Fund Based and Non-Fund Based Operations of the Bank

8/11/2019 Fund Based and Non-Fund Based Operations of the Bank

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FUND BASED AND NON-FUND BASED OPERATIONS

OF A BANK


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FUND BASEDOPERATIONS:Loans and AdvancesExport Credt

Pro!ect and "or#n$ capta%

&nance


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Loans and Advances:

Principles of sound Lending:-'( Prncp%e o) L*+dt,

( Prncp%e o) Sa)et, and Sec+rt,:-

. Capact, o) t.e /orro0er to repa,

. "%%n$ness o) t.e /orro0er to repa,

1( Prncp%e o) Pro&ta/%t,:-. Lendn$ operatons s.o+%d /e s+2cent%, pro&ta/%e to

cover cost o) )+nds3 cost o) nterest and rs# cost3 and%eave /a%ance )or provsonn$ 3 a%%ocaton to capta% andreserves )or expanson3 $ro0t. and )or 4antann$ ts

co4pettve va/%t,(5( Prncp%e o) P+rpose

. Loan s.o+%d /e sanctoned )or prod+ctve p+rpose and notspec+%atve p+rposes(

6( Prncp%e o) Dvers&caton o) Rs#


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Prncp%es o) so+ndLendn$7( Prncp%e o) Soca%

Respons/%t,:-

.An overd+e e4p.ass s.o+%d not

/e p+t on s8e o) t.e /orro0erand sec+rt, t.at .e s o9ern$(

.T.e tec.nca% co4petenc, and

econo4c va/%t, o) t.e pro!ects.o+%d a%so /e consdered(

.T.e prort, sector $+de%nes

s.o+%d a%so /e )o%%o0ed(


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Ter4 Loans:

T.e p+rpose o) t.e ter4 %oan s c%ear%,de&ned( As a res+%t t /eco4es easer )ort.e /an#er to 4ontor and contro% t.e +se o)/an# credt as co4pared to advances /,

0a, o) cas. credt or overdra)t(F+nds are provded at one $o )or a sn$%e

transacton(

Repa,4ent s +s+a%%, 4ade n nsta%%4ents3

t.o+$. so4et4es t can /e repad onde4and(

Interest to /e pad on entre a4o+nt0.et.er t s +t%8ed )+%%, or not(


6/30

T,pes o) Ter4 Loans:

Loans can /e c%ass&ed on t.e /ass o) perodsanctoned or on t.e /ass o) t.e p+rpose o) t.e%oan(

The loans on the basis of period can becategorized as follows:-

'( S.ort Ter4 Loans

( ed+4 or Lon$ Ter4

1( Brd$e Loans

. The loans on the basis of purpose are:-

'( Co4poste Loans

( Cons+4pton Loans


7/30

Sec+rtes and T,pes o) C.ar$es:-

C%ass&caton o) Sec+rt,:-Persona% Sec+rtes;Intan$/%e

sec+rtes

Tan$/%e Sec+rtesPr4ar, Sec+rtes

Co%%atera% Sec+rtes


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odes o) Creatn$C.ar$es:-Type of Charge Nature of

Security

Len


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odes o) Creatn$C.ar$es:Len:-Len 4eans r$.t o) t.e credtor to retan t.e $oods

and sec+rtes o0ned /, t.e de/tor +nt% t.e de/t d+e)ro4 .4 s repad(

T.e credtor on%, $ets t.e r$.t to retan t.e $oods

and not t.e r$.t to se%%(

Len can /e et.er partc+%ar or $enera%

T.e r$.t o) partc+%ar %en can /e exercsed /, aperson 0.o .as spent .s t4e3 4one, or %a/o+r ont.e $oods(

T.e r$.t o) $enera% %en con)ers a /%an#et r$.t on t.e/an#er and s app%ca/%e n respect o) a%% a4o+nts0.c. are d+e )ro4 t.e de/tor(

A /an#er en!o,s a r$.t o) $enera% %en(


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odes o) Creatn$C.ar$es:Pledge:-In p%ed$e $oods can /e retaned )or

an, s+/se*+ent advances /+t not )or

an, exstn$ de/t 0.c. s notcovered /, t.e p%ed$e(

In case o) non pa,4ent t.e /an#er.as r$.t to se%%(

Ban#er>s r$.t o) p%ed$e preva%s overan, ot.er d+es nc%+dn$ $overn4entd+es except 0or#er>s 0a$es(


11/30

odes o) Creatn$c.ar$es:Hypothecation:-=,pot.ecaton s an extended dea

o) p%ed$e 0.ere/, t.e credtor

per4ts t.e de/tor to retanpossesson o) $oods3 et.er on/e.a%) o) or n tr+st )or .4se%)(

It s convenent devce n t.ecrc+4stances n 0.c. t.e trans)ero) possesson s et.er nconvenentor 4practca/%e(


12/30

odes o) Creatn$C.ar$es:Assignent:- It 4eans trans)er o) contract+a% r$.ts and %a/%tes to a t.rd

part,(

T.e /orro0er can ass$n an, o) .s r$.ts3 propertes or de/tsto t.e /an#er as sec+rt, )or a %oan(

Us+a%%, t.e /orro0er 4a, ass$n /oo# de/ts3 4one, d+e )ro4$overn4ent or %)e ns+rance po%ces(

A%t.o+$. t.e notce o) ass$n4ent 3 s not re*+red +nder %a03t s n t.e nterest o) t.e ass$nee to $ve notce to t.e de/tor(

Ass$n4ent 4a, /e %e$a% or e*+ta/%e( A %e$a% ass$n4ent se9ected t.ro+$. an nstr+4ent n 0rtn$ s$ned /, t.e

ass$nor( T.e ass$nor a%so n)or4s t.e de/tor n 0rtn$ a/o+tt.e ass$n4ent3 t.e ass$nee>s na4e and address( T.eass$nee a%so serves a notce on t.e de/tor o) t.e ass$norand see#s con&r4aton o) ass$ned /a%ance(

I) t.e a/ove )or4a%tes are not done3 t s e*+ta/%e 4ort$a$e(


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odes o) Creatn$C.ar$es:-!ortgage:-".en a c+sto4er sec+res an advance on t.e

sec+rt, o) spec&c 44ova/%e propert,3 t.e c.ar$ecreated t.ereon s ca%%ed a 4ort$a$e(

A 4ort$a$e 4a, /e et.er Le$a% or E*+ta/%e(

Le$a% 4ort$a$e s a9ected /, trans)er o) %e$a% tt%eto t.e 4ort$a$e propert, /, t.e 4ort$a$or n )avo+ro) t.e 4ort$a$ee 0.c. nvo%ves expenses n t.e)or4 o) sta4p d+t, and re$straton c.ar$es(

In E*+ta/%e 4ort$a$e on%, doc+4ents o) tt%e aretrans)erred n )avo+r o) t.e 4ort$a$ee and not t.e%e$a% tt%e( In t.s case re$straton s not necessar,and so no need o) sta4p d+t, and re$stratonc.ar$es(


14/30

F+nd Based Operatons: Pro!ectFnanceEver, pro!ect nvo%ves certan &nanca% o+t%a, 0.c.

can /e re)erred to as pro!ect &nance(

I) pro!ect re*+res .+$e a4o+nt o) capta%3 t.en+s+a%%, a consort+4 o) /an#s s )or4ed 0.c.co%%ectve%, &nance t.e pro!ect(

T.e &nance s re*+red )or varo+s np+ts o) t.epro!ect3 e($( %and3 /+%dn$3 %a/o+r 3 4ac.ner, etc(

Fnanca% p%annn$ s /ased on t.e &nanca% apprasa%o) t.e pro!ect (e( ascertan4ent o) tota% %on$ ter4and s.ort ter4 &nancn$ re*+re4ents3 c.oosn$ t.eso+rces o) &nance at 4ost reasona/%e cost and 4ostapproprate t4e(

E($( Part o) capta% co4es )ro4 e*+t, partcpatonand part )ro4 %ender or %essors(


15/30

Pro!ect Apprasa%:

Technical Appraisal:-'( Pro!ect dea3 4an+)act+rn$ process3 p%ant and 4ac.ner, re*+re4ent

( Tec.no%o$, s.o+%d not /e o/so%ete or too advanced(

1( ".et.er nd$eno+s%, ava%a/%e or needs to /e 4ported

5( Ava%a/%t, o) *+a%&ed personne%(

. "inancial Appraisal:-

'( Assess4ent o) tota% &nanca% re*+re4ents and ts co4poston

( T.e so+rces o) )+nds needs to /e dent&ed

1( Cost o) )+nds and pro!ect rate o) ret+rns needs to /e est4ated(

. !ar#et Appraisal:-

'( Exstn$ and est4ated de4and )or prod+ct

( Co4petton

1( Export potenta%

. !anageent Appraisal:-'( Inte$rt, o) 4ana$e4ent

( Ed+caton( Tec.nca% *+a%&caton3 experence o) t.e 4ana$ers(

. $n%ironent Appraisal:-

'( D+e to tec.no%o$, or 0aste an, da4a$e can /e res+%ted to t.e envron4ent

( ".et.er 0aste s rec,c%a/%e3 eco ?)rend%, tec.no%o$, can /e +sed(


16/30

F+nd Based Operatons-"or#n$Capta%:

"or#n$ capta% s t.e a4o+nt o))+nds re*+red /, an enterprseto &nance ts da, to da, /+sness

operatons(In s.ort 0or#n$ capta% s excess

o) c+rrent assets over c+rrent

%a/%tes(Operatn$ c,c%e s t.e perod

/et0een t.e 4atera% ordern$

sta$e to converson o) sa%es n to


17/30

T,pes o) "or#n$ Capta%:

Per4anent "or#n$ Capta%F%+ct+atn$ "or#n$ Capta%


18/30

"or#n$ Capta% Ratos:

"or#n$ Capta% to sa%es ratoInventor, t+rnover rato

C+rrent rato

@+c# Rato


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Proced+re )or Assess4ent o)"or#n$ Capta% Re*+re4ents:-

T+rnover et.odTradtona% et.od

Cas. B+d$et et.od


20/30

F+nd Based Operatons-ExportCredt&is#s in $'port "inance:-'( T.e operatn$ c,c%e /eco4es %on$er d+e to t.e %on$ t4e

ta#en )or transt o) $oods3 .ence t.e need )or /%%dsco+ntn$ /eco4es 4ore 4portant(

( T.e $eo$rap.c dstance nvo%ved 4a#e t d2c+%t to

scr+tn8e t.e nte$rt, o) /+,er or s+pp%er c%ose%,(1( D9erent c+rrences pose rs#s o) exc.an$e rate

+ct+atons(

5( An +nderstandn$ o) t.e d9erent %e$a% s,ste4s3 t4e8ones s re*+red(

6( Apart )ro4 t.s 4a!or rs# s co+ntr, rs# (e( a pro/%e4can arse /eca+se o) o+t/rea# o) 0ar3 a revo%+ton3 cv%0ar etc(

7( A%so c.an$e n $overn4ent po%c, re$ardn$ 4port andexport or t.e +se o) trade ro+tes can a%so pose pro/%e4s(


21/30

Pre-S.p4ent or Pac#n$ Credt:

It s essenta%%, 0or#n$ capta% 4ade ava%a/%e )or&nancn$;p+rc.asn$;processn$;4an+)act+rn$;transportn$;0are.o+sn$o) $oods 4eant )or export(


22/30

Pre-S.p4ent or Pac#n$ Credt:

Rate o) Interest:-In case o) r+pee&nance3 at a rate o) nterest notexceedn$ (6 %ess t.an PLR and n caseo) Fore$n c+rrenc, &nance at a rate o)

nterest not exceedn$ 6 /ass ponts(6 over LIBOR(

Perod o) Fnance:- It s $ranted to an

exporter nor4a%%, )or 'G da,s( In caset.e /an# approves t can /e extended)or anot.er H da,s 0t. t.e prorapprova% o) RBI(


23/30

Post-S.p4ent Fnance:

Post-s.p4ent &nance )ac%t, s $ranted to/rd$e t.e $ap /et0een t.e s.p4ent o)$oods and t.e rea%8aton o) proceeds(

T.e export va%+e s.o+%d /e repatrated to

Inda 0t.n sx 4ont.s )ro4 t.e date o)export n nor4a% crc+4stances and 0t.n'6 4ont.s n case o) $oods exported to a0are.o+se esta/%s.ed o+tsde Inda( In

certan cases %#e 0.en t.e $oods areexported )ro4 a speca% econo4c 8one t.ea4o+nt can /e rea%8ed 0t.n ' 4ont.s(


24/30

Preca+tons to /e ta#en /, t.e /an#n case o) post s.p4ent &nance

T.e export doc+4ents s.o+%d /e s+/4tted0t.n ' da,s )ro4 t.e date o) export +n%ess apror approva% o) reserve /an# .as /eeno/taned(

aro+s doc+4ents %#e nvoce3 pac#n$ %st3ns+rance cert&cate3 /%% o) %adn$ s.o+%d not /enconsstent 0t. eac. ot.er(

T.e ns+rance po%c, and /%% o) %adn$ s.o+%d /eade*+ate and proper%, s$ned3 dated and

sta4ped(T.ere s.o+%d /e no dscrepanc, n t.e 0e$.t

4entoned n t.e nvoce and t.e 0e$.t %stedn ot.er doc+4ents(


25/30

Export I4port Ban# O)IndaEJI Ban#

EJI /an# 0as set +p on an+ar,'3 'HG(

T.e o/!ectves o) t.s /an# are3

$rantn$ %oans and advances nInda so%e%, or !ont%, 0t.co44erca% /an#s and ot.er

&nanca% /odes to personsexportn$ or 4portn$ orntendn$ to export )ro4 Inda3$oods and servces nc%+dn$ex ort o) t+rn#e ro ects ont


26/30

F+ncton o) EJI Ban#

Fnancn$ o) exports and 4ports o) $oods and servcesnot on%, n Inda /+t a%so n t.rd co+ntres(

Provson o) &nanca% assstance )or exports ;4ports o)4ac.ner, and e*+p4ent on %ease /ass(

Invest4ent &nance )or e*+t, partcpaton n !ont

vent+res a/road(


27/30

Export Credt


28/30

Non-F+nd BasedOperatons

(uarantees:-S.ort Ter4

De)erred Pa,4ent

)* Short Ter (uarantees:-. Per)or4ance $+arantee:-

'( It ass+res t.e /ene&car, t.at t.e c+sto4er 0%% per)or4 a contract n accordance 0t.t.e ter4s(

( It s .$. rs# $+arantee as per)or4ance over a perod o) t4e %#e%, to /e a9ected /,

cost over r+ns and +ncertantes to 4ar#et condton(. Fnanca%


29/30

De)erred Pa,4ent


30/30

Letter O) Credt LC

A LC s a doc+4ent ss+ed /, a /an#ass+rn$ pa,4ent to se%%er o) $oods orservces provded certan doc+4ents .ave/een provded to /an#(

A LC serves as a $+arantee to t.e se%%er t.att 0%% /e pad re$ard%ess o) 0.et.er t.e/+,er +%t4ate%, )a%s to pa,(

It )or4s an nte$ra% part o) nternatona%

trade(T.ere are t0o 4a!or t,pes o) LCs( S$.t LC

and Date or t4e LC(

Documents

Fund Based and Non-Fund Based Operations of the Bank