BANKING PRODUCTS AND OPERATIONS – UNIT

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Banking Products and Operations

• Global Banking / Rural & Agriculture / Social Sector / Priority Sector

• Global Banking:• Foreign Currency Account, Foreign Currency Loans • Foreign Currency Services • Buying & Selling of Currencies – Cash, TOM, Spot• Hedging in FEX: Currency Forward, Currency Options,

Currency Swaps• FEX online, FEX on Call Services

Banking Products and Operations• Rural & Agriculture / Social Sector Banking:• No frill Account• Short term Loans / Credit:• Crop Loan, Gold Loan, Loan against Warehouse stock, Kisan Credit

Card,• Long Term loans:• Agricultural Land Purchase, Farm Mechanization, Bio-Gas, Cold Storage• Vehicle Loans: Two Wheeler / Tractor / other farm vehicles• Social Sector Banking:• Branch less banking, Micro loan products, Self Help Groups,•

Banking Products and Operations

• Priority Sector Lending – RBI Norms for all Banks

• (Educational loan, MSME, Agriculture, Export Credit, Housing, Social Infrastructure, Renewal energy & others)

• Implementation of other Govt. Schemes: • Pension , Personal accident policy, Life

Insurance policy etc

Foreign Currency Account

• Foreign Currency Account (FCA) is a transactional account denominated in a currency other than the home currency and can be maintained by a bank in the home country (onshore) or a bank in another country (offshore).

Foreign Currency Account features (Resident)

• Account is a single currency account.• It can be opened in Pound Sterling (GBP), US Dollar (USD),

Japanese Yen (JPY) or EURO (EUR).• Deposits in multiple currencies in a single account are not

permitted. • Separate accounts for each of the permitted currencies • Protects your money from valuation risks due to exchange rate

fluctuations• This account will be maintained in the form of a current account.• No interest is payable on deposits

Foreign Currency Account features (Resident)

• Foreign Currency BUY rate of Bank as prevailing for that currency on the day of the transaction will apply for converting the foreign currency into INR

• Foreign currency withdrawals can be possible in the form of cash, traveler's™ cheque, foreign currency DD. Withdrawal limit will be as per RBI guidelines

• No ceiling on the maximum amount of deposit in the account• No minimum balance required• Convenient and value-added banking• Nomination facility

Resident Foreign Currency Account for NRI

• A Resident Foreign Currency account in India can be maintained by a Non-resident Indian who has returned home for permanent settlement, after staying abroad for a minimum period of one year. An RFC account can be opened without any regulatory approval from the Reserve Bank of India.

• RFC accounts can be maintained in USD/EUR/GBP/JPY/AUD/CAD in the form of Savings / TermDeposit

Resident Foreign Currency Account for NRI

Credits to the account can in any of the following means:(i) Balances standing to the credit of NRE and FCNR accounts at the time of return.(ii) Income from overseas assets or sales proceeds from overseas assets.(iii) Entire amount of pension received from abroad.(iv) Balance in the account can be remitted abroad for bonafide purposes either for yourself or your dependants.

Foreign Currency Loans FCNR (B) Loans

• Corporatescan avail loans from Bank of Baroda. The Indian corporates/ firms are allowedto raise the funds through foreign currency loans at select Indian brancheswithin the prevailing policy guidelines of the Bank/ RBI.

Foreign Currency Loans FCNR (B) Loans

Key Benefits• FCNR (B) loans are beneficial to the corporates on

account of following:• •At times, it may entail lesser interest than Rupee

borrowings. • •The borrower is not required to go to the

International market for raising the funds as foreign currency funds are made available in India reducing the cost of raising such funds.

Foreign Currency Loans FCNR (B) Loans

• The present guidelines for the different purposes of the loans are as under:For meeting working capital requirements in Indian Rupees.

• The loan can be granted after proper assessment and sanction of working capital requirements/ Maximum Permissible Bank Finance (MPBF).

Foreign Currency Loans FCNR (B) Loans

• The borrowers should have natural hedge to cover themselves from exchange risk, which they will have to bear.

• The borrowers who do not have natural hedge are required to take forward cover to avoid the exchange risk.

• The borrowers with a sound financial strength, higher ratings say A+/A and do not have natural hedge may also be considered.

Foreign Currency Loans FCNR (B) Loans

• The loan can be disbursed up to 90% of the MPBF limit. • Wherever borrowers are covered under the Loan system

for delivery of Bank credit, bifurcation of MPBF limit into foreign currency loan, loan component in rupees, cash credit component and bill limit should conform to RBI guidelines.

• The foreign currency loan amount is to be taken as a part of loan component provided minimum period of the loan is -6- months.

• Foreign currency loan can be disbursed in -4- currencies viz US$, Sterling, Euro and Japanese Yen.

What is a Natural Hedge ?

• A natural hedge is the reduction in risk that can arise from an institution's normal operating procedures. A company with significant sales in one country holds a natural hedge on its currency risk if it also generates expenses in that currency.

• For example, an exporter to the United States faces a risk of changes in the value of the U.S. dollar and chooses to open a production facility in that market to match its expected sales revenue to its cost structure.

What is a Natural Hedge ?

• A natural hedge is the reduction in risk that can arise from an institution's normal operating procedures. A company with significant sales in one country holds a natural hedge on its currency risk if it also generates expenses in that currency.

• For example, an exporter to the United States faces a risk of changes in the value of the U.S. dollar and chooses to open a production facility in that market to match its expected sales revenue to its cost structure.

Forward Cover

• Forward Exchange Contract or option involving sale or purchase of a currency at a fixed price on a fixed future date, arranged or bought as a hedge against adverse exchange rate fluctuations.

Foreign Exchange Services

• Below are some of the features of Foreign Exchange Services:

Wide range of products:• Outward Remittance in form of Foreign currency• Demand drafts• Wire transfer,• Travel Card, • Foreign Currency Notes • Travelers Cheques.

Foreign Currency Services

Multi-Currency Forex card • Multi-Currency Forex Card is designed exclusively for

customers who travel extensively across the globe. It is a unique product with multiple currencies loaded on the same card, thus obviating the need to carry multiple cards for different destinations.

• This Multi-Currency Forex Card will be available currently on Visa platform with 15 currencies and additional currencies will be added in the due course of time

Foreign Currency Services – Currency Cash

• Cash is the oldest and commonest method of carrying foreign exchange overseas. Carrying small amount of local currency or internationally acceptable currency variants in your wallet when you travel overseas is reassuring and convenient - especially to make payments for the services you may require on your arrival at the destination.

• According to FEMA guidelines, the maximum amount of currency that can be availed of for any purpose of travel is the equivalent of USD 2,000.

Features• Convenience : Meeting personal expenses like paying for taxi fare, food

expenses, tips and other expenses• Choice : Currency notes in over 14 currencies available in a variety of

denominations • Buy-Back : When you return back to India, you can encash any unused foreign

currency cash at any of the Bank Branches.

Foreign Currency Travellers Cheques

• Features & Benefits• A tried and tested way of carrying foreign exchange overseas.

American Express Traveler's cheques are widely accepted globally as a mode of payment in many parts of the world.

• The beauty of Travelers' Cheques is that they can be replaced if they are lost or stolen. It always helps if you keep a record of your travelers' cheque numbers in a safe place, preferably a copy with you (but not with your cheques) and another copy at home (or somewhere where someone can fax them to you if you need to make a claim for lost cheques).

Foreign Currency Travellers Cheques

• Convenience : Easy to use. Secured to protect your money when on the move.• Choice : Available in United States Dollars (USD), Great Britain Pounds (GBP),

EURO, Japanese Yen (JPY), Australian Dollars (AUD) and Canadian dollars (CAD).• Acceptance : Accepted worldwide in over 400,000 locations spread across 200

countries. TCs can be encashed or used at Exchange bureaus, Banks, Hotels Shops, Restaurants and other establishments.

• Security : Signature based security. If your cheques are lost or stolen, the 24 hour Call Centre is just a phone call away. Replacement of lost TCs is attended to on priority across the world.

• Buy-Back : When you return back to India, you can encash any unused TCs issued by us, at any of the Bank Branches.

• Expiry : Valid forever! You can save any unused Travellers Cheques for future trips.

Outward Money Transfers – Wire Transfers

• Bank offers Outward Remittance through Wire Transfer, a highly secure and efficient method to remit money abroad.

• Wire Transfers through the SWIFT mode, which ensures secure and safe remittance to any place of choice.

• Bank offers Wire Transfers in many currencies

Outward Money Transfers – Wire Transfers

• Bank now offers Outward Remittances through Internet Banking in over 100 currencies across 150 countries.

• Advantages:– Get competitive exchange rates– Avoid dual conversion charges– Know the exact amount that the beneficiary will

receive in their account– Enjoy faster & hassle- free remittances

Inward Remittance – Sending money to India

• Wire Transfer Instructions is one of the easiest methods of receiving money to account in India.

• From the time you place the funds transfer request with local bank, it takes 24-48 banking hours for the funds to reach our account held with our correspondent bank.

• The Wire transfer will be processed and the money will be transferred to your beneficiary account in 2 hours time, provided you furnish the required documents to your Branch.

Forex Products

• Forex products like cash, tom, spot and forwards in all major currencies

• Cash transaction is for value TODAY (T) TOM transaction is for value T+1 SPOT transaction is for value T+2 Forwards are offered for exposures beyond SPOT for managing future currency risk

What is the Spot Market?• A spot transaction is the exchange of one currency for

another currency, fixed immediately in respect of an underlying foreign exchange commitment, at a specified rate, where settlement takes place two business days later.

• The two day settlement process is due to the fact that the bank requires two business days notice to process payments due to time zones and currency cut-off times.

• In instances where urgent payments/receipts are to be processed, one-day value or even same-day value rates of exchange may be provided depending on currency cut-off times. It is also commonly known as ‘Spot Cover’.

What is the Spot Market?• Dealing date Settlement (Transaction date) (Value date)• There are two spot rates for a currency. • The bid rate is the rate at which one currency can be purchased

in exchange for another (the price maker’s buying rate), while the offer rate is the rate at which one currency can be sold in exchange for another (the price maker’s selling rate).

• The difference, or spread, between the two rates provides the bank’s profit margin on transactions. It is very important to understand who is buying and who is selling, this is because the opposite of what the client wants is what happens from the bank’s perspective.

What is the Spot Market?

• That is, • if the client is buying – the bank is selling • if the client is selling – the bank is buying.

• Each decimal in an exchange rate is commonly referred to as a ‘point’ or ‘pip’. For example, if the USD to rand (ZAR) rate is quoted as USD/ZAR6.8550 and subsequently weakens to USD/ZAR6.8620, the rate is said to have moved by 70 points or pips.

Currency Forward

• In currency forward contracts, the contract holders are obligated to buy or sell the currency at a specified price, at a specified quantity, and on a specified future date. These contracts are not transferrable.

• An agreement between two parties to exchange a certain amount in currencies at a certain rate at a certain time.

Forward Exchange Contracts (FECs)

• A forward exchange contract, commonly known as a FEC or forward cover, is a contract between a bank and its customer, whereby a rate of exchange is fixed immediately, for the buying and selling of one currency for another, for delivery at an agreed future date. Economic, technical and political factors can cause upheaval in the foreign exchange markets, resulting in volatile exchange rates that can hamper international trade.

Forward Exchange Contracts (FECs)

• The forward exchange contract (FEC) is an effective hedging tool tantamount to an insurance policy, in that it protects traders and clients from unfavourable exchange rate fluctuations which might occur between the contract date and the payment date.

• The exact value of the import and export order can be calculated on the day it is processed and thus, budgeting and costing are accurate.

• Both parties can make use of forward exchange contracts and this kind of instrument caters for a diverse range of commercial and financial transactions.

Currency Swap

• an Indian client who has taken a USD loan can eliminate the USD rate of interest risk and the USD/INR currency risk together, by doing a USD INR currency swap.

Forward Rates USD / INR Rates

Currency Option

• A Currency option is a contract between a buyer and a seller that gives the buyer the right to buy (Call option) or to sell (Put option) an underlying currency at a future date at an agreed rate (Strike) for an agreed price (Premium).

Agricultural / Rural Banking

• Specialized Banking• Products:• Tractor Loan • Agricultural Gold Loan• Kisan Credit Card• Kisan Gold Card Scheme• Financing Land Tillers & other harvesting

machinary

Agricultural / Rural Banking

Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable.

Priority Sector – RBI Norms

• What is meant by Priority Sector?• Priority sector refers to those sectors of the

economy which may not get timely and adequate credit in the absence of this special dispensation.

• Typically, these are small value loans to farmers for agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.

What are the different categories under priority sector?

Priority Sector includes the following categories:(i) Agriculture (ii) Micro and Small Enterprises (iii) Education (iv) Housing (v) Export Credit (vi) Others

Priority Sector / Agriculture banking Target

New Work

New Environment

New Colleagues

Welcome

• Familiarize yourself with your new assignment1

• Explore your new environment2

• Meet your new colleagues3

Today’s Overview

Learning Objectives• Technology • Procedure• Policies• Benefits

NEW WORK

New WorkThe technology learning curve

New Em-

ployee

1 yr 2 yr 3 yr

Who’s Who

Lead Contact informationJim Jim@company.com

Dee Dee@gcompany.com

Mavis Mavis@company.com

Doug Doug@company.com

Time Spent

Proj

ects

Wor

ked

On

Get Familiar

Achieve Mastery

Working Toward Mastery

Get Experience

d

Doing Your Best Work

• Working from home• Working offsite• Technology

requirements

Case Study• Jeremy– His first day– Mistakes made– Successes achieved– The moral of the story

Discussion• What we can learn

from Jeremy• Best practices• Take-aways

Summary

• Define your challenges– Technological as well as personal

• Set realistic expectation– Mastery is not achieved overnight

• Keep your eye on the goal– Mentorship programs

Resources

• <Intranet site text here><hyperlink here>

• <Additional reading material text here><hyperlink here>

• This slide deck and related resources:<hyperlink here>

QUESTIONS?

APPENDIX