Ratio Analysis and Interpretation

Ratio Analysis and Interpretation

• The equity ratio indicates the proportion of a company's assets financed by equity.
• The market capitalization is calculated by multiplying the company's current share price by the total number of outstanding shares.
• The dividend yield showcases the percentage return on a stock investment from dividends relative to the market price.
• The Receivables Turnover Ratio measures the effectiveness of a company in collecting its receivables.
• The Cash Flow Ratio assesses a company's ability to meet short-term obligations using readily available cash.
• The Interest Coverage Ratio evaluates a company's capability to cover its interest expenses with its earnings before interest and taxes (EBIT).
• The Gross Profit Margin indicates a company's efficiency in generating profits from its sales, after deducting the cost of goods sold.
• The Price to Earnings (P/E) Ratio shows the amount investors are willing to pay for each rupee of earnings.
• The principle of lending emphasizing the security of the lender's funds is known as Collateral Security, not Profitability.

Penal Interest on Loans

• Banks are regulated by borrower agreements regarding penal interest on loans.
• The maximum allowable penal interest charge for non-individual borrowers must be higher than the charges for individual borrowers.

Joint Naval Exercise

• The joint naval exercise "Security Belt-2024" involves India, Brazil, and China.

Prime Minister of Portugal

• Harris O'Sullivan was appointed as the new prime minister of Portugal.

Inflation Rate Increase and Reliance Industries Stake

• The main reason cited for the inflation rate increase is increased consumer spending.
• Reliance Industries acquired a 20% stake in Adani's power project.

IDEX Initiative

• The IDEX initiative aims to support technology-focused startups.

Tata Power Solar Systems Milestone

• Tata Power Solar Systems Limited completed India's largest solar and battery energy storage project.

Tata Power Solar Systems Partnership and Mahakumbh 2024

• Tata Power Solar Systems is partnering with the Indian Institute of Technology Delhi (IIT Delhi).
• Startup Mahakumbh 2024 focuses on developing green technologies.

Tata Power Solar Systems Energy Focus, Indian Oil Fuel Name, and Flipkart's UPI Services

• Tata Power Solar Systems Limited specializes in solar energy projects.
• Indian Oil manufactures a fuel called Storm petrol for Formula One racing.
• Flipkart launched UPI services in partnership with the State Bank of India.

ECB: All-In-Cost and Foreign Exchange Management Regulations

• The All-in-Cost for ECB and Trade Credit includes guarantee fees and ECA charges.
• The Foreign Exchange Management (Borrowing and Lending) Regulations do not apply to Authorized Persons (APs).

Guarantees for Credit Enhancement

• The maximum permissible guarantee fee and associated costs for credit enhancement is 1 percent of the principal amount.

ECB Drawdown Requirement

• Borrowers must obtain written consent from the lender before drawing down an ECB.

Reporting under the ECB Framework

• Submission of a statutory auditor's certificate is not a requirement for reporting under the ECB Framework.

Untraceable Entity Availng ECB

• If a borrower is deemed an untraceable entity availing ECB/Trade Credit, a Revised Form ECB should be filed.

Borrower's Reporting Obligations

• Borrowers must report actual ECB transactions within 15 working days.

Reporting Changes in ECB

• Any changes in party contact information must be reported through a revised Form ECB.

Failing to Comply with ECB Reporting Requirements

• Failure to comply with ECB reporting requirements for eight consecutive quarters will necessitate debt restructuring.

Converting ECB to Equity

• Conversion of ECB into equity requires written agreement from both the lender and borrower.

Raising ECB under Corporate Insolvency Resolution

• Entities under corporate insolvency resolution can raise ECB if they possess sufficient collateral.

Refinancing through ECB

• Eligible corporate borrowers classified as SMA-2 or NPA can refinance only unsecured loans through ECB.

Lending to Borrowers Raising ECB for Repayment of Rupee Loans

• National banks within India are the only entities permitted to lend to borrowers raising ECB for the repayment of Rupee loans under specific conditions.

ECB Information Dissemination and Primary Responsibility

• The RBI website monthly publishes overall national debt and forecast information regarding ECB.
• The borrowing entity itself is primarily responsible for ensuring compliance with ECB regulations.

Trade Credit

• Any private company in India can raise Trade Credit (TC) for imports.
• The receipt of payment issued by the bank for Trade Credit transactions involving Special Economic Zones serves as an import document.

Security for Trade Credit

• Only bank guarantees from Indian banks can be offered as security for raising Trade Credit.

Foreign Trade Policy of India and Trade Credit

• The Foreign Trade Policy of India restricts the types of goods that can be imported using Trade Credits.

Average Maturity for Oil Marketing Companies Raising ECB

• The minimum average maturity period for Oil Marketing Companies (OMCs) raising ECB under the automatic route is 5 years.

Maximum Borrowing Limit for Startups

• The maximum borrowing limit for Startups under the ECB framework is USD 10 million.

Security for ECB Loan

• Movable and immovable assets can be provided as security for the ECB loan.

Recognized Lender for Startups

• Foreign banks exclusively qualify as recognized lenders for Startups under the ECB guidelines.

Liabilities in Banking System

• Inter-bank assets are classified as liabilities in the banking system.

Liabilities Excluded from NDTL Computation

• Borrowings through Tier 2 capital instruments are excluded from NDTL computation for CRR and SLR.

Bank Loan Excluded from NDTL for CRR but Not SLR

• Loans taken from NaBFID by scheduled co-operative banks are excluded from NDTL for CRR, but not for SLR.

Claims Not Included in Bank's Liabilities for NDTL Computation

• Promissory notes issued by a bank are not included in the bank's liabilities for NDTL computation.

Subsidy Exempted from NDTL

• Loans with subsidized interest rates qualify as exempted from NDTL for CRR.

Category for Inter-Bank Liabilities

• Inter-bank liabilities are added to total liabilities when computing NDTL for CRR.

Effect of Borrowing from RBI on NDTL

• Borrowing from the RBI is excluded from NDTL calculation.

Maximum Commission on Shares Issued by Banking Companies

• The maximum commission that a banking company can pay on issued shares is 2.50%.

Reserve Fund Transfer

• Banking companies must transfer 20% of their profits to the reserve fund before declaring dividends.

Shareholding Percentage in Another Company

• A banking company can hold a maximum of 30% of shares in another company.

Reserve Bank Power to Control Advances

• Section 21 of the Banking Regulation Act grants the Reserve Bank of India the authority to control advances by banking companies.

Scrutiny of Interest Rates

• Only the interest rates charged by non-scheduled banks are subject to scrutiny by courts.

Issuing Shares to Employees

• Banking companies are prohibited from issuing their own shares to employees.

Statutory Liquidity Ratio (SLR)

• The current Statutory Liquidity Ratio (SLR) that banks must maintain is 15%.

Assets Included in SLR Computation

• Real estate holdings can be included as part of SLR.

Securities Excluded from CRR/SLR Computation

• State development loans are excluded from CRR/SLR computations.

Ceiling Percentage of SLR in India

• The ceiling percentage for SLR in India is 30%.

Maintaining Investments in Government Securities

• Banks are required to maintain investments in government securities in cash management accounts.

Treating Treasury Bill for SLR Purposes

• Unsecured bank loans are treated as Treasury Bills for SLR purposes.

Fair Valuation Frequency

• Fair valuation of securities held in Available-for-Sale (AFS) must occur at least quarterly.

Fair Valuation of Securities Classified under Held for Trading (HFT)

• Securities classified as Held for Trading (HFT) within Fair Value through Profit or Loss (FVTPL) must be fair valued monthly.

Fair Value of Investments in Subsidiaries, Associates, and Joint Ventures

• Investments in subsidiaries, associates, and joint ventures should be held at book value.

Reclassifying Investments Between Categories

• Banks are not required to obtain any approval to reclassify investments between categories such as HTM, AFS, and FVTPL.

Maximum Carrying Value of Investments Sold Out of HTM Portfolio

• The maximum carrying value of investments sold from the HTM portfolio in any financial year without prior approval is 5 percent.

Sales Excluded from the Five Percent Regulatory Limit on HTM Sales

• Sales of investments to other banks are excluded from the five percent regulatory limit on HTM sales.

Evaluating Investments in Subsidiaries, Associates, and Joint Ventures

• Banks are required to evaluate investments in subsidiaries, associates, and joint ventures for impairment on a quarterly basis.

Investment Classification When an Investee Ceases to be a Subsidiary, Associate, or Joint Venture

• The investment classification does not change when an investee ceases to be a subsidiary, associate, or joint venture. It is simply ignored.

NABARD Headquarters

• The headquarters of NABARD is located in Mumbai, not Kolkata.

Refinace for Agriculture

• NABARD, not UTI provides refinance to Scheduled Commercial Banks for supporting agriculture.

Minimum Paid-Up Voting Equity Capital Required for a Commercial Bank

• The minimum paid-up voting equity capital required for a commercial bank is ₹500 crore, not 2 billion.

Minimum Capital Requirement for Payment Banks

• The minimum capital requirement for Payment Banks is ₹200 crore, not ₹500 crore.

Maximum Limit of Voting Rights for a Single Shareholder

• The maximum limit of voting rights for a single shareholder in a banking company without prior approval from the Reserve Bank is 10%, not 20%.

Minimum Ratio of Authorized, Subscribed, and Paid-Up Capital in a Banking Company

• The required minimum ratio of authorized, subscribed, and paid-up capital in a banking company is 4:3:1, not 3:2:1.

Minimum Capital Requirement for Small Finance Banks (SFBs)

• The minimum capital requirement for small finance banks (SFBs) is ₹100 crore, not ₹300 crore.

Duration to Preserve Paid Cheques

• The duration for which customers are required to preserve paid cheques is 3 years, not 10 years.

Maximum Period Allowed for Payment by Buyer to Supplier

• The maximum period allowed for payment from the buyer to the supplier under the MSME Act is 45 days.

Interest Liability for Failing to Make Payment to MSME Suppliers

• The buyer is liable to pay double the bank rate of interest as penal interest if they fail to make payment to the MSME supplier within the timeframe decided by the government.

Dispute Resolution Council for MSMEs

• The Banking Ombudsman, not a separate Dispute Resolution Council, is referenced for disputes regarding amounts due to the MSME supplier.

Committee Responsible for Examining Adequacy of Institutional Credit to the SSI Sector

• The Chakrabarty Committee was not responsible for examining the adequacy of institutional credit to the SSI sector.

Recommended Limit for Collateral-Free Loans to MSEs

• The recommended limit for collateral-free loans to MSEs is Rs. 10 lakh, not Rs. 5 lakh.

Credit Facility to Extend in Case of Unforeseen Circumstances for MSEs

• The credit facility that banks are advised to extend in case of unforeseen circumstances for MSEs is working capital loans, not home loans.

Bank's Action if a Loan Application is Rejected

• Banks must explain the reasons for rejecting a loan application in writing.

Credit Guarantee Scheme for Micro and Small Enterprises

• The Nayak Working Group did not review the Credit Guarantee Scheme for Micro and Small Enterprises.

Objectives of the High-Level Committee on Credit to the SSI Sector

• One of the objectives of the high-level committee on credit to the SSI sector is to ensure adequate availability of credit and not to eliminate small business loans.

Confidentiality of Credit Related Information for MSMEs

• Banks must ensure the confidentiality of credit-related information for MSMEs and not disclose any online visibility of such information.

Credit Limit Expansion for MSEs

• Banks should consider changes in demand patterns when expanding credit limits for MSEs

Credit Guarantee Scheme of CGTMSE

• The maximum guarantee coverage limit under the Credit Guarantee Scheme of CGTMSE is ₹500 lakh.

NRI Customer's Bank Account Management

• An NRI customer with rental income should consider converting their SB account into NRO and opening an NRE account to park local funds.

Dealing with a Customer with a Different Address in Aadhaar Card

• If a customer's present address differs from the Aadhaar card address, the account cannot be opened.

Handling an Order Cheque for Payment in Cash

• An order cheque cannot be paid in cash over the counter.

Ratio Analysis and Interpretation

• The P/E Ratio indicates profitability generated from shareholder investments.
• The Debt-to-Equity Ratio shows the proportion of assets financed by debt.
• The Return on Equity (ROE) measures how well a company generates profits from its equity.
• The Quick Ratio assesses a company's ability to pay short-term liabilities without including inventory.
• The Net Profit Margin represents the percentage of revenue exceeding the cost of goods sold.
• The Asset Turnover Ratio reflects the efficiency of asset management to produce sales.
• The Days Sales Outstanding (DSO) measures the efficiency of collecting receivables.

Penal Interest

• Penal interest should be added to the existing interest rate.

Joint Naval Exercise

• The joint naval exercise includes Russia, the U.S., and Saudi Arabia.

Prime Minister of Portugal

• The current Prime Minister of Portugal is Luís Montenegro.

Inflation

• Inflation is caused by a rise in the price of food articles and energy.

Reliance Industries Stake

• Reliance Industries holds a 30% stake in a particular company.

IDEX Initiative

• The IDEX initiative aims to enhance the capabilities of the Indian Army and Air Force.

Tata Power Solar Systems

• Tata Power Solar Systems developed a new solar panel technology, partnering with the Indian Institute of Management.
• The company's energy focus is on nuclear energy.
• The company launched a solar energy awareness campaign as part of its social entrepreneurship initiative.

Indian Oil Fuel Name

• Indian Oil's new fuel is called "RaceFuel".

Flipkart's UPI Services

• Flipkart partnered with Axis Bank for its UPI services.

All-In-Cost

• Foreign Exchange Management Regulations (FEMA) govern both External Commercial Borrowings (ECBs) and Trade Credits.

Guarantee Fees

• The guarantee fee is 3 percent of the principal amount.
• The guarantee fee is payable upon the submission of loan agreement copies.

Reporting Requirements for ECB

• The following changes must be reported within 7 days: changes in terms, transfer of ECB to another bank, and change in repayment terms.
• The reporting frequency for actual transactions is monthly.
• Entities that fail to comply with reporting requirements are subject to penalties by the Reserve Bank.
• ECBs can be raised after 5 years of borrowing, provided certain conditions are met.

ECB Loan Types

• Eligible corporate borrowers can refinance Rupee loans used for capital expenditure in specific sectors through ECB.

Eligible Borrowers for ECB

• Recognised lenders, including foreign branches/subsidiaries of Indian banks, can provide ECB.

Information Dissemination for ECB

• Details of borrower name, amount, purpose, and maturity of ECB must be disclosed.
• Government regulatory bodies are responsible for information dissemination regarding ECB.
• Eligible borrowers for ECB include units or developers in Special Economic Zones (SEZs) and Duty Free Trade Zones (DFTZ).

Inter Unit Receipt

• An inter unit receipt generated through NSDL is used for payment between units of the same company.

Security for Trade Credit

• Security for trade credit can include movable assets, immovable assets, and guarantees.

Foreign Trade Policy of India

• The Foreign Trade Policy of India outlines permissible imports for which Trade Credits can be raised.

Average Maturity Period for OMCs

• The average maturity period for Oil Marketing Companies (OMCs) is 2 years.

Borrowing Limit for Startups

• The borrowing limit for startups is USD 2 million.

Security for ECB Loans

• Security for ECB loans can include personal guarantees, real estate, and financial securities.

Resident of a FATF Compliant Country

• Entities seeking ECB approval must be residents of a FATF compliant country.

Amount Received by Correspondent Banks

• Amount received by correspondent banks is included in capital reserves.

Paid-Up Capital and Reserves

• Paid-up capital and reserves constitute a bank's core capital, which includes deposits from customers.

Loans Taken from NaBFID by Scheduled Banks

• Loans taken from the National Bank for Financing Infrastructure Development (NaBFID) by scheduled commercial banks are included in a bank's assets.

Claims from Invoking ECGC Guarantees

• Claims from invoking Export Credit Guarantee Corporation (ECGC) guarantees are included in a bank's assets.

Subsidy Exempted from NDTL

• Investment tax credits are exempted from the Net Domestic Tax Liability (NDTL).

Effect of Borrowing from RBI on NDTL

• Borrowing from the Reserve Bank of India (RBI) increases a bank's liabilities.

Maximum Commission on Shares Issued

• The maximum commission on shares issued is 1.50%.

Reserve Fund Transfer

• The minimum transfer to the reserve fund is 15% of the profit.

Shareholding Percentage

• The maximum voting rights for a single shareholder is 35%.

Reserve Bank Power to Control Advances

• The Reserve Bank has the power to control advances under Section 19 of the Banking Regulation Act.

Scrutiny of Interest Rates

• Interest rates are not subject to scrutiny by the RBI.

Loan Security

• Banks can grant loans on the security of unencumbered dated securities of the Government of India.

Unencumbered Securities

• Unencumbered securities include debentures not secured by government securities and corporate bonds.

Repo

• Dated securities and government treasury bills are eligible for repurchase agreements (repos).

Maintaining Investments

• Banks must maintain their investments in Subsidiary General Ledger (SGL) accounts.

Holding of Securities Classified Under HFT Sub-Category

• Cash management bills are classified under the 'Held for Trading' (HFT) sub-category.

Investments in Subsidiaries, Associates and Joint Ventures

• Banks must review their investments in subsidiaries, associates, and joint ventures annually.

Reclassifying Investments

• When an investee ceases to be a subsidiary, associate, or joint venture, it should be reclassified to the respective category.

Five Percent Regulatory Limit on HTM Sales

• The five percent regulatory limit on sales of securities held for trading is applicable to sales of equities.

Evaluating Investments

• Banks must evaluate their investments annually.

Investment Classification When an Investee Ceases to be a Subsidiary, Associate, or Joint Venture

• An investee that ceases to be a subsidiary, associate, or joint venture should be reclassified to the respective category.

NABARD Headquarters

• The headquarters of NABARD is in Mumbai.

Minimum Paid-Up Capital for a Commercial Bank

• The minimum paid-up capital requirement for a commercial bank is ₹10 billion.

Minimum Paid-Up Capital for Payment Banks

• The minimum paid-up capital requirement for a payment bank is ₹100 crore.

Maximum Voting Rights for a Single Shareholder

• The maximum voting rights for a single shareholder in a bank is 15%.

Minimum Ratio of Capital

• The minimum ratio of capital for a bank is 4:2:1.

Minimum Capital Requirements for SFBs

• The minimum capital requirement for a Small Finance Bank (SFB) is ₹200 crore.

Duration for Preserving Cheques

• Cheques must be preserved for 5 years.

Payment Period under MSME Act

• The payment period for MSMEs is 30 days.

Interest Types

• Compound interest at two times the market rate is charged for certain loans.

Credit Guarantee Scheme

• The Credit Guarantee Scheme for Micro and Small Enterprises is managed by the National Credit Guarantee Trustee Company.

Committee Responsible for Examining Adequacy of Institutional Credit to the SSI Sector

• The Kapur Committee examined the adequacy of institutional credit to the SSI sector.

Recommended Limit for Collateral-Free Loans

• The recommended limit for collateral-free loans is Rs. 15 lakh.

Standby Credit Facility

• A standby credit facility is a type of credit card.

Bank's Action if a Loan Application is Rejected

• Banks must explain the reasons for rejection in writing.

Objectives of High-Level Committee on Credit to the SSI Sector

• The Shri V.K.Sharma Working Group assessed the flow of credit to the MSE sector.

Confidentiality of Credit Related Information

• Credit related information pertaining to MSMEs shall be displayed prominently on the bank’s website.

Factors to Consider When Expanding Credit Limits

• Banks should consider changes in the demand pattern of MSE borrowers when increasing credit limits.

Ratio Analysis and Interpretation

• The Equity Ratio indicates the company's financial leverage.
• The Market Capitalization ratio measures how much investors are willing to pay for a rupee of earnings.
• Dividend Yield represents the return on investment from dividends relative to the market price of the stock.
• Market Capitalization is calculated by multiplying the current share price by the number of outstanding shares.
• The Receivables Turnover Ratio measures the effectiveness of a company's receivables collection process.
• The Cash Flow Ratio is a liquidity ratio that excludes inventory from current assets.
• The Interest Coverage Ratio evaluates a company's ability to meet its debt obligations.
• The Gross Profit Margin indicates a company's efficiency in generating profit from sales.
• The Asset Turnover Ratio evaluates how efficiently a company generates sales from its total assets.
• The Price to Earnings (P/E) Ratio focuses on the company's earnings potential.
• The principle of lending that emphasizes the security of the lender's funds is Profitability.

Penal Interest on Loans

• The penal interest charged by banks on loans is set by the borrower agreement.
• Penal charges for individual borrowers must be lower than the charges for non-individual borrowers for similar non-compliance.

Joint Naval Exercise

• The joint naval exercise 'Security Belt-2024' involves China, Brazil, and India.

Prime Minister of Portugal

• The new prime minister of Portugal is Harris O'Sullivan.

Inflation Rate Increase and Reliance Industries Stake

• The main cited reason for the inflation rate increase is increased consumer spending.
• Reliance Industries acquired a 20% stake in Adani's power project.

IDEX Initiative

• The IDEX initiative aims to support startups in the technology sector.

Tata Power Solar Systems Milestone

• Tata Power Solar Systems Limited completed India's largest solar and battery energy storage project.

Tata Power Solar Systems Partnership and Mahakumbh 2024

• Tata Power Solar Systems partnered with the Indian Institute of Technology Delhi (IIT Delhi).
• Startup Mahakumbh 2024 is associated with developing green technologies.

Tata Power Solar Systems Energy Focus, Indian Oil Fuel Name, and Flipkart's UPI Services

• Tata Power Solar Systems Limited focuses on solar energy projects.
• Indian Oil manufactures a fuel called Storm petrol for Formula One racing.
• Flipkart launched its UPI services in partnership with State Bank of India.

ECB: All-In-Cost and Foreign Exchange Management Regulations

• All-in-Cost, in case of ECB and Trade Credit, includes guarantee fees and ECA charges.
• Foreign Exchange Management (Borrowing and Lending) Regulations do not apply to authorized persons.

Guarantees for Credit Enhancement

• The maximum allowed guarantee fee and associated costs for credit enhancement is 1 percent of the principal amount.

ECB Drawdown Requirement

• A borrower must obtain written consent from the lender before drawing down on an ECB.

Reporting under the ECB Framework

• Reporting under the ECB Framework requires:
  • Submitting Form ECB online
  • Submitting audited financial statements
  • Submitting a report on the end use of the ECB
  • Submitting a compliance certificate.

Untraceable Entity Availing ECB

• If a borrower is deemed an untraceable entity availing ECB/Trade Credit, they must file a Revised Form ECB.

Borrower's Reporting Obligations

• Borrowers must report actual ECB transactions within 15 working days.

Reporting Changes in ECB

• Borrowers must report any changes in ECB information through a revised Form ECB.

Failing to Comply with ECB Reporting Requirements

• If a borrower does not comply with ECB reporting requirements for eight quarters, they must restructure their debt.

Converting ECB to Equity

• A borrower can convert ECB to equity if both lender and borrower agree verbally.

Raising ECB under Corporate Insolvency Resolution

• An entity under corporate insolvency resolution can raise ECB if they have sufficient collateral.

Refinancing through ECB

• Eligible corporate borrowers can refinance through ECB if classified as SMA-2 or NPA only for unsecured loans.

Lending to Borrowers Raising ECB for Repayment of Rupee Loans

• National banks within India are allowed to lend to borrowers raising ECB for repayment of Rupee loans under certain conditions.

ECB Information Dissemination and Primary Responsibility

• The RBI's website disseminates monthly information on overall national debt and forecast.
• The borrowing entity is primarily responsible for ensuring compliance with ECB guidelines.

Trade Credit

• Any private company in India can raise Trade Credit (TC) for imports.
• The receipt of payment issued by the bank is treated as an import document for Trade Credit transactions involving Special Economic Zones.

Security for Trade Credit

• An importer can offer bank guarantees from Indian banks as security for raising Trade Credit.

Foreign Trade Policy of India and Trade Credit

• The Foreign Trade Policy of India restricts types of goods that can be imported using Trade Credits.

Average Maturity for Oil Marketing Companies Raising ECB

• The minimum average maturity period for Oil Marketing Companies (OMCs) raising ECB under the automatic route is 5 years.

Maximum Borrowing Limit for Startups

• The maximum borrowing limit per Startup under the ECB framework is USD 10 million.

Security for ECB Loan

• The ECB loan can be secured with movable and immovable assets.

Recognized Lender for Startups

• Foreign banks only qualify as recognized lenders under the ECB guidelines for Startups.

Liabilities in Banking System

• Inter-bank assets are considered liabilities in the banking system.

Liabilities Excluded from NDTL Computation

• Borrowings through Tier2 capital instruments are excluded from the NDTL computation for CRR and SLR.

Bank Loan Excluded from NDTL for CRR but Not SLR

• Loans taken from NaBFID by scheduled cooperative banks are excluded from the NDTL computation for CRR but not for SLR.

Claims Not Included in Bank's Liabilities for NDTL Computation

• Promissory notes issued by the bank are not included in the bank's liabilities for NDTL computation.

Subsidy Exempted from NDTL

• Loans with subsidized interest rates are treated as exempted from NDTL for CRR.

Category for Inter-Bank Liabilities

• Inter-bank liabilities are added to the total liabilities in relation to NDTL for CRR.

Effect of Borrowing from RBI on NDTL

• Borrowing from the RBI is excluded entirely from the NDTL calculation.

Maximum Commission on Shares Issued by Banking Companies

• Banking companies can pay a maximum of 2.50% as commission on shares issued.

Reserve Fund Transfer

• Banking companies must transfer 20% of their profits to the reserve fund before declaring dividends.

Shareholding Percentage in Another Company

• A banking company can hold a maximum of 30% shares in another company.

Reserve Bank Power to Control Advances

• Section 21 of the Banking Regulation Act gives the Reserve Bank of India the power to control advances by banking companies.

Scrutiny of Interest Rates

• The rates of interest charged by banks are only subject to scrutiny by courts for non-scheduled banks.

Issuing Shares to Employees

• A banking company is prohibited from issuing its own shares to employees.

Statutory Liquidity Ratio (SLR)

• The current Statutory Liquidity Ratio (SLR) that banks must maintain is 15%.

Assets Included in SLR Computation

• Real estate holdings can be included as part of the SLR.

Securities Excluded from CRR/SLR Computation

• State development loans are excluded from CRR/SLR computations.

Ceiling Percentage of SLR in India

• The ceiling percentage for SLR in India is 30%.

Maintaining Investments in Government Securities

• All banks must maintain investments in government securities in cash management accounts.

Treating Treasury Bill for SLR Purposes

• Unsecured bank loans are treated as a Treasury Bill for SLR purposes.

Fair Valuation Frequency

• Securities held under Available-for-Sale (AFS) must be fairly valued at least quarterly.

Fair Valuation of Securities Classified under Held for Trading (HFT)

• Securities classified under Held for Trading (HFT) must be fairly valued monthly.

Fair Value of Investments in Subsidiaries, Associates, and Joint Ventures

• Investments in subsidiaries, associates, and joint ventures should be held at book value.

Reclassifying Investments Between Categories

• Banks can reclassify investments between categories such as HTM, AFS, and FVTPL without prior approval.

Maximum Carrying Value of Investments Sold Out of HTM Portfolio

• The maximum carrying value of investments that can be sold out of the HTM portfolio in any financial year without prior approval is 5 percent.

Sales Excluded from the Five Percent Regulatory Limit on HTM Sales

• Sales to other banks are excluded from the five percent regulatory limit on HTM sales.

Evaluating Investments in Subsidiaries, Associates, and Joint Ventures

• Banks must evaluate investments in subsidiaries, associates, and joint ventures for impairment quarterly.

Investment Classification When an Investee Ceases to be a Subsidiary, Associate, or Joint Venture

• When an investee ceases to be a subsidiary, associate, or joint venture, the investment classification should be ignored.

NABARD Headquarters

• The headquarters of NABARD is located in Mumbai.

Refinace for Agriculture

• NABARD provides refinance to Scheduled Commercial Banks for supporting agriculture.

Minimum Paid-Up Voting Equity Capital Required for a Commercial Bank

• The minimum paid-up voting equity capital required for a commercial bank is INR 2 billion.

Minimum Capital Requirement for Payment Banks

• The minimum capital requirement for Payment Banks is INR 500 crore.

Maximum Limit of Voting Rights for a Single Shareholder

• The maximum limit of voting rights for a single shareholder in a banking company without prior approval from the Reserve Bank is 20%.

Minimum Ratio of Authorized, Subscribed, and Paid-Up Capital in a Banking Company

• The minimum ratio of authorized, subscribed, and paid-up capital in a banking company is 3:2:1.

Minimum Capital Requirement for Small Finance Banks (SFBs)

• The minimum capital requirement for Small Finance Banks (SFBs) is INR 300 crore.

Duration to Preserve Paid Cheques

• Customers must preserve paid cheques for 10 years.

Maximum Period Allowed for Payment by Buyer to Supplier

• The maximum period allowed for payment from the buyer to the supplier under the MSME Act is 45 days.

Interest Liability for Failing to Make Payment to MSME Suppliers

• The buyer is liable to pay fixed interest if they fail to make payment to the MSME supplier within the timeframe decided by the government.

Dispute Resolution Council for MSMEs

• Banking Ombudsman Council handles disputes regarding amounts due to the MSME supplier.

Committee Responsible for Examining Adequacy of Institutional Credit to the SSI Sector

• The Chakrabarty Committee was responsible for examining the adequacy of institutional credit to the SSI sector.

Recommended Limit for Collateral-Free Loans to MSEs

• The recommended limit for collateral-free loans to MSEs is Rs. 5 lakh.

Credit Facility to Extend in Case of Unforeseen Circumstances for MSEs

• Banks are advised to extend credit facilities to MSEs in case of unforeseen circumstances.

Bank's Action if a Loan Application is Rejected

• Banks must explain the reasons for rejecting a loan application in writing.

Credit Guarantee Scheme for Micro and Small Enterprises

• The Nayak Working Group reviewed the Credit Guarantee Scheme for Micro and Small Enterprises.

Objectives of the High-Level Committee on Credit to the SSI Sector

• One of the objectives of the High-Level Committee on Credit to the SSI Sector was to improve access to credit for small businesses.
• Confidentiality of Credit Related Information for MSMEs*
• Banks are required to maintain the confidentiality of credit related information for MSMEs.

Factors to Consider When Expanding Credit Limits for MSEs

• Banks should consider changes in demand patterns when expanding credit limits for MSEs.

Maximum Guarantee Coverage Limit in the Credit Guarantee Scheme of CGTMSE

• The Credit Guarantee Scheme of CGTMSE has a maximum guarantee coverage limit of ₹500 lakh.

NRI Customer's Bank Account Management

• Customers who have moved abroad for work can open an NRO account to manage their Indian Rupee income.
• They can also open an NRE account to park their foreign currency earnings in India.
• Customers can maintain their existing savings account and open both an NRO and NRE account.

Dealing with a Customer with Different Address in Aadhaar Card

• If a customer's present address differs from the one on their Aadhaar card, the bank cannot open an account.

Handling an Order Cheque for Payment in Cash

• An order cheque cannot be paid in cash over the counter.

Ratio Analysis and Interpretation

• Profitability ratios measure a company's ability to generate profits from its operations.
  • Net Profit Margin: Overall profitability after all expenses.
  • Return on Equity (ROE): How well a company generates profits from its equity.
• Activity ratios measure how efficiently a company uses its assets.
  • Asset Turnover Ratio: The efficiency of asset management to produce sales.
• Liquidity ratios measure a company's ability to meet its short-term obligations.
  • Current Ratio: The ability to pay short-term liabilities.
  • Quick Ratio: How easily a company can pay interest on outstanding debt.
  • Cash Ratio: Liquidity without considering current liabilities.
• Solvency ratios measure a company's ability to meet its long-term obligations.
  • Debt-to-Equity Ratio: The proportion of assets financed by debt.
  • Times Interest Earned Ratio: How easily a company can pay interest on outstanding debt.

Penal Interest, Joint Naval Exercise, Prime Minister of Portugal, Inflation, Reliance Industries Stake, and IDEX Initiative

• Penal interest is treated as a charge and cannot be capitalized.
• The maximum penal interest for individual borrowers cannot exceed the charges for non-individual borrowers.
• Joint naval exercises have been conducted by Russia, the U.S., and Saudi Arabia.
• Inflation in Portugal has been attributed to a rise in food articles and energy prices.
• Reliance Industries currently holds a 26% stake in a major company.
• The IDEX initiative aims to enhance the capabilities of the Indian Army and Air Force.

Tata Power Solar Systems Milestone, Partnership, and Mahakumbh 2024

• Tata Power Solar Systems has developed a new solar panel technology.
• Tata Power Solar Systems partnered with the Indian Institute of Management for social entrepreneurship training.
• Mahakumbh 2024 will be a focus for support for renewable energy initiatives.

Tata Power Solar Systems Energy Focus, Indian Oil Fuel Name, and Flipkart's UPI Services

• Tata Power Solar Systems focuses on nuclear energy.
• Indian Oil's high-performance fuel is called "RaceFuel".
• Flipkart's UPI payments are powered by Axis Bank.

All-In-Cost, Foreign Exchange Management Regulations, and Guarantee Fees

• The Foreign Exchange Management Regulations (FEMA) govern both External Commercial Borrowings (ECBs) and Trade Credit.
• Guarantee fees are typically 3 percent of the principal amount.
• Loan agreements and copies of the Loan Registration Number (LRN) must be submitted for guarantee fee verification.

Reporting Requirements for ECB

• Borrowers must obtain an LRN for ECBs.
• Changes in ECB terms must be reported within 7 working days.
• Monthly reporting of actual transactions is required for ECBs.
• Borrowers must submit a new ECB application if they wish to transfer the loan to another bank.
• If certain conditions are met after 5 years of borrowing, borrowers can access additional ECBs without seeking prior approval from the Reserve Bank.
• Borrowers can access ECBs to resolve financial issues if they can demonstrate significant cash flow improvements, provided it is specifically permitted under their resolution plan.
• Borrowers are subject to penalties by the Reserve Bank if they violate ECB regulations.

ECB Loan Types, Eligible Borrowers, and Information Dissemination

• ECBs can be used for capital expenditures in specific sectors like manufacturing and infrastructure, but only by eligible corporate borrowers that are not classified as SMA-2 or NPA.
• Recognised lenders, including foreign branches and subsidiaries of Indian banks, can provide ECBs for the repayment of Rupee loans.
• The government regulatory bodies are responsible for disseminating information about ECBs, including the borrower's name, amount, purpose, and maturity.

Inter Unit Receipt, Security for Trade Credit, and Foreign Trade Policy of India

• The Indian government issues the Foreign Trade Policy, which outlines permissible imports for which Trade Credits can be raised.
• Security for Trade Credit includes movable and immovable assets as well as guarantees.
• An inter unit receipt generated through NSDL is required for inter-unit transactions.
• LRNs are required for Trade Credit transactions.

Average Maturity Period for OMCs, Borrowing Limit for Startups, and Security for ECB Loans

• The average maturity period for Oil Marketing Companies (OMCs) is 2 years.
• Startups can borrow up to USD 2 million for Trade Credits.
• Personal guarantees, real estate, and financial securities can all be used as security for ECB loans.

Resident of a FATF Compliant Country, Amount Received by Correspondent Banks, and Capital Reserves

• The lender/investor must be a resident of a FATF compliant country to be recognized.
• Capital reserves, not amounts received by correspondent banks, are included in a bank's assets under NDTL regulations.

Paid-Up Capital and Reserves, Loans Taken from NaBFID by Scheduled Banks, and Loans Taken From Foreign Banks

• Paid-up capital and reserves are considered shareholder funds, not deposits or securities issued on the open market.
• Loans taken from NaBFID by scheduled commercial banks are considered to be assets and included in NDTL, while loans from foreign banks are considered to be liabilities and deducted from NDTL.

Claims from Invoking ECGC Guarantees, Subsidy Exempted from NDTL, and Investment Tax Credits

• Claims from invoking ECGC guarantees are classified as assets and considered to be part of NDTL.
• Investment tax credits are exempted from NDTL.
• Cash grants from the government are considered to be assets and included in NDTL.

Effect of Borrowing from RBI on NDTL, Maximum Commission on Shares Issued, and Reserve Fund Transfer

• Borrowing from the Reserve Bank of India (RBI) is considered a liability and increases NDTL.
• The maximum commission on shares issued is 1.50%.
• Banks can transfer up to 15% of their profits to the Reserve Fund.

Shareholding Percentage, Reserve Bank Power to Control Advances, and Scrutiny of Interest Rates

• Under the RBI's regulations, a single shareholder cannot hold more than 35% of the shares in a bank.
• Under Section 19 of the Banking Regulation Act, the Reserve Bank can control advances made by banks.
• Banks are not subject to scrutiny of interest rates.

Loan Security, Unencumbered Securities, and Repo

• Banks grant loans based on the security of unencumbered dated securities of the Government of India.
• Debentures not secured by government securities are classified as unencumbered securities.
• Funds borrowed under a repo transaction are considered to be assets and included in NDTL.

Maintaining Investments, Holding of Securities Classified Under HFT Sub-Category, Investments in Subsidiaries, Associates and Joint Ventures, and Reclassifying Investments

• Securities classified under the HFT (Held For Trading) sub-category are held in physical stock certificates.
• State development loans, corporate bonds, and cash management bills fall under the HFT category.
• Banks must reclassify investments when an investee ceases to be a subsidiary, associate, or joint venture.

Five Percent Regulatory Limit on HTM Sales, Evaluating Investments, and Investment Classification When an Investee Ceases to be a Subsidiary, Associate, or Joint Venture

• Banks can sell up to 5% of their investments classified as HTM (Held To Maturity).
• The Reserve Bank of India does not allow banks to sell HTM investments under liquidity management operations.
• Banks must evaluate their investments annually.
• When an investee ceases to be a subsidiary, associate, or joint venture, the investment is reclassified to the respective category.

NABARD Headquarters, Minimum Paid-Up Capital for a Commercial Bank, and Minimum Paid-Up Capital for Payment Banks

• NABARD's headquarters is in Mumbai.
• The minimum paid-up capital for a commercial bank is ₹10 billion.
• The minimum paid-up capital for a payment bank is ₹1 billion.

Maximum Voting Rights for a Single Shareholder, Minimum Ratio of Capital, Minimum Capital Requirements for SFBs, Duration for Preserving Cheques, and Payment Period under MSME Act

• A single shareholder cannot have voting rights exceeding 15% in a bank.
• An acceptable Debt:Equity:Tier-I ratio is 4:2:1.
• The minimum capital requirement for a Small Finance Bank (SFB) is ₹200 crore.
• Cheques must be preserved for a minimum of 5 years.
• The maximum payment period under the MSME Act is 30 days.

Interest Types, Credit Guarantee Scheme, and Committee Responsible for Examining Adequacy of Institutional Credit to the SSI Sector

• Credit Guarantee Scheme under the Small Industry Development Corporation (SIDC) provides a guarantee for loans to MSEs.
• The Kapur Committee was responsible for examining the adequacy of institutional credit to the SSI sector.

Recommended Limit for Collateral-Free Loans, Standby Credit Facility, and Bank's Action if a Loan Application is Rejected

• The recommended limit for collateral-free loans is Rs. 15 lakh.
• A standby credit facility is a type of credit line that can be used to cover unexpected expenses.
• Banks must provide a written explanation to applicants when their loan applications if rejected according to the bank's approved sanction time norms.

Objectives of High-Level Committee on Credit to the SSI Sector, Confidentiality of Credit Related Information, and Factors to Consider When Expanding Credit Limits

• The Shri V.K.Sharma Working Group investigated the flow of credit to the MSE sector.
• All credit-related information pertaining to MSMEs should be displayed prominently on the bank’s website.
• Banks should consider changes in the demand patterns of MSE borrowers when increasing credit limits.

Maximum Guarantee Coverage Limit

• The maximum guarantee coverage limit for Credit Guarantee Scheme of CGTMSE is ₹500 lakh.

Test your knowledge on key financial ratios used in ratio analysis. This quiz covers various aspects of equity, profitability, and liquidity ratios essential for interpreting a company's financial health. Assess your understanding of concepts like the equity ratio, dividend yield, and market capitalization.