Basel Norms and Basel III Accord

Basel Norms: Basel norms are international banking regulations issued by the
Basel Committee on Banking Supervision (BCBS). They provide
recommendations on banking regulations concerning capital risk, market risk,
and operational risk.

Basel III: Basel III is a comprehensive set of reform measures developed by the
BCBS to strengthen the regulation, supervision, and risk management of the
banking sector. It aims to improve the banking sector's ability to deal with
financial stress, improve risk management, and strengthen banks'
transparency. Key features include increased capital requirements, a leverage
ratio to reduce the risk of excessive leverage, and two new liquidity ratios – the
Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR).

CIBIL (Credit Information Bureau India Limited)

CIBIL: CIBIL is India's first Credit Information Company (CIC) founded in 2000. It
collects and maintains records of individuals' and non-individuals' (commercial
entities) payments pertaining to loans and credit cards.

How Banks Check CIBIL: Banks check CIBIL scores to assess the
creditworthiness of loan applicants. A higher CIBIL score indicates better credit
history and thus higher chances of loan approval. Banks retrieve CIBIL reports
to review payment history, credit usage, and outstanding debt.

International Monetary Fund (IMF)

IMF: The IMF is an international financial institution headquartered in
Washington, D.C., consisting of 190 countries. It aims to foster global monetary
cooperation, secure financial stability, facilitate international trade, promote
high employment and sustainable economic growth, and reduce poverty. The
IMF provides policy advice, financial assistance, and technical assistance to its
member countries.
Asian Infrastructure Investment Bank (AIIB), Asian
Development Bank (ADB), and New Development Bank
(NDB)
AIIB: AIIB is a multilateral development bank headquartered in Beijing. It aims
to improve social and economic outcomes in Asia and beyond by investing in
sustainable infrastructure and other productive sectors.

ADB: ADB is a regional development bank headquartered in Manila. It aims to

promote social and economic development in Asia and the Pacific through
loans, technical assistance, grants, and equity investments to its member
countries.

NDB: NDB, formerly referred to as the BRICS Development Bank, is a

multilateral development bank established by the BRICS states (Brazil, Russia,
India, China, and South Africa). Its purpose is to fund infrastructure and
sustainable development projects in BRICS and other emerging economies.

Commercial Paper and Commercial Bill

Commercial Paper (CP): CP is an unsecured, short-term debt instrument issued
by corporations to meet immediate financial needs. It has a maturity period
ranging from a few days to a year.

Commercial Bill: Commercial bills are short-term, negotiable, and self-

liquidating instruments with low risk. They are issued by companies to meet
their working capital requirements and are generally payable on demand or at
a future date.

Mutual Fund and Systematic Investment Plan (SIP)

Mutual Fund: A mutual fund is a financial vehicle that pools money from many
investors to invest in securities like stocks, bonds, money market instruments,
and other assets. It is managed by professional fund managers.

SIP: SIP is a method of investing a fixed sum regularly in a mutual fund scheme.
It allows investors to buy units of the fund at different times, which can
average out the cost of investment and reduce risk.
Trial Balance
Trial Balance: A trial balance is a bookkeeping worksheet in which the balance
of all ledgers are compiled into debit and credit account columns. It ensures
that the total debits equal the total credits in the ledger, indicating that the
books are in balance.

Initial Public Offering (IPO) and Follow-on Public Offering

(FPO)
IPO: An IPO is the process through which a private company offers shares to
the public for the first time to raise capital from public investors.

FPO: An FPO is the issuance of additional shares by an already publicly listed

company to raise more funds.

Foreign Institutional Investor (FII) and Foreign Direct

Investment (FDI)
FII: FIIs are investment funds or entities that invest in the financial markets of a
foreign country. They typically invest in stocks, bonds, and other financial
assets.

FDI: FDI involves direct investment into production or business in a foreign

country, either by buying a company in the target country or by expanding
operations of an existing business.

Cash Flow and Fund Flow

Cash Flow: Cash flow refers to the net amount of cash being transferred into
and out of a business, especially concerning operating, investing, and financing
activities.

Fund Flow: Fund flow statements analyze the financial statements to show the
movement of funds and how they are generated and used over a specific
period.
Break-Even Point (BEP)
BEP: BEP is the point at which total revenue equals total costs, resulting in no
net loss or gain. It is used to determine the minimum sales volume needed to
avoid a loss.

Formulae:
BEP (Units)=Fixed CostsSelling Price per Unit−Variable Cost per Unit\text{BEP
(Units)} = \frac{\text{Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable
Cost per
Unit}}BEP (Units)=Selling Price per Unit−Variable Cost per UnitFixed Costs
BEP (Sales)=Fixed Costs1−Variable CostsSales\text{BEP (Sales)} =
\frac{\text{Fixed Costs}}{1 - \frac{\text{Variable
Costs}}{\text{Sales}}}BEP (Sales)=1−SalesVariable CostsFixed Costs

Inflation and Types of Inflation

Inflation: Inflation is the rate at which the general level of prices for goods and
services rises, leading to a decrease in purchasing power.

Types of Inflation:

 Demand-Pull Inflation: Caused by an increase in aggregate demand.

 Cost-Push Inflation: Resulting from rising costs of production.
 Built-In Inflation: Related to adaptive expectations, where workers
demand higher wages, leading to increased costs.

Consumer Price Index (CPI) and Wholesale Price Index (WPI)

CPI: CPI measures the average change over time in the prices paid by urban
consumers for a market basket of consumer goods and services.

WPI: WPI measures the average change in the price of goods at the wholesale
level.
Current Ratio and Its Ideal Ratio
Current Ratio: The current ratio measures a company's ability to pay short-
term obligations with its current assets.

Formula: Current Ratio=Current AssetsCurrent Liabilities\text{Current Ratio} =

\frac{\text{Current Assets}}{\text{Current
Liabilities}}Current Ratio=Current LiabilitiesCurrent Assets

Ideal Ratio: An ideal current ratio is typically considered to be 2:1, indicating

that the company has twice as many current assets as current liabilities.

Debt Equity Ratio and Its Ideal Ratio

Debt Equity Ratio: The debt equity ratio indicates the relative proportion of
shareholders' equity and debt used to finance a company's assets.

Formula: Debt Equity Ratio=Total LiabilitiesShareholders’ Equity\text{Debt

Equity Ratio} = \frac{\text{Total Liabilities}}{\text{Shareholders'
Equity}}Debt Equity Ratio=Shareholders’ EquityTotal Liabilities

Ideal Ratio: An ideal debt equity ratio is typically considered to be 1:1,

indicating a balanced proportion of debt and equity financing.
1. Role of a Credit Officer

A credit officer is responsible for evaluating, approving, or denying loan

applications from individuals or businesses. Key responsibilities include:

 Assessing creditworthiness by analyzing financial statements and credit

reports.
 Ensuring compliance with lending policies and regulations.
 Making informed decisions to minimize risk while maximizing
profitability for the financial institution.
 Providing recommendations to improve the credit process.
 Managing loan portfolios and monitoring ongoing financial health of
borrowers.

2. Helping a Farmer Financially as a Credit Officer

To assist farmers financially, you could:

 Offer tailored loan products suited to agricultural needs, such as crop

loans, equipment financing, or seasonal loans.
 Provide education on financial management and planning to ensure
sustainable farming operations.
 Collaborate with government schemes and subsidies designed to
support agriculture.
 Facilitate access to microfinance and cooperative banking options for
small and marginal farmers.
 Monitor loan usage to ensure funds are being used effectively for
agricultural activities.

3. Mobile Banking

Mobile banking refers to the use of a mobile device to perform financial

transactions. Features typically include:

 Checking account balances.

 Transferring funds between accounts.
 Paying bills.
 Depositing checks using the mobile device's camera.
 Accessing customer support.
 Managing personal finances with tools provided by the bank's mobile
app.
4. Sukanya Samriddhi Scheme

The Sukanya Samriddhi Scheme is a savings scheme launched by the

Government of India aimed at securing the future of a girl child. Key features
include:

 High interest rate compared to other savings schemes.

 Tax benefits under Section 80C of the Income Tax Act.
 Flexibility in deposit amounts with a minimum of INR 250 per year.
 Maturity period until the girl child turns 21 or gets married after age 18.
 Partial withdrawal allowed for education purposes after the girl turns 18.

5. Updating KYC of Customer

KYC (Know Your Customer) updates can be done by:

 Collecting updated identification documents like Aadhaar, PAN,

passport, etc.
 Verifying the address through utility bills, rental agreements, or other
valid documents.
 Using digital KYC methods like video KYC or e-KYC using Aadhaar-based
OTP.
 Ensuring regular updates to reflect any changes in the customer’s
information.

6. Double Entry System and Bookkeeping

The double entry system of bookkeeping involves recording each transaction in

two accounts: debit and credit. Key principles include:

 Every transaction affects at least two accounts.

 The total debits must equal the total credits.
 It helps maintain the accounting equation: Assets = Liabilities + Equity.
 Ensures accuracy and completeness in financial records.

7. Accounting Standard

Accounting standards are authoritative standards for financial reporting and

are used to ensure consistency, transparency, and comparability of financial
statements. They are issued by regulatory bodies like the International
Accounting Standards Board (IASB) or Financial Accounting Standards Board
(FASB).
8. Depreciation and Types of Depreciation

Depreciation is the allocation of the cost of a tangible asset over its useful life.
Types include:

 Straight-line depreciation: Allocates equal expense each year.

 Declining balance depreciation: Higher expense in earlier years,
decreasing over time.
 Sum-of-the-years-digits: Accelerated depreciation method.
 Units of production: Based on usage or output.

9. Accounting Procedure for Non-Profit Organization

Non-profits use fund accounting to track resources restricted by donors. Key

procedures include:

 Maintaining separate ledgers for restricted and unrestricted funds.

 Preparing financial statements like the statement of financial position,
activities, and cash flows.
 Ensuring compliance with donor restrictions and reporting
requirements.

10. Capital Budgeting

Capital budgeting is the process of evaluating and selecting long-term

investments that are consistent with the firm’s goal of maximizing owner
wealth. Techniques include:

 Net present value (NPV).

 Internal rate of return (IRR).
 Payback period.
 Profitability index (PI).

11. Bank Finance

Bank finance involves providing loans and credit to individuals, businesses, and
other entities. It includes:

 Short-term loans for working capital.

 Long-term loans for capital expenditures.
 Trade finance.
 Mortgage lending.
  Syndicated loans for large projects.

12. Major Differences Between Debentures and Shares

 Ownership: Shares represent ownership in a company, while debentures

are a form of debt.
 Return: Shareholders earn dividends, while debenture holders earn
interest.
 Risk: Shares are riskier as returns depend on company performance,
while debentures offer fixed returns.
 Priority: Debenture holders have priority over shareholders in case of
liquidation.

13. Major Changes to Balance Sheet in Revised Schedule VI of Companies Act

1956

Key changes included:

 Revised format and presentation for greater transparency.

 Classification of assets and liabilities into current and non-current.
 Detailed disclosure requirements for various items.
 Introduction of the "Notes to Accounts" for additional information.

14. General Instructions for Preparing a Company’s Balance Sheet

 Follow the prescribed format under applicable accounting standards.

 Classify items appropriately as current or non-current.
 Provide detailed disclosures and notes for significant items.
 Ensure accuracy and completeness of financial information.
 Comply with regulatory and statutory requirements.

15. Bancassurance

Bancassurance is a partnership between a bank and an insurance company

wherein the bank sells the insurance company's products. Benefits include:

 Increased revenue for banks through commissions.

 Wider distribution network for insurance companies.
 Convenience for customers to access banking and insurance services at
one place.
16. DRT and Appellate Tribunal

 Debt Recovery Tribunal (DRT): A specialized tribunal to recover debts

owed to banks and financial institutions. It handles cases involving
recovery of secured and unsecured loans.
 Appellate Tribunal: An appellate body to hear appeals against decisions
made by the DRT. It ensures fair and just resolution of disputes in the
debt recovery process.