5 Banking 1 of 4 PDF

Source : RBI & Various Articles /published papers/Text Books and speakers personal experience. Banking & Insurance Parag Shah, CA, MBA (Fin), LLB(Gen) (With > 25 years of BFSI experience of whi...

Source : RBI & Various Articles /published papers/Text Books and speakers personal experience. Banking & Insurance Parag Shah, CA, MBA (Fin), LLB(Gen) (With > 25 years of BFSI experience of which in the last 10 years as a CXO - Banks/NBFCs) Handle - “The Coaching Vista” (Mentorship Vertical) PS : No part of the presentation may be used without the express consent of the author mentioned below. Parag Shah for NMIMS- ASMOC  Banking Part 1 Parag Shah for NMIMS- ASMOC Context Setting…. Rewind 2023…. (CNBC Extract..) Parag Shah for NMIMS- ASMOC EXPECTATION SETTING ? What should I expect ? Can I know more… Is it just theory? or laced with corporate stories of those theory applications… But stories will not get us marks…. Syllabus & style of Q. Paper and how will we structure classes ? Parag Shah for NMIMS- ASMOC Context setting Background/ Factors contributing/ impacting Indian Economy (Separate PPT being shown…)  Overview of Syllabus ◼ Brief Syllabus and Recommended reading and approx. time mentioned against each broad topic. ◼ The chronology of topics being taught may vary to keep the presentation in a flow. ◼ The no of hours may vary depending on the depth of discussions/Class participation and Practical cases that may be discussed in class. ◼ Importance is placed for application of the concept in corporate life; rather than the just the text book - verbatim concept. Parag Shah for NMIMS- ASMOC  Syllabus 1 of 3 No of Classes Particulars Book References Hours Banking History & Introduction -History of Indian Banking -Principles of Banking -Basic Concepts & Need for Banking -Functions of Banks -Performance measures (NIM, NIS, NII) VijayaraghavanIyengar. Outcome: Students should be able to understand the basics of banking industry Introduction to Banking. and comprehend the performance measures. They should be able to analyse a Excel Books. Chapter 1 and 1-7 bank’s performance. 2..https://www.rbi.org.in/ 7 Banks & capital markets: -Banks role in capital markets (Depository, DP , Repository, ASBA) Outcome: Students should be able to understand the bank’s role in capital Capital Markets in India: 8-14 markets and functions of a depository Rajesh Chakraborti 7 Banking Structure – Types of Banks Scheduled and Non Scheduled - New age : Small Finance Banks Payments Banks /Shadow Banks/Neo Banks - Other than Banks (NBFC/Neo Banks) - RBI & its Functions - Types of accounts, Saving Account Interest Calculation (Concept) - Instruments, Cards, Foreign currency accounts -Fee based products -Loans - Tools of Monetary Control (CRR, SLR, OMO , SCC, LAF, MSF,SDF ) VijayaraghavanIyengar. Outcome: Students to understand multiple offerings of a banking corporation Introduction to Banking. 15-23 and the classification of banks. Excel Books 9 Negotiable Instruments Act: -Basics of negotiable instruments act Promissory Notes Bill of Exchange Cheque Section 138- -New age clearing system including the CTS- New age remittance system : RTGS, NEFT, Introduction to Digital Rupee Digital Rupee vs UPI Banking (Theory & Practice) Outcome: Students should be able to comprehend the role of negotiable : KC Shekhar & Lakshmi 24-29 instrument in Banking and the respective rules. Shekhar. Vikas Publication 6 VijayaraghavanIyengar. Introduction to Banking Compliance & E Banking: -Section 138 -KYC & AML -Priority Sector Advances - Management of Banking and Financial Services- Electronic banking - Phishing, Vishing,Parag Shah for NMIMS- ASMOC Smishing Pearson- Padmalatha Outcome: Students to understand the shift of banking towards electronic Suresh and Justin paul interfaces  Syllabus 3 of 3 Classes Particulars Book References No of Hours NPAs Types Recovery Identification Solution Cases VijayaraghavanIyengar. Outcome: Students to understand the concept of NPAs – its effects Introduction to Banking. Excel 33-37 and recovery techniques. Books 5 Parag Shah for NMIMS- ASMOC  Syllabus 2 of 3 Classes Particulars Book References No of Hours Basics of Insurance: -History of Insurance - Basic concepts of Insurance -Taxation – (80C, 80D, 10 (10D) Meaning of Risk -Principles of Insurance - Life &General Insurance (Motor and Health) Principles of Insurance: Outcome: Students to understand the genesis and basic building Insurance Institute of 38-44 blocks of insurance India 7 Insurance Types(Endowment, Whole Life , Term plan, Moneyback, Child plan, ULIP) Outcome: Students to learn and analyse multiple offerings in insurance Life Insurance: Insurance 45-52 products (Life) Institute of India 8 Underwriting (Financial / Medical) Claims Outcome: Students should understand the basics of underwriting and India Insurance Guide: LP 53-54 claims. Gupta 3 Reinsurance (Treaty & Facultative) and Retrocession MWPA (Married Woman Prop Act) India Insurance Guide: LP 55-57 Outcome: Students should understand basics of reinsurance Gupta 3 Insurance Repository Functions Concept of Electronic Insurance account https://www.policyholder.g Outcome: Students to understand the shift towards electronic form of ov.in 58-60 insurance. 2 Parag Shah for NMIMS- ASMOC  TEXT BOOKS AND REFERENCES Prescribed Text Books: Jyotsna Sethi, Nishwan Bhatia, Elements of Banking and Insurance 3rd Edition, PHI publication, 2023 References: chapter references see official course module – word/pdf file Dr. Sunil Kumar, Essentials of Banking and Insurance, JSR Publications, 2nd Edition, 2020-21, Reprint 2023 LM Bhole, Financial Institutions and Markets, Tata McGraw-Hill, 6th Edition, 2017 Web Based References: http://www.allbankingsolutions.com/ https://www.rbi.org.in/ https://www.policyholder.gov.in https://irdai.gov.in/ Parag Shah for NMIMS- ASMOC  ICA & Corporates ICA Type Marks Tentative Schedule 1. Presentation/Assignment 10 2nd / 3rd Week August (Leaders with chronological roll no wise 2024 teams) (+/- 1 week) 2. Presentation/Assignment 10 3rd or 4th week- Sept (Ditto) 2024 (+/- 1 week) 3. Quiz (Groups of two- 10 1st week//2nd week Nov combinations to be decided on Quiz 2024 (+/- 1 week) day) 4. Mid Term 20 As per college dates announced (currently, 2nd week Sept- 12th Sept-14th) Term End- 5th Dec onwards Parag Shah for NMIMS- ASMOC  Context setting : Indian Financial System An institutional framework of a country to enable financial transactions… Parag Shah for NMIMS- ASMOC Key aspects of a Financial system FINANCIAL ASSETS FINANCIAL INSTITUTIONS FINANCIAL MARKETS Loans, deposits, bonds, Banks, mutual funds, Money market, capital market, equities etc insurance companies etc forex market etc REGULATORS Parag Shah for NMIMS- ASMOC  Emerging entities (not directly Indian Financial System regulated by RBI) – Fintechs/ Paytechs/ Neo Banks Financial Markets Financial Intermediaries Financial Services Credit Markets Insurance Public NBFCs (aka.Shadow FIs* Banks CIC/HFCs Banks) & types etc.. Private Scheduled**/Commercial Banks MB, IB, VC*, PE etc Public Private Foreign Payments Co-op /SFB /RRBs Forex Capital Mkt Commodities Money Mkts (Equity, Debt, MFs) (T.Bills, Call Money, CPs, CDs) Primary (IPOs, NFOs, Pvt. Placement) **Banks listed under second schedule to RBI act 1949- PS : Mutual Funds/Forex Detailed expl in class not in ppt. obbligato/ Privileges given& A linguistic blend of two individual terms ‘Finance’ & Secondary (Mutual Funds, Stock Exchanges) incl Coop /Comm banks/Has ‘Technology’, FinTech is being used to denote the wide array of technological innovations that have a capital cut offs Parag Shah for NMIMS- ASMOC bearing on financial services.  Money Market Basics… ◼ ‘Money Market’ is used to define a market where short-term financial assets with upto one year tenor paper are traded. ◼ The assets are a close substitute for money and can be traded in the primary and secondary market. ◼ High liquidity and short maturity are typical features which are traded in the money market. ◼ The non-banking finance corporations (NBFCs), commercial banks, and corporate houses typically make up the money market. Parag Shah for NMIMS- ASMOC  Features of Money Market… 1. High Liquidity ◼ Owing to this characteristic money market instruments are considered as close substitutes of money. 2. Secure Investment ◼ Since issuers of money market instruments TYPICALLY have a high credit rating. 3. Fixed returns ◼ The instruments are typically / more often than not, offered at a discount to the face value, the amount that the investor gets on maturity is decided in advance. Parag Shah for NMIMS- ASMOC Types of Money Market Instruments… 1. Treasury Bills (T-Bills) ◼ T Bills are issued by RBI on behalf of the Central Government for raising money. ◼ They have short term maturities with highest upto one year. ◼ Currently, T- Bills are issued with 3 different maturity periods, which are, 91 days T-Bills, 182 days T- Bills, 1 year T – Bills. ◼ T-Bills are issued at a discount to the face value and at At maturity, the investor gets the face value. Very safe instrument as backed by Govt. ◼ 2. Commercial Papers ◼ Large companies and businesses issue UNSECURED promissory notes to raise capital to meet short term business needs, known as Commercial Papers (CPs). These firms have a high credit rating, But not entirely risk free. Discuss why not risk free in class. ◼ Corporates, primary dealers (PDs) and All-India Financial Institutions (FIs) can issue CPs. ◼ CPs have a fixed maturity period ranging from 7 days to 270 days. However, investors can trade this instrument in the secondary market. They offer relatively higher returns compared to that from treasury bills. Parag Shah for NMIMS- ASMOC Parag Shah for NMIMS- ASMOC Types of Money Market Instruments… 3. Certificates of Deposits (CD) CDs are financial assets that are issued by banks and financial institutions. They offer fixed interest rate on the invested amount. The primary difference between a CD and a Fixed Deposit is that of the value of principal amount that can be invested. The former is issued for large sums of money ( 1 lakh or in multiples of 1 lakh thereafter). The maturity period of Certificates of Deposits ranges from 7 days to 1 year, if issued by banks.4. 4. Inter-Corporate Deposit (ICD) is an unsecured borrowing by corporates and FIs from other corporates ◼ Corporate having surplus funds would lend to another corporate in need. ◼ uncollateralized basis and hence a higher rate of interest ◼ The short term credit rating of the borrower would determine the rate ◼ Credit spreads demanded even for the top rated corporates would be higher than similar rated banks and the rates on ICDs would higher than those in the CDs market. ◼ Tenor -1 day to 1 year, but the most common tenor of borrowing is for 90 days Parag Shah for NMIMS- ASMOC ◼ Capital Market Basics… Definition:  Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc.  The buying/selling is undertaken by participants such as individuals and institutions. ◼ What do they do :  Capital markets help channelise surplus funds from savers to institutions which then invest them into productive use.  This market trades mostly in long-term securities. Who do they comprise :  Capital market consists of primary market and secondary market. ◼ Primary market deals with trade of new issues of stocks and other securities ◼ Secondary market deals with the exchange of existing or previously- issued securities. Anything more ? ◼ Another important division in the capital market is made on the basis of the nature of security traded, i.e. stock market and bond market. Parag Shah for NMIMS- ASMOC  All about Bond Market Bonds : A bond is a debt instrument that provides a periodic stream of interest payments to investors while repaying the principal sum on the specified maturity date. A bond’s terms and conditions are contained in a legal contract between the buyer and the seller, known as the indenture. Key Bond Characteristics Each bond can be characterized by several factors. These include: ▪ Face Value ▪ Coupon Rate ▪ Coupon ▪ Maturity ▪ Call Provisions ▪ Put Provisions Parag Shah for NMIMS- ASMOC  All about Stocks/Equity…. -- The stock market is a marketplace where the common stocks of listed companies are traded. In simple terms, the stock market is a platform where stock or shares are bought and sold. Trading means buying and selling, and so, when we talk about stock trading, it essentially means buying and selling of stock. Stock exchanges in India, BSE (Bombay Stock Exchange) Operates Sensex and the NSE (National Stock Exchange)- Nifty is operated by an NSE subsidiary. The tools of the trade : To buy and sell in the share bazaar, you need some basic tools. An active bank account from where the financial transactions would take place A Demat account for holding your stocks in a dematerialized format A trading account for trading in stocks. A stockbroker through whom you trade in stocks. Parag Shah for NMIMS- ASMOC.  Options in Trading… -- not only means trading in stocks. Trading Different options of trading available that you can explore. Intraday trading Intraday trading means trading in stocks in a single day. Through intraday trading, you buy and sell stocks on the same day to earn profits. Commodity trading Besides trading in stocks, you can also trade in commodities that are listed in the commodity markets. Commodities are moveable goods and assets that can be bought and sold. In India, the commodity market has four types of commodities: Energy like natural gas, crude oil, etc. Metals like gold, silver, copper, and platinum Food like rice, wheat, pulses, etc. Livestock and meat like eggs, cattle, pork, etc. You can trade in commodities through a commodity trading account opened in your name. The commodity exchanges of India include MCX, NCDEX etc… Parag Shah for NMIMS- ASMOC  All about Trading…. Futures and Options trading Futures and Options are stock derivatives. Under a Futures and Options contract, you agree to buy or sell a stock at a pre-defined price on a pre-defined date. For example, if you agree to sell Stock A after 15 days at Rs.15/unit, it would be a type of futures and options contracts. Commodity trading can also be done through a futures contract. Forex trading Forex trading is trading in a decentralized currency market in different world currencies. Under forex trading, you buy and sell currencies of different economies. You need a forex trading account, and the trading is settled on a cash basis daily. Parag Shah for NMIMS- ASMOC  Concepts about trading (Stock Market)…. Stock Exchanges and SEBI Depositories Sensex and Nifty - stock indices examples Online vs Offline trading Fundamental analysis ( investors) /Technical ( traders) Intraday vs Delivery Parag Shah for NMIMS- ASMOC  Concepts about trading (Stock Market)…. Bid Price A bid price is nothing but the amount that you (dealer) desire to pay for a particular share. I will buy at 50 but sell at 52... 50/52. Ask Price Ask price is a specific price at which you are looking to sell a share. Short sell : An investor sells short when he anticipates that the price of a stock may fall from the existing price. So, the investor “borrows” a share and sells it. Once the share price dips, he will buy the same share at a lower price, and return it back, while pocketing a profit in the bargain. Simply put, you first sell at a high and then buy at a low. Short-selling is usually conducted in anticipation of a downward stock movement and is a risky proposition. Parag Shah for NMIMS- ASMOC  Concepts about trading (Stock Market)…. Upper and lower circuits Some stocks are more volatile than others. To curb this volatility, SEBI has come up with the concept of circuit filters. Its maximum limit the price of a stock can move on a given day. Price trading band. If a stock breaches this limit, trading is halted in that stock for a while. There are three levels of limits. Each limit leads to trading halt for a progressively longer duration. If all 3 circuit filters (say 5%/10% etc) are breached, then trading is halted for the day. Also, prices may not be same on the two exchanges – NSE and BSE. So, circuit filters can be different for shares on the two exchanges. Insider trading The trading of shares based on knowledge not available to the rest of the world’. It is illegal to trade after receiving 'tips' of confidential securities information. This applies to corporate personnel as well as traders and brokers. Company management have to report their trades to the exchange. Eg : Corporate officers, directors, or employees trade the company’s stocks after significant, confidential corporate developments, it is an illegal form of insider trading Parag Shah for NMIMS- ASMOC  Concepts about trading (Stock Market)…. International Securities Identification Number (ISIN) An ISIN is a 12-digit alphanumeric code that uniquely identifies a specific security. The numbers allocated by country's respective national numbering agency (NNA). An ISIN is not the same as the ticker symbol, which identifies the stock at the exchange level. The ISIN is a unique number assigned to a security that is universally recognizable. ISINs are used for numerous reasons including clearing and settlement. The numbers ensure a consistent format so that holdings of institutional investors can be tracked consistently across. PE Ratio : The price/earnings (P/E) ratio, also known as an “earnings multiple,” Definition of a P/E ratio is stock price divided by earnings per share (EPS) EPS : EPS is the bottom-line measure of a company’s profitability Defined as net income divided by the number of outstanding shares. Basic and Diluted - Explain in class Parag Shah for NMIMS- ASMOC Broad Differences- Stocks/Bonds Source : The Balance Parag Shah for NMIMS- ASMOC  Class Participation Time ◼ Learnings from the previous Slide  Corporate- Real life Examples Parag Shah for NMIMS- ASMOC  Next is Banking Part 2…what to expect…. History Of Banking RBI and its functioning Types of Banks Principles of Banking Basic Concepts of Banking Role of Banks Functioning of Banks Fund Based and Non fund based products Appraisal and lending- How its done Working Capital- Overview Parag Shah for NMIMS- ASMOC