Banking Presentation Part 1 - 2023 Overview

Banking & Insurance Presentation

• Presenter: Parag Shah, CA, MBA (Fin), LLB(Gen)
• Experience: Over 25 years in BFSI, including 10 years as CXO at Banks/NBFCs
• Presentation Handle: "The Coaching Vista" (Mentorship Vertical)
• Source: RBI publications, Articles, Books, and personal speaker experiences

Banking Part 1

• This is the first part of a presentation on Banking
• No further details provided in the slides regarding the specific content

Context Setting (2023)

• Review of 2023, possibly from CNBC
• Focus is on the context, setting the stage for the discussion but doesn't dive into specific details beyond that

Expectations

• Students are encouraged to be proactive and ask questions
• The content will not just be theoretical but will include corporate examples of theory applications.
• Marks will depend on the understanding of the syllabus, question style, and presentation structure for the Q. Paper

Context Setting (Indian Economy)

• Slides mention background and influencing factors of Indian economy
• A separate presentation (PPT) is expected to cover this topic

Overview of Syllabus

• Syllabus and recommended reading for broad topics are provided
• Presentation order of topics may vary
• Number of class hours may depend on level of discussion and practical cases
• Application of concepts in corporate life is emphasized over verbatim textbook definitions

Syllabus (Part 1 of 3)

• Covers Banking history, principles, and performance measures (NIM, NII)
• Discussion of banks' role in capital markets and depository functions
• Types of banks (scheduled/non-scheduled, small finance, payment banks, NBFC/Neo Banks)
• Banking instruments (loans, instruments, calculations, etc.)
• Tools of monetary control

Syllabus (Part 2 of 3)

• Covers the history and basics of insurance and types of insurance plans (life insurance, endowments, whole life, term plans)
• Underwriting and claims processes
• Reinsurance, MWPA (Married Woman Prop Act)
• Electronic insurance, shift towards electronic forms
• Topics in this section also mention detailed explanations in class rather than in the slides (i.e. for the mutual funds/forex sections)

Syllabus (Part 3 of 3)

• Covers NPAs (Non Performing Assets) – its effects, recovery techniques, and identification solutions
• Additional topics for banking part 3 are not explicitly described in the slides

Prescribed Textbooks and References

• Jyotsna Sethi, Nishwan Bhatia, "Elements of Banking and Insurance" (3rd Edition, PHI, 2023)
• Dr. Sunil Kumar, "Essentials of Banking and Insurance" (2nd Edition, JSR Publications, 2020-21, Reprint 2023)
• LM Bhole, "Financial Institutions and Markets" (6th Edition, Tata McGraw-Hill, 2017)
• Additional web-based resources are listed: allbankingsolutions.com, rbi.org.in, policyholder.gov.in, irdai.gov.in

ICA (Interactive Class Activities)

• Presentation assignments (team-based) covering 2 weeks of August, 3-4 weeks of September, and 1-2 weeks of November 2024.
• Quizzes (groups of two)
• Mid-term exam (20 marks)
• Term end exam (5th December 2024 onwards)

Context Setting: Indian Financial System

• Framework for financial transactions within a country
• This section provides high-level definitions on the topic, without further details.

Key Aspects of a Financial System

• Financial Assets: Loans, deposits, bonds, equities
• Financial Institutions: Banks, mutual funds, insurance companies
• Financial Markets: Money market, capital market, forex market
• Regulators: RBI, IRDA (mentioned in the financial system diagram.)

Indian Financial System Diagram

• Visual representation details concerning financial markets and institutions.

Money Market Basics

• Definition: Market for short-term financial assets (typically with maturity of one year or less).
• Key features: High liquidity and short maturity.
• Participants: Non-banking finance corporations (NBFCs), commercial banks, and corporate houses

Money Market Features

• High liquidity: Short-term financial assets are easily convertible to cash.
• Secure investment: Issuers usually have high credit ratings.
• Fixed returns: Maturity values tend to be predetermined.

Types of Money Market Instruments

• Treasury Bills (T-Bills): Issued by RBI on behalf of the central Government.
• Commercial Papers (CPs): Unsecured promissory notes issued by large corporations, businesses, and institutions.
• Certificates of Deposits (CDs): Financial assets issued by banks with a fixed interest rate.
• Inter-Corporate Deposit (ICD): Unsecured borrowing by corporations

Capital Market Basics

• Definition: Market for financial securities like bonds and stocks, enabling buying and selling of existing debt/equity securities.
• Function: Channelizing surplus funds from investors to institutions for productive use..
• Participants: Individual/institutions for buying/selling/exchange of securities.

All about the Bond Market

• Definition: Debt instrument providing periodic interest payments.
• Key characteristics: Face value, Coupon rate, Coupon, Maturity, Call provisions, and Put provisions.

All about Stocks/Equity

• Definition: A marketplace for buying and selling stocks/shares.
• Participants: Investors, financial institutions, intermediaries, stock brokers.
• Tools: Bank accounts, Demat accounts for holders/ trading account for traders, Stock Brokers.
• Exchanges: BSE, NSE

Options in Trading (besides stocks)

• Trading can also involve commodities (energy, metals, food, livestock/meat), futures and options contracts, and forex trading.

All About Trading (Futures, Options, Forex)

• Futures and Options: Agreements to buy/sell an asset at a specific price on a future date, derivatives.
• Forex: Decentralized trading market for currencies.

Concepts about Trading (Stock Market)

• Stock Exchanges: Listing and trading of securities (Examples: Sensex, Nifty); regulations by SEBI
• Online vs. Offline trading
• Fundamental/Technical analysis
• Intraday vs. Delivery trading

Concepts about Trading(Stock Market) continued

• Bid Price: Price at which a dealer wants to purchase a share
• Ask Price: Price at which a dealer wants to sell a share
• Short Selling: Selling borrowed securities in the anticipation of a price decline.

Concepts about Trading (Stock Market) continued

• Upper and lower circuit limits: Limit on the amount of price fluctuation for particular stocks to control volatility in trading.
• Insider trading: Trading based on non-public information. This is illegal and is discussed.
• ISIN: International Securities Identification Number, unique code for securities.
• PE Ratio: Price/Earnings ratio (stock price/ earnings per share).

Broad Differences: Stocks/Bonds

• Stocks: Equity instrument, dividends, voting rights, less guaranteed return; potential for higher return, and are a representation of ownership
• Bonds: Debt Instrument, payment of interest, preferential treatment, guaranteed return (to a point.)

Class Participation Time

• Learning from previous slides with possible corporate real-life examples related to the given sections.