Interview Questions: Views

01. Updates

Particulars Present Rate

Bank Rate wef 04/10/2016 06.75 %

Repo rate wef 04/10/2016 06.25%

Reverse Repo Rate wef 04/10/2016 05.75%

CRR wef 09/02/2013 04.00%

SLR wef 01/01/2017 20.50%

MSF wef 04/10/2016 06.75%

Union Bank – BPLR wef 01/03/2016 14.25%

Union Bank Base Rate wef 01/12/2016 9.55%

MCLR wef 01.01.2017 8.15, 8.35, 8.40, 8.50, 8.65, 8.70, 8.75

MCLR Tenor ON, 1M, 3M, 6M, 1Y, 2Y, 3Y

02 Benchmarks stipulated by RBI?

% of ANBC

Priority Sector Advances 40%

Agril Advances 18%

MF & SF 08%

Micro Enterprises 7.50%

Weaker Section 10%

Women 05%

03 What is the meaning of ANBC

Computation of Adjusted Net Bank Credit:

I Bank credit in India (As prescribed in item No VI of Form „A‟ (Special return as on March 31st ) under section 42 (2) of the RBI Act, 1934

II Bills rediscounted with RBI and other approved Financial Institutions

III(I-II) Net Bank Credit (NBC)*

IV Bonds/debentures in Non-SLR categories under HTM category + other investments eligible to be treated as priority sector + outstanding deposits, as on preceding March 31st , under RIDF, and other eligible funds with NABARD, NHB,SIDBI and MUDRA Ltd + outstanding PSLCs

V Eligible amount for exemption on issuance of long term bonds for infrastructure and affordable housing

VI + Advances extended in India against the incremental FCNR (B)/ NRE deposits, qualifying for exemption from CRR/SLR requirements, till their maturity

III+IV-V- VI

Adjusted net Bank Credit (ANBC)

04 Define priority sector?

1. Sectors which impacts large sector of population, the weaker sections 2. Sectors which are employment intensive like agriculture and micro and small

enterprises 3. Sectors which provided basic amenities to human life 4. Sectors which contributes to GDP/economy development

05 What are the components under Priority sector advances?

1. Agriculture

2. Micro small and Medium enterprises 3. Export advances 4. Housing Loan 5. Education Loan 6. Social Infrastructure 7. Renewable Energy 8. Other Priority sector

06 What are the components of weaker sections category?

Priority sector loans to the following borrowers will be considered under weaker

sections category:

1. Agricultural labourers – more than 50% of their annual income is from activities related to agriculture

2. Tenant farmers – farmers who take land on lease for cultivation 3. Share croppers – persons who cultivate others land with a condition to share the

produce on an agreed basis 4. Artisans, village and cottage industries where individual credit limits do not exceed

Rs. 100000/-.

5. Beneficiaries of National Rural Livelihood Mission (NRLM)

6. Scheduled castes and scheduled tribes

7. Beneficiaries of Differential Rate of Interest (DRI) scheme

8. Beneficiaries of National Urban Livelihood Mission (NULM)

9. Beneficiaries under the scheme for Rehabilitation of Manual Scavengers (SRMS)

10. Loans to Self Help Groups (SHG)

11. Loans to distressed farmers indebted to non- institutional lenders

12. Loans to distressed persons other than farmers not exceeding Rs. 50000/- per borrower to prepay their debt to non- institutional lenders

13. Loan to individual women beneficiaries up to Rs. 100000/- per borrower

14. Loan sanctioned under (1) to (13) above to persons from minority communities as notified by Govt. of India.

15. Person with disabilities

16. Overdraft in PMJDY accounts upto Rs.5000/-.

07 Why we should promote you?

In my opinion, I am better equipped with the quality of connecting and collaborating with both internal and external customers. This quality is very much essential in effective team building and excellent customer service which is very essential in present day customer centric banking. In my opinion due to dedication, domain knowledge & experience I am better equipped in aligning quality and skills of my staffs as per corporate objectives. In this process, I shall be able in bringing sense of responsibility and ownership among staff. Now-a-days customers require faster decisions and with

increased delegated authority on elevation to higher grade, decision making process will be faster and delivery of bank‟s product will be within turnaround time. It is well said as in TEAM- “Together Each One Achieves More”; I will certainly achieve corporate objectives more efficiently due to effective and motivated team of staffs and good customers. I had always added good business to the bank. I am also very loyal and attached to my esteemed organization. Therefore, if I be given an opportunity to shoulder higher responsibility, I will

contribute more effectively in the development of my beloved organization.

08 What is the meaning of your name?

Person Specific

09 What is special about the place to which you belong/ are working?

Person Specific

10 How will the organization gain with your selection?

Person Specific

11 What are your strengths/ weakness?

Person Specific

12 What are strengths/ weakness of your current job?

Person Specific

13 What do you consider your greatest achievement?

Person Specific

14 Where do you see yourself in a 5 year’ from now?

Person Specific

15 What are your extracurricular activities/ hobbies?

Person Specific

16 How do you perceive the bank after 5 year?

Person Specific

17 Who are our competitors? And how can we meet the competition?

Person Specific

18 Strategy to increase our market share?

- Superior Customer Experience - Increasing thrust on marketing & sales - Market & customer survey - Customer segmentation based approach - Assistance in product designing suited to our target customer base - Focused approach on leveraging of technology

19 What will banking look like 10 years from now?

20 SWOT analysis of the economy, banking sector and of the bank?

21 You have done courses of Financial Advisor, MBA Finance,MBA HRM What is the use in bank

Throughout the life we deal with the people & finance. My degree is all about knowing people & finance which are very much required for a Banker. Person Specific

22 You are qualified, You Might Have so many option, why you are working in bank.

In Banking Industry we are having opportunity to work for each & every

areas/activities of economy Person Specific

23 What is your specific quality, which differential from others

Hard Work & Passion to achieve the Goal. Person Specific

24 Which place is easy to work and why

It is in the mindset. If we involve our self every place is easy to work. Person Specific

25 What is your contribution in Banking industry

Wherever I worked, always working for the image/reputation building of the Bank by giving a quality service to the customers and guiding the new entrants in Bank who are contributing for the growth of Bank. Person Specific

26 Defined in one sentence - Make in India

Make in India is an initiative launched by the Government of India to encourage multi-national, as well as national companies to manufacture their products in India.

27 Digital India

1. Creation of Digital Infrastructure 2. Provision of all the Government Services through Digital Channel 3. Increasing Digital Literacy

28 Stand up India

The scheme is intended to promote entrepreneurship among SC/ST & Women. Loan Amount Rs. 10.00 lacs to Rs. 100.00 lacs for new Entrepreneur

29 Start up India

Start up India is a flagship initiative of the GOI, intended to build a strong ecosystem for nurturing innovation and start-ups in the country. All Stand up India can be Start up India but all start up India cannot be stand up India.

30 Financial inclusion

Accessibility, Affordability & Availability of Financial Services to Weaker section is Financial Inclusion

31 Difference between off B/S items & contingent Liability

The items which are not appearing the balance sheet e.g. LC & LG, etc are known as Off Balance items for which provisions are made by the bank equally as for the on-balance sheet items whereas cases pending in the court, etc where the financial loss is not known to Bank comes under contingent liability.

32 Digital Banking

Banking Services through the Digital Channels

33 Project Utkarsh

Transformation process for better customer experience, Sales Culture & Process Efficiency. The objective is to become the leading digitally enable PSB with improved profitability & high customer centricity.

34 Project Indradhanush: Most Comprehensive Reforms for PSBs after 1969

Seven Initiatives of Banking Reform: Appointment, Bank Board Bureau, Capitalisation, De-stressing of Bank, Empowerment, Framework of Accountability, Governance Reforms

35 PMMY: Pradhan Mantri Mudra Yojana

To create an inclusive, sustainable and value based entrepreneurial culture, in collaboration with our partner institutions in achieving economic success and financial security. 1. Shishu :- Loan up to Rs. 50,000 2. Kishore :- Loan ranging from Rs. 50,000 to Rs. 5 lakh 3. Tarun :- Loan above Rs. 5 lakh and below Rs. 10 lakh

36 PMJJBY

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) provides life insurance cover of Rs. 2 lakhs for an annual premium of Rs. 330/-. This is an annual cover starting from June 1, 2015, renewable from year to year and provides cover for death due to any reason. The scheme would be administered through Life Insurance Corporation of India. All resident savings bank account holders in the age group of 18 to 50 years are entitled to join.

37 MUDRA: Funding to unfunded and formalizing the informal

38 PMSBY

The scheme will be a one year cover, renewable from year to year; Accident Insurance Scheme offering accidental death and disability cover for death or disability on account of an accident. Scope of coverage: All savings bank account holders in the age 18 to 70 years in participating banks will be entitled to join. In case of multiple saving bank accounts held by an individual in one or different banks, the person would be eligible to join the scheme through one savings bank account only.

39 Skill India

Skill India is a campaign launched by Prime Minister Narendra Modi on 15 July 2015 with an aim to train over 40 crore people in India in different skills by 2022.

40 What is the future of banking

Still our country has unbanked population as under PMJDY we have captured only one person per family. Therefore, we see a vast scope & potential for Bank in future.

Digital Banking

Virtual Banking. For example ING Diva is a bank in Germany without branch. Giving all banking facilities without having a single bank branch in Germany. Our bank can have a subsidiary to tap young generation banking customers pan India. Will give new identity and good penetration in future retail banking. Operational expenditure saved can be passed back to client. Competition from payment Bank’s can be neutralised well in advance.

Using authentic data base properly in banking system to reduce TAT and better customer service. KYC Bank concept to be introduced. (CERSAI is working on it)

Proper Benefit of IT and Technology: Client as well bankers are not using proper IT platform. Data base of all Govt departments and Banks to be well connected. Linkage at Indian Banking system can reduce the issues of KYC, improve TAT and reduce frauds. Volume of population India can be benefited a lot with synchronization.

41 Merger of Banks

It‟s good idea to have strong banks to meet the challenges of growing economy. To move at next level is demand of time and need to be done quickly. Process of merger to be designed properly. It should not be used an tool to decrease PSU banks. Entire banking system of Country to participate in the process; not only PSU. Role of PSU banks were decided to develop the economy not earn only profit. Banks role since 1969 can‟t be ignored in development process.

42 Privatization of PSU Banks

It can be used to shift ownership of state in the name of generating profit or increasing efficiency but this will affect the govt‟s motto to grow the last person‟s economical condition. In my opinion more autonomy should be given to all PSU banks. Single Regulatory body to be created to control entire PSU banking system. IBA is ready to take this forward. IBA should be made statuary body and entire team should be appointed in line with lokapl or other regulatory body; totally free from political and bureaucracy.

43 NPA Management

First of all it should be renamed as asset management. Because we manage good things not bad. NPA is something needs to be kicked out from the system not to be managed. In the business of baking it can‟t be avoided. Based on Indian scenario it‟s a need of hour to have proper asset monitoring system (If possible centralized system for entire PSU Bank who take care of stress assets). Same person responsible for credit growth can‟t manage asset as well. And person who deals bad assets can‟t grow credit. Recovery mechanism to improve. Proper education of borrowers should be arranged for. If we succeed in changing mind set of borrowers 50% issues resolved immediately. For other reasons viz. Market situation, economical condition, industry specific problems need to be analysed and according asset to be classified. We can give more time based on requirement to classify such assets NPA based on the requirement of business of that entity. Such accounts should be transferred to “Special Care Units” of bank and specialists should guide borrowers to come out from the situation.

44 What are top 5 qualities of a good branch manager?

i. Problem solving ii. Adaptability iii. Conflict resolution. iv. interpersonal skill v. Team leader vi. Quick decision making vii. Diplomatic & situational

viii. Have ability to speak right thing with right person with right time.

45 What are the benefits of leveraging of technology?

Benefits of Leveraging Technology: For Banks:

Cost reduction, increased efficiency.

Increased reach, wider range of products and Services.

New source of revenues

Speed and accuracy in service delivery.

Customer loyalty,

Customer profile based marketing.

Quick decision marketing. For Customers

Convenience, Self reliance, safety

Global access, round the clock service.

Cost effectiveness.

46 Citizen Charter/Customer Rights

Right to Fair Treatment/Right to Transparency & Honest Dealing/Right to Suitability/Right to Privacy/Right to Customer Grievance & Compensation

47 UPI: Unified Payments Interface

UPI was launched by National Payments Corporation of India with Reserve Bank of

India's vision of migrating towards a 'less-cash' and more digital society. NPCI has built on the Immediate Payment Service (IMPS) platform through which one could transfer money instantly by going online-by adding another layer that allows easy debit capability even on mobile phones. Unified Payments Interface (UPI) is architecture and a set of standard APIs (Application Programming Interface) to facilitate the next generation online immediate payments leveraging trends such as increasing Smartphone adoption, Indian language interfaces, and universal access to Internet and data.

48 Net Neutrality

Net neutrality (also network neutrality, Internet neutrality, or net equality) is the principle that Internet service providers and governments should treat all data on the Internet the same, not discriminating or charging differentially by user, content, site, platform, application, type of attached equipment, or mode of communication.

49 Monetary Policy Committee

MPC to guide interest rate in the Economy. The Committee will have six members. The committee will consist of the RBI governor, the deputy governor in charge of monetary policy and one official nominated by the central bank. The other three members will be appointed by the central government through a search committee, said the Finance Bill. This search committee will comprise of the cabinet secretary, the secretary of the Department of Economic Affairs, the RBI governor and three experts in the field of economics or banking as nominated by the central government. The members of the MPC appointed by the search committee shall hold office for a period of four years and shall not be eligible for re-appointment, said the government. The monetary policy committee framework will replace the current system where the RBI governor and his internal team have complete control over monetary policy decisions.

50 Monetary Policy

Monetary policy is that process by which monetary authority of a country, generally a central bank controls the supply of money in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth.

51 Repo Rate

The rate at which the RBI lends money to commercial banks is called repo rate.

52 Reverse Repo Rate

Reverse Repo rate is the short term borrowing rate at which RBI borrows money from banks.

53 Bank Rate & Repo Rate

Loan vs. Securities – bank rate usually deals with loans, whereas, repo orrepurchase rate deals with the securities. The bank rate is charged to commercialbanks against the loan issued to them by central banks (RBI), whereas, the repo rate is charged for repurchasing the securities.

54 Preventive Vigilance Committee

At Branch Level Frequency of Meeting: Monthly

55 What is Priority Sector?

The sectors which are proving the basic needs (Food, Shelter, Cloth) of mankind.

56 Benchmark

PSA: 40%, Agriculture: 18%, Small & Marginal Farmers: 8%, Micro Enterprises: 7.5%, Weaker Section: 10%

57 Marginal & Small Farmer

Farmers with landholding of up to 1 hectare (Marginal Farmers). Farmers with a landholding of more than 1 hectare and up to 2 hectares (Small Farmers).

58 Micro, Small and Medium Enterprises (MSMEs)

Manufacturing Sector

Enterprises Investment in plant and machinery/Equipment Micro Enterprises Does not exceed twenty five lakh rupees Small Enterprises More than twenty five lakh rupees but does not exceed five crore

rupees

Medium

Enterprises

More than five crore rupees but does not exceed ten crore rupees

Service Sector Micro Enterprises Does not exceed ten lakh rupees

Small Enterprises More than ten lakh rupees but does not exceed two crore rupees Medium

Enterprises

More than two crore rupees but does not exceed five crore rupees

58 WHAT IS CLAYTON’S RULE?

As per this rule, each withdrawal in the running account like cash credit account is considered as a new loan and each deposit as a repayment of the loan in the order in which it is made. The first debit in the account is considered to have been discharged or reduced by the first item in the credit side and accordingly other entries follow suit in chronological order. To avoid application of Clayton‟s Rule, the bankers stop operation of the running accounts in case of death of a partner/guarantor/joint account holders etc.

60 Business Debit Card?

Card Shall be issued to all Current Account customers, with AQB Rs. 1.00 lacs and above

Free issuance charges

Withdrawal limit through ATM – Rs. 50,000

Daily shopping through POS & online – Rs. 2 lacs

Free Airport lounge access at airport- 2 in a quarter

Personal Accidental Insurance cover – Rs. 2 lacs

Exclusive offers from Visa on travel, entertainment and dining

61 Usecure Credit Card

Credit Card Backed by Deposit

Limit up to 80% of the Term Deposit kept under lien

Spending limit- max. Rs. 5 lacs

62 Signature Credit Card

For high net worth customers.

EMV Chip Card

International Card

Limit will be 20% of latest ITR/Salary slip with a minimum of Rs. 1.00 Lac

63 What is the main difference between Project and Asset Finance?

If the finance is based on existing cash flow then it is asset finance (assets which are not generating cash) and if the finance depends upon future cash flows out of the usage of asset created by our finance then it is project finance.

64 What is DSCR & its Bench mark?

Average DSCR: 1.5:1 with minimum DSCR of 1.2:1

65 What is Current Ratio & its benchmark as per our loan Policy?

CR: 1.17 and above

66 DER

Debt Equity Ratio <=2.00:1

67 TOL/TNW

Total Outside Liabilities to Tangible Net Worth Ratio<=4:1

68 IRR: Internal Rate of Return

IRR is the discount rate which makes the Net Present Value (NPV) of future Cash Flow equal to zero. The guiding principle to decide whether any project is acceptable is that its IRR should be greater than the cost of capital. IRR approach is used for assessment of Term Loans of Rs 10 crores and above with repayment period of 5 years or more A project is generally accepted if its IRR is higher than 15%.

69 Methods of Assessment

a. Turnover Method b. Flexible Bank Finance Method c. Cash Budget Method d. Net owned Fund for NBFCs

70 Turnover Method

Working capital limit shall be computed at 20% of the projected sales turnover accepted by the Bank. In the case of MSE borrowers, seeking/enjoying fund based working capital facilities up to Rs.500 Lacs from banking system, the limits shall be assessed on the basis of turnover method working capital limits to the non MSE borrowers requiring working capital facilities up to Rs.100 Lacs The guidelines on turnover method were framed assuming an average production /processing cycle of 3 months (i.e. Working capital would be turned over four times in a year).

71 Flexible Bank Finance

Flexible Bank Finance method is normally applicable for account with credit limits of Rs. 1 Crore and above for other advances & above Rs.5 Crores for MSE advances.

72 Cash Budget Method

Cash Budget Method may be adopted in case of specific Industries/Seasonal activities such as Software Development, Construction Industry, Film Industry, Sugar, Fertilizers etc., and working capital short term loans. The cash budget method can be used for assessment while lending to NBFCs.

73 Net owned Funds Method

RBI vide its Master Circular on 'Bank Finance to NBFCs' has withdrawn Net Owned Funds method for NBFCs except for Residuary Non-Banking Companies (RNBCs).

74 Holding on Operation

"Holding on operation" may be considered for a period of 6 months to viable/potentially viable units (MSME or otherwise). This will allow subject units to draw funds from the cash credit account at Least to the extent of their deposit of sale receipts during the period of such "holding on operation" less pre-agreed cutbacks to reduce overdues. Holding on operation essentially implies:

a. Continuous operations in the account, like opening fresh LCs to the extent of reduction in devolvement, even if devolvement is not fully cleared

b. Roll over of LC opened by the Bank c. Allowing operations in the cash credit account despite interest / forced debits

not being cleared d. Fall in drawing power etc

Such holding on operations may generally be permitted with a cut back towards reduction in overdues. Further, operations are allowed within existing outstanding / exposure level. Holding on operations within the overall sanctioned limits to be permitted by the next higher authority up to RLCCs and respective delegatee thereafter. Permission to allow holding on operation in the account is to be reported as per reporting system in the Bank.

75 Channel Finance

This is the concept of 'supply chain' with the chain having three perceptibly distinct links - the pre-production, production and post- production. There is a proper continuity and coordination of all related issues like delivery channels of goods, services and finances. The finances required for the organization transfused across the business cycles will have to be healthily circulated and supported, sustaining the supply chain of activities. This process of infusing the financial lifeblood across the supply chain is normally the gist of channel financing. Thus the focus of channel finance is to extend an integrated financial and commercial solution to the supply and distribution channels of a business unit. Our other products 'UNION PROCURE' and 'UNION SUPPLY' also can be promoted concurrently, as Channel Finance Products.

76 Line of Credit

Line of Credit is a facility to offer flexibility to clients to maneuver between the various working capital facilities sanctioned with relative ease compared to the prevalent system of restricting the usage of funds within the maximum limits available within the facility only. This system will essentially facilitate medium / large business units as a point of flexibility in managing their institutions borrowing arrangement without any additional cost.

77 TAKE-OVER OF ADVANCES CODE

The specific reasons for shifting the account from Financial Institution / other Bank to our Bank should be ascertained. The advance to be taken over should be rated CR4 or better Discrete inquiries with at least 3 people in the similar line of activity / buyers / suppliers and their view about the prospective borrower's credentials, financial soundness, integrity, reputation and capability (amount proposed to be taken over) must be obtained The account should have been a Standard Asset in the books of the other Bank/Fl during the preceding 3 years The unit should have earned net profits (post tax) in each of the immediately preceding 3 years. Credit Report of the existing bankers, which is a basic due diligence, should be obtained. Statement of account of the existing bank for preceding 6 - 12 months is to be obtained and verified to assess the quality of operations with the existing bankers Current Ratio of 1.17 However, CR- may be considered on case to case basis up to 1.10-by sanctioning authority looking to other strengths of the proposal. TOL/TNW Ratio of 3:1 and in case of Trade accounts above 4:1. The average DSCR for the project should not be less than 1.50 at the time of take-over or for the remaining period of advance.

The project should not be in the implementation phase at the time of takeover of the loan.

78 RISK RATING

For borrowers rated with Bank's own models, the hurdle rate for new borrowers / Greenfield projects will be CR-5 and for takeover and CRE loans to builders the same will be CR-4. Hurdle rate for new accounts, if rated by external credit rating agencies is BB and for takeover accounts is BBB.

79 Decoy Customer? What is the purpose? Who has issued the guidelines?

A “Decoy Customer” is an officer of the bank, who will be deputed for a day to some other branch in an adjoining district in a disguised manner i.e., without disclosing the fact that he is an employee of the bank with the intention of noting down whether the branch is following all the KYC norms for opening an account.

80 What are SMA 0, SMA 1 & SMA 2?

81 What is “Relief” under OTS proposal as per new Recovery Policy?

Relief is the total amount of contractual dues minus the settlement amount

82 Eligibility criteria for Taking Action under SARFAESIA

Account should be classified as NPA

The total dues in the account should be more than Rs.1 lac

The property against which action is proposed should be Non-Agricultural(however usage of property at the time of initiating SARFAESIA is other than agriculture, then such properties can be attached)

Total dues in the account should be more than 20% of the original loan amount plus interest charged in the account

83 Gross NPA of the Bank as on 31.03.2016

Gross NPA: Rs. 24171 Crores (8.70%), Net NPA: Rs. 14026 Crores (5.25%)

84 What is the Periodicity for submission of Monitoring Reports in case of Stressed accounts? (SMA category)

Monthly Basis. In case of standard accounts it is on quarterly basis

85 Provision coverage Ratio

The ratio of provisioning to gross non-performing assets. Indicates the extent of funds a bank has kept aside to cover loan losses. PCR of our Bank as on 31.03.2016 is 50.98%

86 USPs of our home loan product

a. No limit

b. Higher quantum eligibility of individuals at the higher income slabs

c. Flexible repayment options

d. Longer repayment period at 30 years

e. TAT of 5 days

f. Top-up loan eligibility

g. Personal loan to housing loan borrowers

h. Higher age limit up to 70 years

87 CRAR as on 31.03.2016 of our Bank

10.56%

88 CASA as on 31.03.2016

Rs. 110869 Crores (32.30%)

89 Garnishee Order & Attachment Order

90 What are the stages of Money Laundering?

a. Placement b. Layering c. Integration

91 Beneficial Owner

Beneficial Owners shall mean the natural person who ultimately owns or controls a client and/or the person on whose behalf a transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person. It is mandatory to create Cust IDs of all beneficial owners (BOs) like Proprietor, Partners, Directors, Authorised signatories in case of Clubs, Associations etc, Trustees, Karta and Co-Parceners.

92 Frequency of updation of Customer Profile

a. For Low risk customers once in 10 years b. For medium Risk customers once in 8 years c. For High Risk customers once in 2 years

93 Reports under KYC

a. CTR: Cash Transaction Report b. STR: Suspicious Transaction Report c. CCR: Counterfeit Currency Report d. NTR: Non-Profit making Organisation Transaction Report e. CWTR: Cross Border Wire Transfer Report

94 Partnership Account: Maximum Number of Partners

100

95 Maximum Number of Shareholder in Pvt Company

200

96 COPRA: Jurisdiction

District Forum: Rs. 20.00 lacs State Forum: Rs. 100 lacs National Forum: Above Rs. 100 lacs

97 How many branches are authorized to accept PPF?

1229 Branches. ROI: 8.10% for 2016-17. Maximum Inv/year: Rs. 150000/-

98 What is CRILC?

Central Repository of information on Large Credits. RBI mandated as per the above guidelines that the stressed accounts identified under SMA sub categories with exposure of Rs.5 Crores and above have to be reported to CRILC

99 What is RFA?

RFA is Red Flagged Accounts. Where any signals of fraud is found, such accounts to be classified as RFA. Accounts with limits of Rs.50.00 crores and above have to be reported under the guidelines. RBI has suggested 45 early warning signals to identify such irregularities.

100 What is 5:25 scheme?

5:25 scheme (Flexible Structuring of existing Infrastructure loans) is applicable for Long term infrastructure projects where the moratorium period is very long. Banks have the liberty to revisit the options after every 5 years and continue the finance, provide

additional finance, or exit the exposure. The maximum period for such projects can go up to 25 years. Total loan period should not exceed 85% of initial concession period (leaving a tail of 15%).

101 What is SDRS?

SDRS is Strategic Debt Restructuring Scheme announced by RBI, where banks can acquire ownership of borrowal units wherever such accounts are under stress/NPA. Alternatively, they can hand over the management of such units to more efficient persons, which will result in revival of the economic value of the unit. Such ownership can take place only where all the banks put together equity holding exceeds 51% (debt is converted into equity).

102 Restricted Areas

a. Loan against of Bank‟s own share b. Loan against Gold Bullions/Silver Bullions/Primary gold c. Loan for purchase of Gold in any form d. Loan against Certificate of Deposit e. Loan against partly paid shares f. Loan against FDR/Deposit of Other bank g. Loan for purchase of KVPs

103 LAS (Lending Automation Solution): How many Modules?

a. Loan Processor b. IRB Module c. Credit Monitoring Module d. NPA Manager e. MIS Module

104 Why the MCLR reform?

At present, the banks are slightly slow to change their interest rate in accordance with repo rate change by the RBI. Commercial banks are significantly depending upon the RBI‟s LAF repo to get short term funds. But they are reluctant to change their individual lending rates and deposit rates with periodic changes in repo rate. Whenever the RBI is changing the repo rate, it was verbally compelling banks to make changes in their lending rate. The purpose of changing the repo is realized only if the banks are changing their individual lending and deposit rates.

105 How to calculate MCLR

The concept of marginal is important to understand MCLR. In economics sense, marginal means the additional or changed situation. While calculating the lending rate, banks have to consider the changed cost conditions or the marginal cost conditions. For banks, what are the costs for obtaining funds? It is basically the interest rate given to the depositors (often referred as cost for the funds). The MCLR norm describes different components of marginal costs. A novel factor is the inclusion of interest rate given to the RBI for getting short term funds – the repo rate in the calculation of lending rate. Following are the main components of MCLR. 1. Marginal cost of funds; 2. Negative carry on account of CRR; 3. Operating costs; 4. Tenor premium.

Negative carry on account of CRR: is the cost that the banks have to incur while keeping reserves with the RBI. The RBI is not giving an interest for CRR held by the banks. The cost of such funds kept idle can be charged from loans given to the people.

Operating cost: is the operating expenses incurred by the banks Tenor premium: denotes that higher interest can be charged from long term loans

Marginal Cost: The marginal cost that is the novel element of the MCLR. The marginal cost of funds will comprise of Marginal cost of borrowings and return on networth. According to the RBI, the Marginal Cost should be charged on the basis of following factors: 1. Interest rate given for various types of deposits- savings, current, term deposit,

foreign currency deposit 2. Borrowings – Short term interest rate or the Repo rate etc., Long term rupee

borrowing rate 3. Return on net worth – in accordance with capital adequacy norms.

The marginal cost of borrowings shall have a weightage of 92% of Marginal Cost of Funds while return on net worth will have the balance weightage of 8%. In essence, the MCLR is determined largely by the marginal cost for funds and especially by the deposit rate and by the repo rate. Any change in repo rate brings changes in marginal cost and hence the MCLR should also be changed. According to the RBI guideline, actual lending rates will be determined by adding the components of spread to the MCLR. Spread means that banks can charge higher interest rate depending upon the riskiness of the borrower. Powerful element of the MCLR system form the monetary policy angle is that banks have to revise their marginal cost on a monthly basis. According to the RBI guideline, “Banks will review and publish their MCLR of different maturities every month on a pre-announced date.” Such a monthly revision will compel the banks to consider the change in repo rate change if any made by the RBI during the month. Regarding the status-quo of base rate, the initial guidelines from the RBI indicate that the Base rate will be replaced by the MCLR. “Existing loans and credit limits linked to the Base Rate may continue till repayment or renewal, as the case may be. Existing borrowers will also have the option to move to the Marginal Cost of Funds based Lending Rate (MCLR) linked loan at mutually acceptable terms.”

106 How MCLR is different from base rate?

The base rate or the standard lending rate by a bank is calculated on the basis of the following factors: 1. Cost for the funds (interest rate given for deposits), 2. Operating expenses, 3. Minimum rate of return (profit), and 4. Cost for the CRR (for the four percent CRR, the RBI is not giving any interest to

the banks) On the other hand, the MCLR is comprised of the following are the main components. 1. Marginal cost of funds; 2. Negative carry on account of CRR; 3. Operating costs; 4. Tenor premium

It is very clear that the CRR costs and operating expenses are the common factors for both base rate and the MCLR. The factor minimum rate of return is explicitly excluded under MCLR. But the most important difference is the careful calculation of Marginal costs under MCLR. On the other hand under base rate, the cost is calculated on an average basis by simply averaging the interest rate incurred for deposits. The requirement that MCLR

should be revised monthly makes the MCLR very dynamic compared to the base rate.

Under MCLR: 1. Costs that the bank is incurring to get funds (means deposit) is calculated on a

marginal basis 2. The marginal costs include Repo rate; whereas this was not included under the

base rate. 3. Many other interest rates usually incurred by banks when mobilizing funds also

to be carefully considered by banks when calculating the costs. 4. The MCLR should be revised monthly. 5. A tenor premium or higher interest rate for long term loans should be included.

107 Insolvency Vs Bankruptcy

• Insolvency refers to a financial state and bankruptcy to a distinct legal concept • Insolvency is a financial condition or a state experienced when a legal entity or a

person‟s liabilities exceeds their assets and can no longer meet their debt obligations on time as they become due.

Bankruptcy is defined as a successful legal procedure that resulted from an application to the relevant court by • A Legal Entity or a person • Creditor • Special Resolution filed by a company with the Registrar • To be declared as Insolvent

Insolvency does not necessarily lead to bankruptcy, but all bankrupt debtors are considered Insolvent

108 THE INSOLVENCY AND BANKRUPTCY Code, 2016 Why?

• Multiple Laws to deal with Insolvency • Overlapping jurisdiction of laws • Lack of clarity in their provisions

Delay in disposal of applications

109 How it is beneficial for economy?

• Timely Resolution of cases • Creditors can seek recourse • Confidence to Creditors & Investors in India & Abroad • Deepen the Bond Market • Protect the interest of workers & employees • Fair chance to recover a company before it erodes • Ranking in ease of doing business will improve

110 Benefits of the Code

• Code to help wind up sick businesses • Cross-border insolvency • Protect workers of a bankrupt company • Fast Track Corporate Insolvency Resolution Process • Voluntary Liquidation of Corporate Persons, Firms and Individuals • Concept of operational creditor • Simple Procedure to resolve insolvency

111 Insolvency Professionals

A specialised cadre of certified professionals known as insolvency professionals (IPs)

will be created to handle insolvency resolution. These IPs will conduct the insolvency resolution process, take over the management of a company, assist creditors in the collection of relevant information, and manage the liquidation process.

112 Insolvency Professional Agencies

The IPs will be enrolled with insolvency professional agencies (IPAs). The IPAs will conduct examinations, certify IPs, and enforce a code of conduct for their functioning. Further, an IPA will furnish a performance bond to the regulator (Bankruptcy Board) on the commencement of insolvency resolution by a member IP. This bond will act as a surety against any misconduct by the IP during the resolution process.

113 Information Utilities

• Information utilities will be set up to collect, collate and disseminate financial information related to debtors. Such information will be collected from creditors and include records of debt, liabilities and defaults of a debtor.

• The information available with these utilities will be used as evidence to initiate insolvency resolution, and assist creditors in drafting a plan to resolve insolvency.

114 Insolvency and Bankruptcy Board of India

• The Insolvency and Bankruptcy Board of India will be set up as a regulator to oversee functioning of entities created under the Code, including IPs, IPAs and information utilities.

• The Board will have 10 members, including representatives from the central government and the Reserve Bank of India.

115 What is e-KYC?

Online generation of AADHAR 116 Rights of a Banker 1. Right of general lien

2. Right of set- off 3. Right of Appropriation

4. Right to act as per the mandate of the customer

117 Parameters of ranking the Bank by BCSBI

Transparency

Customer Centricity

Information Dissemination

Customer Feedback

Grievance Redressal

118 Scheme for Sustainable Structuring of Stressed Assets (S4A)

Resolution of large borrowal accounts which are facing severe financial difficulties may, inter-alia, require co-ordinated deep financial restructuring which often involves a substantial write-down of debt and/or making large provisions. Citing the case of the Strategic Debt Restructuring (SDR) mechanism which provides 18 months for banks to make prescribed provisions for the residual debt and mark-to-market (MTM) provisions on their equity holding arising from conversion of debt, banks have represented for allowing more time to write down the debt and make the required provisions in cases of resolution of large accounts.

119 Bank Board Bureau

BBB started functioning from 01.04.2016 It has replaced the Appointments Board for appointment of top level jobs at PSBs Composition: Six member body with at least 3 former bankers, 2 professionals and secretary, DFS

Functions:

Recommendations for appointment of full-time directors as well as non-executive Chairman of PSBs

Give advice to PSBs in developing differentiated strategies for raising funds through innovative financial methods and instruments and to deal with stressed assets

Guide banks on mergers & consolidations

120 Why banks are giving more thrust to Retail lending now a days?

Retail lending has the following advantages for the Banks: i. Less Risk and Diversification of Risk

ii. High earnings

iii. Capital conservation due to less risk weight under certain segments

iv. Creates wide customer base

v. Less effort in delivery of loans

121 What are the drivers of Retail lending that is giving a boost to Retail lending in our Country?

i. Rising Disposable Incomes ii. Nuclear Family Concept taking root iii. Demographic Dividend iv. Government Initiatives v. As Alternate Investment vi. Urbanization vii. Consumerism viii. Growing Aspirations ix. Unit Value Growth x. Increase in Double Income Families xi. Innovation in banking products and services. xii. Deregulation of interest rates.

xiii. Changes in life style of working/middle class.

122 What are the challenges facing banks for enhancing retail lending?

i. Cut throat competition

ii. Susceptibility to Frauds

iii. Need for constant innovation in products

iv. Need for setting up of a state-of-the-art marketing set-up

v. Non- digitization of land records in some States

123 What are the fundamentals driving growth of home loans in the country?

i. Demand for housing continues to grow with the population

ii. Existing housing shortage in the country especially in the affordable category

iii. Rising Urbanization driving significant chunk of growth

iv. Home owner profile changing- Age of housing loan borrowers coming down and

people getting more comfortable with financing

v. Penetration of housing finance increasing

vi. Average value of homes on the rise

vii. Loan values going up

124 What are the strategies to enhance retail lending in the Bank?

i. Tie up with builders, Auto dealers, Educational institutions, Govt. departments, etc.

ii. Canopy at Residential Apartments, Corporate offices, Residential colonies, etc. iii. Stalls at exhibition and other promotional events iv. Referral through our CC/CD/SB Customers. v. Staff relatives and friends vi. Presentations at Corporate Offices. vii. Putting up specialized schemes to RO and Corporate Office. viii. Pamphlets at strategic locations. ix. Internal Staff, building rapports with existing customers for cross selling x. Involving Top Executives while liasoning with builder, corporate, high end

customers. xi. Participating in Rotary/ lions and other club meetings.

xii. Sponsoring professional association meetings in order to target Professionals.

125 What are the USPs of our home loan product?

i. No limit

ii. Higher quantum eligibility of individuals at the higher income slabs

iii. Flexible repayment options

iv. Longer repayment period at 30 years

v. TAT of 5 days

vi. Top-up loan eligibility

vii. Personal loan to housing loan borrowers

viii. Higher age limit up to 70 years

126 Why Banks should sell third party products like insurance, mutual funds, etc.?

i. Thinning interest spreads necessitates improvement in fee-based income ii. Scope for improving income without much additional expenses iii. Need to optimize Human / Infrastructure / Capital resources iv. Customers need Universal banking v. Scope to Cross sell / Up-sell vi. More off-take of products offered on package terms vii. Increasing propensity to spend / save by the populace viii. Growing Middle income / High net worth segment ix. Need for retaining / improving market share x. Permits delivery through multiple channels

127 What is Inflation?

In economics inflation means, a rise in general level of prices of goods and services in

an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Thus, inflation results in loss of value of money. Another popular way of looking at inflation is "too much money chasing too few goods". The last definition attributes the cause of inflation to monetary growth relative to the output / availability of goods and services in the economy.

128 What is Stagflation?

Stagflation refers to economic condition where economic growth is very slow or stagnant and prices are rising

129 What is our Bank’s Vision Statement?

“To become the Bank of first choice in our chosen areas by building beneficial and lasting relationships with customers through a process of continuous improvement”

130 What is our Bank’s Mission Statement?

To be a Customer Centric Organization known for a differentiated Customer Service

To Offer a comprehensive range of products to meet all financial needs of Customers

To be a top creator of Share Holder Wealth through focus on profitable growth. To be a Young Organization leveraging on Technology and an Experienced

Workforce To be the Most Trusted Brand admired by all stake holders To be a Leader in the area of Financial Inclusion

131 BRAND Promises of our Bank

1] Value For Money 2] Committed turnaround time for delivery of products and services 3] Choice of channels 4] Transparency in Products offerings and prices

What is a repo rate? : Repo rate is the rate at which banks borrow funds from the RBI to meet the gap between the demands they are facing for money (loans) and how much they have on hand to lend. If the RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate. What is a reverse repo rate? : This is the exact opposite of repo rate. The rate at which RBI borrows money from the banks (or banks lend money to the RBI) is termed the reverse repo rate. The RBI uses this tool when it feels there is too much money floating in the banking system. If the reverse repo rate is increased, it means the RBI will borrow money from the bank and offer them a lucrative rate of interest. As a result, banks would prefer to keep their money with the RBI (which is absolutely risk free) instead of lending it out (this option comes with a certain amount of risk). Consequently, banks would have lesser funds to lend to their customers. This helps stem the flow of excess money into the economy Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks, while repo signifies the rate at which liquidity is injected. What is bank rate? : This is the rate at which RBI lends money to other banks (or financial institutions. The bank rate signals the central bank‟s long-term outlook on interest rates. If the bank rate moves up, long-term interest rates also tend to move up, and vice-versa. Banks make a profit by borrowing at a lower rate and lending the same funds at a higher rate of interest. If the RBI hikes the bank rate (this is currently 6 per cent), the interest that a bank pays for borrowing money

(banks borrow money either from each other or from the RBI) increases. It, in turn, hikes its own lending rates to ensure it continues to make a profit. What is call rate? : Call rate is the interest rate paid by the banks for lending and borrowing for daily fund requirement. Since banks need funds on a daily basis, they lend to and borrow from other banks according to their daily or short-term requirements on a regular basis. What is CRR? Cash Reserve Ratio, refers to a portion of it enables that RBI control liquidity in the system, and thereby, inflation by tying their hands in lending money What is SLR? : Besides the CRR, banks are required to invest a portion of their deposits in government securities as a part of their statutory liquidity ratio (SLR) requirements. What SLR does is again restrict the bank‟s leverage in pumping more money into the economy

BANK PERFORMANC TERMINOLOGY 1. Burden efficiency ratio: i.e. Non-Interest cost less non-interest revenue

divided by total business X 100. An increasing trend would show lack of burden bearing capacity.

2. Cash coverage ratio: i.e. cash divided by total business liabilities X 100. An increasing trend signifies presence of more of idle investments.

3. Non-performing advances ratio i.e. non-performing advances divided by total or net advances X 100. An increasing trend implies gradual increase in bad credit portfolio.

4. Total business growth ratio i.e. current period‟s business divided by last period‟s business. An increasing trend shows improvement.

5. Priority sector ratio i.e. PS advances divided by total advances X 100. The ratio shows the advances mix.

6. Aggregate deposits are the total deposits of a bank at the close of the accounting year. These include deposits from public and deposits from banks. From a different angle, the aggregate deposits equal the total of all demand and time deposits. A high deposit figure signifies a bank‟s brand equity, branch network and deposit mobilization strength.

7. Average working funds (AWF): The AWF at the beginning and at the close of an accounting year or at times worked out as fortnight or monthly average.

8. Working funds These are total resources (total liabilities or total assets) of a bank as on a particular date. Total resources include capital, reserves and surplus, deposits, borrowings, other liabilities and provision. A high AWF shows a bank‟s total resources strength. There is a school of theory which maintains that working funds are equal to aggregate deposits plus borrowing. However, more pragmatic view in consonance with capital adequacy calculations is, to include all resources and not just deposits and borrowings.

9. Net profits are the profits net of provisions, amortization and taxes. 10. Operating profits: Net profits before provisions and contingencies are

called operating profits. This is an indicator of a bank‟s profitability at the operating level.

11. Total debt Total debt equals total borrowings plus aggregate deposits. Total borrowings include borrowings in India and outside India. In turn, borrowings in India include borrowings from RBI, borrowings from other banks and borrowings from other institutions and agencies. It indicates a bank‟s propensity to leverage its net worth.

12. Net worth: This is aggregate of core equity capital and reserves and surplus. The net worth is tangible which is net of accumulated losses and unamortized preliminary expenses. It stands for the core strength of a bank and denotes a bank‟s margin of safety, its cushion for all creditors and its base foundation.

13. Total debt to net worth: The ratio is expressed as a number. The corresponding ratio in a manufacturing company is termed the debt-equity ratio. This ratio denotes a bank‟s degree of leveraging, relative to its net worth. A higher ratio is proof of bank‟s ability to leverage its net worth effectively.

14. Gross advances: These include overdraft, bills purchased, cash credit, loans and term loans including food credit. From a different angle, aggregate advances include advances inside India and advances outside India. When the food credit is reduced from the gross advances, it amounts to non-food credit.

15. Investments: Investments include investments in government securities, shares, bonds, commercial papers and debentures and other approved securities.

16. Interest income: The sum total of discount, interest from loans, advances and investment and from balance with RBI and other interest flows.

17. Interest income to average working funds: Expressed as a percentage, this ratio shows a bank‟s ability to leverage its average total resources in enhancing its main stream of operational interest income.

18. Non-interest income: This is other income of a bank. It includes items such as exchange commission, brokerage, gains on sale and revaluation of investments and fixed assets and profits from exchange transactions.

19. Non-interest income to average working funds This ratio denotes a bank‟s ability to earn from non-conventional sources. In a liberalized environment, this ratio assumes significance. For, it mirrors a bank‟s ability to take full advantage of its operational freedom.

20. Operating expenses: Equals the non-interest expenses. The operating expenses to AWF ratio explain the overall operational efficiency of a bank. In fact, this ratio is one of the indictors of profitability of a bank.

21. Interest spread: This is the excess of total interest earned over total interest expended. The ratio of interest spread to AWF shows the efficiency of bank in managing and matching interest expenditure and interest income effectively. Interest spread is critical to a bank‟s success as it exerts a strong influence on its bottom line.

22. Net spread: is an alternative term for operating profit in the banking industry. The net spread to AWF ratio reveals a lot about the overall

operational efficiency of a bank. 23. Risk weighted assets: The cumulative risk weighted value of assets plus

risk weighted credit converted contingent liabilities, which is used as the denominator for computing the capital adequacy ratio of bank.

24. Adjusted capital to risk weighted assets ratio: It reckons the unimpaired capital (net of net NPAs) available with the bank to mitigate potential adverse impact of credit, market and operational risk.

25. Net profit to AWF: The ratio is a foolproof indicator of excellent utilization of resources and optimum leveraging of funds.

26. Net profit to net worth: The ratio is equivalent of the return on net worth ratio used in other industries. It is indicator of profitability and return on shareholders‟ funds.

27. Operating profits to net worth: This is a corollary to NP/NW ratio and is another indicator of shareholders‟ return.

28. Capital adequacy ratio: This ratio relates a bank‟s core net worth to its risk-weighted assets. The ratio is internationally accepted risk-driven measure of a bank‟s degree of capitalization. A higher ratio indicates that a bank is well capitalized vis-a-vis its perceived risks. It is an excellent indicator of a bank‟s long term solvency.