Management Presented By R.JothiVelMBA,.
  2. 2. Contents Application Of Bank Funds Bank Investment and Function Bank Lending and Function Types Of Bank Lending Company L/O/G/O
  3. 3. Introduction Of Application Of Bank Funds  The application of is part of funds statement which shows the various uses of bank funds.  Banks undertake a wide of activities, which play a critical role in the economy of a country.  In addition they provide a smooth functioning payment system that allows financial and real resources to flow relatively freely to their highest return uses.  Banks are important source of funds for small borrowers who often have limited access to other sources of external finance. [ Image information in product ]  Image :www.photosclub.co.kr / CD_Global Business&communication(ImageStates)  Note to customers : This image has been licensed to be used within this PowerPoint template only. You may not extract the image for any other use.
  4. 4. Bank Investment SLR Investment RBI require lenders to maintain a portion of their deposits in liquid asset. These liquid asset can be cash, gold and goverment securities. SLR ratio set by RBI based is monetary police Non-SLR Investment Current SLR Is 22% Decreased from 22.5% It is the bank Invest in various capital market instrument such as stock & bonds issued by govrment and public company and mutual fund units
  5. 5. Function Of Bank Investment  There are three main objective of investment like safety, growth and income.  Every investor with specific objectives in mind and each investment has its own unique set of benefits and risk. Importance Function Of Investment; 1. Safety 2. Growth 3. Income 4. Other Objectives • Tax Exemption • Liquidity
  6. 6. Bank Lending  The primary function of a bank receive deposits and loans  The majority of funds are used for lending  The Lending accompanied by risk  Loans provide specific time period short term loan but term loan i.e loans for more than a year granted  The borrower may be give entire amount in lump sum or installment
  7. 7. Loans Granted Against Of securities  Commodities  Financial Instrument  Real Estate  Automobiles  Document Of Title
  8. 8. Principles Of Bank Lending Policy Margin Money Profitability Principles Of Lending Character Of The Borrower Liquidity Security National Interest Object Of Loan Safety Diversification
  9. 9. Types Of Lending Fund Based Lending Non Fund Based Lending Asset Based Lending Types Of Lending
  10. 10. Fund Base Lending On the basis of fund based lending bank commits the physical outflow of funds. Fund position of the lending bank get affected. Types Of Fund Based Lending;  Loans  Cash Credit  Overdraft  Purchase of bill of exchange
  11. 11. Loans • A loan is a kind of advance made with or without securities. • It is given for a fixed period at an agreed rate of interest. • Repayment may be installment or at expiry of certain period. • Loan may be demand loan or a term loan • Demand loan is payable on demand, it is short term loan to meet the working capital requirement of business. • Term loan is medium and long term loan. • Medium term loan repayable within 1 to 5 years. • Long term loan repayable after 5 years.
  12. 12. Cash Credit • It is popular method bank lending in India. • Under the cash credit system a limit called the credit limit is specified by the bank. • A borrower is entitled to borrow the up to the limit, it is granted against security of tangible and guarantee. • The borrower can withdraw money any number of time up to the limit. • Bank charge the interest on the actual amount withdrawn and period of such amount is withdrawn. • The cash credit facility is granted against the pledge or hypothecation of stock or marketable instrument ,or personal security. • Cash credit is most favorable mode of borrowing by commercial and industrial enterprise in India.
  13. 13. Overdraft  The bank allow the customers to overdraw its current deposit account within a specific limit.  Interest is charged only on the amount of drawn and not on the whole amount sanctioned.  The bank obtain written request from the customer .  He should also settle the terms and condition and rate of interest chargeable.  It is usual to obtain a promissory note from the customer to cover the overdraft.
  14. 14. Bills Purchase and Discounted  Discounting bills refers to an act of selling of a bill to obtain payment for before its maturity.  The bank provides the customer with facility of purchasing their bills receivables.  The bank permit the customer to discount his bills receivables and have value of the bills credited to his accounts.  The bank charges discounting charges on the face value of the bills  The bill of exchange time may be 3 to 6 months
  15. 15. Non-Fund Based Lending  The lending bank does not commit any physical outflow of funds  The non fund based lending can be made by the banks in two forms. Types  Bank Guarantees  Letter Of Credit(Domestic& Foreign)
  16. 16. Bank Guarantees  A bank guarantee is a promise from a bank or other lending institution that if a particular borrower defaults on a loan, the bank will cover the loss. Note that a bank guarantee is not the same as a letter of credit.  How it works/Example:  Let's assume Company XYZ is a small, relatively unknown restaurant company that would like to purchase $3 million of kitchen equipment.  The equipment vendor may require Company XYZ to provide a bank guarantee in order to feel more confident that it will receive payment for the equipment it ships to Company XYZ.
  17. 17. Con…  To obtain this bank guarantee, Company XYZ requests one from its preferred lender (usually the bank with which it keeps its cash accounts). The lender provides the guarantee in writing, which is then passed on to Company XYZ and its vendor. Company XYZ's lender essentially becomes a co-signer on the purchase contract with the vendor
  18. 18. Letter Of Credit(Domestic&Foreign)  A letter of credit is a written undertaking issued by the buyer(opener) bank(opening bank) to the seller (beneficiary) to reimburse the cost of goods and services supplied to the buyer against production document stipulated therein within a specific time, at a specific place and up to the specific amount to a specified bank (reimbursing bank) provided the documents submitted are in strict conformity with the term and condition of LC  Buyer , seller and issuing banks are in the same country, such credit are domestic LC  In the foreign LC the buyer will be in one country, the seller will be in another country and the amount will be denominated in a foreign currency, i.e., either in the seller currency or a third country ..currency
  19. 19. Asset Based Lending  "asset-based lending" and "asset financing" refer to the same thing. Asset-based lending generally refers to a business using its assets as collateral for a loan. If the loan is not repaid and falls into default, the lender may seize and sell the collateral to pay off the loan amount. Types  Project Finance  Securitization
  20. 20. Project Finance  Defined by the International Project Finance Association (IPFA) as the following: The financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cash flow generated by the project.
  21. 21. Securitization  Securitization means the conversion of existing or future cash in-flows of a person into tradable security Which then may be sold in the market.  The cash in-flow from financial assets such as mortgage loans ,automobiles loans, trade receivables , fare collection become the security against which borrowing raised.  According to Oxford Dictionary, “Securitization means to convert an asset (specifically loan) into marketable securities for the purpose of raising cash or funds”.  Thus the process of securitization involves pooling of asset and selling these to investors through a specialized intermediary created for the purpose. .  Examples Of Securitization Debt, City Bank carved out car loan portfolios to ICICI Bank
  22. 22. LOGO www.themegallery.com

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