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Sikkim Manipal University – Distant Education
Name: Registration Number: Learning Center:
Manik Pant 511017114 Chandigarh 03038
Learning Center Code: Course:
Masters of Business Administration
MA0037 Banking Related Laws & Third
Directorate of Distance Education Sikkim Manipal University II Floor, Syndicate House Manipal – 576104
Reg no # 511017114
___________________ _______________ _________________ Signature of Coordinator Signature of Center Signature of Evaluator Master of Business Administration – MBA Semester 3 MA0037 - Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 1
Q.1 a Who is a “holder”? How does a holder differ from a “holder in due course”? Ans: Holder : Section 8 of the Negotiable Instruments Act states that “The ‘holder’ of a promissory note, bill of exchange or cheque means “any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.” Holder in due course: A person who for consideration becomes the possessor of a promissory note, bill of exchange or cheque (if payable to bearer) The rights of a holder in due course of a negotiable instrument are qualitatively, as matters of law, superior to those provided by ordinary species of contracts: The rights to payment are not subject to set-off, and do not rely on the validity of the underlying contract giving rise to the debt (for example if a cheque was drawn for payment for goods delivered but defective, the drawer is still liable on the cheque) No notice need be given to any party liable on the instrument for transfer of the rights under the instrument by negotiation. However, payment by the party liable to the person previously entitled to enforce the instrument "counts" as payment on the note until adequate notice has been received by the liable party that a different party is to receive payments from then on.
Reg no # 511017114 Transfer free of equities—the holder in due course can hold better title than the party he obtains it from (as in the instance of negotiation of the instrument from a mere holder to a holder in due course) Negotiation often enables the transferee to become the party to the contract through a contract assignment (provided for explicitly or by operation of law) and to enforce the contract in the transfereeassignee’s own name. Negotiation can be effected by endorsement and delivery (order instruments), or by delivery alone (bearer instruments). In addition, the rights and obligations accruing to the transferee can be affected by the rule of derivative title, which does not allow a property owner to transfer rights in a piece of property greater than his own. A bill of exchange may be endorsed by the payee in favour of a third party, who may in turn endorse it to a fourth, and so on indefinitely. The "holder in due course" may claim the amount of the bill against the drawee and all previous endorsers, regardless of any counterclaims that may have disabled the previous payee or endorser from doing so. This is what is meant by saying that a bill is negotiable. Q1 b. What precautions should a banker take in making payment of the cheque? Ans: In the case of collection of cheques, a banker is: i. A Holder for Value: In the case of uncrossed or open cheques, he occupies exactly the same position as any other person who so acquires them. Ii .An agent: A banker, while collecting a cheque for a customer, cannot assert any right of a holder for value, for he is acting only as an agent. In doing so, he gets the same title on the cheques as that of his customer. Statutory Protection According to Section 131 of the Negotiable Instruments Act, 1881, “a banker, who has in good faith and without negligence received payment for a customer on a cheque crossed generally or specially to himself, shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reasons only of having received such payment.” The onus of proving good faith and absence of negligence is on the banker claiming protection under Section 131.
a banker should take extra precautions to safeguard the interests of the true owner.A cheque. Drawee ii. Authorized agent of the drawee iii.Reg no # 511017114 Conversion Conversion may be defined as the lawful talking. Collecting Banker’s Duties and Responsibilities 1. The Chief Accountant of Lloyds bank in Bombay was authorized to draw cheques on the account kept by the Lloyds Bank with the then Imperial bank of India. a banker would be liable for conversion if he paid a cheque on a forged endorsement. Legal representative. 4. It is the duty of the collecting banker to exercise the same care and precaution in the interests of the true owner of a cheque as a reasonable businessman would exercise in his own interests. if there are several drawees. Official Receiver. It may be noted that if there were no statutory protection. unless any one of them has the proper authority to accept it on behalf of all RESERVE BANK’S INSTRUCTION TO BANKS 1. when the drawee has been declared an insolvent v. depositing or destroying of goods. if the drawee is dead iv.The sole director of one-man co company endorsed. in the name of the company. which was made payable to a partnership firm. In collecting third party cheques. All the drawees. cheques drawn by third parties in favour of the company which collected them on his behalf and credited his account with their proceeds 5. using. 2. 3. was endorsed by one partner on behalf of the firm and was paid into his private account for collection with the defendant bank. which is inconsistent with the owner’s right of possession. The banker should present a bill for acceptance to the following: i. Solicitor Terrington drew cheques on Reckitt’s account pursuant to the power of attorney and paid them into his private account with the Midland Bank who collected them for him. Immediate Credit of Cheques 4/39 .
2. These facilities are to be provided to the customer even if the collection advices are not received by the banks concerned. In case of State capitals and other centers with more than100bank offices. Reserve Bank has further authorized the banks to ensure that where delay occurs. Reserve Bank has advised the banks to extend the facility of giving credit to the accounts for outstation cheques only to (i) satisfactory operated accounts and (ii) up to a maximum amount of Rs. Master of Business Administration – MBA Semester 3 MA0037 .000.Reg no # 511017114 Banks are required to give in the normal course immediate credit up to Rs. credit to the customer’s A/c should be given within 10 days and customer allowed withdrawing the amount. subject to the satisfactory operation of the customer’s account.000 to a customer for local as well as outstation cheques.Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 1 5/39 .5.10. the account holders should be paid penal interest without their requesting for it.
6/39 . The preamble of the Deposit Insurance and Credit Guarantee Corporation Act. commerce. (i) one Officer (normally in the rank of Executive Director) of the RBI. having special knowledge or practical experience in respect of accountancy.2 Explain the significance of DICGC Act. Ans: Legal Framework/Objective The functions of the DICGC are governed by the provisions of 'The Deposit Insurance and Credit Guarantee Corporation Act. (iii) five Directors nominated by the Central Government in consultation with the RBI. besides the Chairman. which is fully issued and subscribed by the Reserve Bank of India (RBI). or experience in co-operative banking or co-operative movement and none of the directors should be an employee of the Central Government. Organization and Functions Management The authorized capital of the Corporation is Rs. law or small scale industry or any other matter which may be considered to be useful to the Corporation. insurance. agriculture and rural economy. three of whom are persons having special knowledge of commercial banking. 1961 states that it is an Act to provide for the establishment of a Corporation for the purpose of insurance of deposits and guaranteeing of credit facilities and for other matters connected therewith or incidental thereto. or otherwise actively connected with a banking company or a cooperative bank. and (iv) four Directors. industry or finance and two of whom shall be persons having special knowledge of. The management of the Corporation vests with its Board of Directors. finance.50 crore. co-operation. of which a Deputy Governor of the RBI is the Chairman. banking. or the RBI or the Corporation or a director or an employee of a banking company or a co-operative bank. (ii) one Officer from the Central Government. 1961' framed by the Reserve Bank of India in exercise of the powers conferred by sub-section (3) of Section 50 of the said Act. nominated by the Central Government in consultation with the RBI. 1961' (DICGC Act) and 'The Deposit Insurance and Credit Guarantee Corporation General Regulations. economics. Highlight the latest amendments to the act.Reg no # 511017114 Q. the Board shall consist of. As per the DICGC Act.
Out of these. since almost all the banks have opted out of the Credit Guarantee Schemes. It has four Departments. 2000. Chennai and Nagpur were closed with effect from November 30. 1961. viz. While major items of work of these three branches were taken over by the Head Office of the Corporation. are treated as eligible banks. situated at Kolkata. Registration of new banks as insured banks Under Section 11 of the DICGC Act. An Chief Executive Officer is in overall charge of its day-to-day operations. Chennai. other than those from the States of Meghalaya and the Union Territories of Chandigarh. Credit Guarantee and Administration. the branches situated at Kolkata. 1961. and most of the pending claims have been settled. (II) Co-operative Banks . The Corporation had four branches. Nagpur and New Delhi.Reg no # 511017114 The Head Office of the Corporation is at Mumbai. Lakshadweep and Dadra and Nagar Haveli are covered by the Scheme. Central and Primary co-operative banks functioning in the States/Union Territories which have amended their Co-operative Societies Act as required under the DICGC Act. Deposit Insurance Banks covered by Deposit Insurance Scheme (I) All commercial banks including the branches of foreign banks functioning in India. All State. Local Area Banks and Regional Rural Banks. 1949. amalgamation or reconstruction of a cooperative bank without prior sanction in writing from the RBI. under the supervision of other Senior Officers. Following the enactment of the Regional Rural Banks Act.All eligible co-operative banks as defined in Section 2(gg) of the DICGC Act are covered by the Deposit Insurance Scheme. some residual items of work are vested with the DICGC Cells specially created in the Rural Planning & Credit Department of the Reserve Bank of India at the respective centres. Deposit Insurance. Accounts. At present all co-operative banks. all new commercial banks are required to be registered as soon as may be after they are granted licence by the Reserve Bank of India under Section 22 of the Banking Regulation Act. empowering RBI to order the Registrar of Co-operative Societies of the respective States/Union Territories to wind up a co-operative bank or to supersede its committee of management and requiring the Registrar not to take any action for winding up. 1976 all Regional Rural Banks are required to be registered within 30 days from 7/39 .
1968. 1965 or at any time thereafter is to be registered within three months of its making an application for licence. it is required to send.Reg no # 511017114 the date of their establishment in terms of Section 11A of the DICGC Act. 1961. which is dispatched by Registered post or the date of commencement of business whichever is later. The insured bank has to submit its first return and remit the amount of premium within one month from the receipt of the letter. The letter of intimation. if it has been informed by the RBI in writing that a licence cannot be granted to it. Co-operative Banks .A new co-operative bank is required to be registered as soon as may be after it is granted a licence by the RBI. an intimation in writing to the bank that it has been registered as an insured bank. However. a co-operative bank will not be registered. apart from the advice of registration and registration number. A primary co-operative credit society becoming a primary co-operative bank is to be registered within 3 months from the date of its application for license. or the amalgamation of two or more co-operative societies carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act. the rate of premium payable to the Corporation. Latest Amendments The Deposit Insurance and Credit Guarantee Corporation (DICGC) has reviewed its policy for settlement of claims of joint account holders in the event of liquidation of a bank. As per the revised policy the deposits held in two separate joint accounts in combination of say "A" 8/39 . after the Corporation registers a bank as an insured bank. as a result of the division of any other co-operative society carrying on business as a co-operative bank. A co-operative bank which has come into existence after the commencement of the Deposit Insurance Corporation (Amendment) Act. A copy of this letter is endorsed to the Reserve Bank of India and also National Bank For Agriculture and Rural Development (NABARD) in the case of Regional Rural Banks/State co-operative banks and District Central co-operative banks. the manner in which the premium is to be paid by the bank and the returns to be furnished to the Corporation etc. gives the details about the requirements to be observed by the bank. In terms of Section 14 of the DICGC Act. within 30 days of the bank's registration.
Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 1 Q. "X" and "Y".3 When a bank obtains a guarantee of a third party as collateral security.Reg no # 511017114 and "B" and "B" and "A". (d) fixing of self-set target to SSI sector by banks. will now be treated as two separate accounts. one lakh aggregating the balance in both accounts together. one lakh. one lakh in the event a bank is taken for liquidation. and each category of the joint account will be eligible for a claim upto Rs. DICGC used to settle the claims of all joint accounts in "the same capacity and the same right" upto Rs. etc. one lakh. one lakh. Gupta Committee. Often husband and wife having independent source of income maintained joint accounts for operational convenience. So far. "Y" and "Z" will be treated as different from the joint account of "Y". 9/39 . Govt. (c) regular meeting of Standing Advisory Committee (SAC). a joint account of "X". This meant that joint accounts of "A" and "B" and "B" and "A" in the same bank were treated as one account and the claims were settled for only upto Rs. Six recommendations have not been accepted by the Ministry of SSI. for the purpose of settlement of claims and claims in each category account will be paid upto Rs. (b) softer interest rate for SSI entrepreneurs. Master of Business Administration – MBA Semester 3 MA0037 . The DICGC pays insurance claims of depositors upto Rs. if a husband and a wife having independent sources of income opened two joint accounts for operational convenience as "A" and "B" and "B" and "A". of India. Similarly. The revised policy is expected to bring relief to depositors who maintain such accounts. Thus. (d) enhancement in the quantum of composite loan and collateral free loans. for all combinations of the same set of depositors. 8 recommendations pertained to RBI which have been implemented such as (a) fixing of time frame for disposal of loan application forms. "Z" and "X" or "Z". one lakh. The policy has been revised in response to representations received from affected depositors.P. one lakh. what factors will it examine in it? Ans: Out of 64 major recommendations of the S. their claim was payable only upto Rs. It may be noted that deposits of all banks are insured upto Rs.
However. 10. they. In respect of other accounts. due to peculiar land tenure system. Reserve Bank of India may also prescribe that at least 10% of the SSI loans sanctioned by a bank branch should be without collateral guarantees. the banks may exercise their commercial judgement in determining the level of collateral or third party guarantee. However. The Committee also suggests that for loans upto Rs. The support from this fund will be limited to projects costing upto Rs.g.00 lakh.00 lakh. however. must play a more proactive role to assist SSI entrepreneurs. SSI Associations. (in most of states. the value of collateral security or the net means of third party guarantee should not be more than 50% of the fund and non-fund based exposure of the bank/financing institution.10.Reg no # 511017114 The Working Group strongly feels that the banks should have the freedom to decide the terms of lending (with or without collaterals) depending on the risk perception of any proposal. There is a need for private initiative to provide mutual credit guarantee. 100 crore to be contributed by Government of India. NABARD.2.10. Beyond loans of Rs. the issue of alternative to land mortgage for availing bank loan could be addressed if Deputy Commissioners can provide guarantee for the loans in their capacity as Chairman of Village Development Boards (e. in no case a bank should obtain a collateral security or third party guarantee which is in excess of the loan amount. The scheme needs to be revisited to make it more affordable for the intended users. entrepreneurs will have to contribute to this 10/39 .000/-. Greater emphasis may be laid on the viability of the project and the management of the enterprises rather than on collateral security.25. The Committee proposes the setting up of a collateral Reserve Fund with an initial corpus of Rs. A revised floor level of Rs.e. thereby making it difficult to provide individual collateral for availing credit). The Model of Mutual Credit Guarantee may be able to address the problem of collateral. Reserve Bank of India should initiate appropriate policy measures for phasing out the system of collateral securities.00 lakh. SIDBI. the collateral security including third party guarantee should be in relation to the risk undertaken. the land is owned by the community. In the states of North Eastern Region. i. till such time the policy relating to collateral-free lending is reviewed.00 lakh for exemption of borrowal accounts from obtention of collateral securities is recommended as against the existing level of Rs. as a prudent measure the existing credit guarantee scheme (CGTSI) may continue. he North East entrepreneurs have a major problem in providing collaterals. However. The Credit Guarantee Scheme for Small Industries (CGTSI). State Governments and banks with a view to providing support to first generation entrepreneurs who find it very difficult to furnish collateral securities or 3rd party guarantees. Nagaland). banks and the CGTSI should actively encourage SSI entrepreneurs to cover their loans under the Scheme.
trained personnel. etc. Individual SFCs or groups of SFCs may be reconstituted under the Companies Act in order to enhance their functioning. Commercially viable SFCs may be restructured which could become effective vehicles for banks/financial institutions to fund the SME and tiny sector. they could be encouraged to play a more proactive role with the help of the following measures: • • • • • • SFCs Act needs be repealed in order to enable them to become effective vehicles for the promotion of SMEs and tiny sector.Reg no # 511017114 fund by paying some token amount of interest in addition to the PLR to avail of this assistance Furthermore since many SFCs already have good infrastructure. SIDBI and banks either individually or jointly would be ideally placed to initiate the privatization of SFCs. State Government stake in SFCs may be taken over by SIDBI or individual banks as may be appropriate.. Restructuring of SFCs could be facilitated by their NPAs being transferred to appropriate Asset Reconstruction Companies. Master of Business Administration – MBA Semester 3 11/39 .
Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 1 Q. Ans: With an aim to provide a structured platform to the Banking sector for managing its mounting NPA stocks and keep pace with international financial institutions. Over the course of time. the Government has adopted several ad-hoc measures to tackle sickness among financial institutions. 12/39 . asset-liability mismatches and improve recovery by taking possession of securities.4 Highlight the main provisions of SARFAESI. As stated in the Act.Reg no # 511017114 MA0037 .” Prior to the Act. Board for Industrial and Financial Reconstruction (BIFR) and The Appellate Authority for Industrial and Financial Reconstruction (AAIRFR) and their benches. sell them and reduce non performing assets (NPAs) by adopting measures for recovery or reconstruction. The committee suggested the need for special legislation for speedy revival of sick units or winding up of unviable ones and setting up of quasijudicial body namely. the Government has put in place various mechanisms for cleaning the banking system from the menace of NPAs and revival of a healthy financial and banking sector. Some of the notable measures in this regard include: • Sick Industrial Companies (Special Provisions) Act. the legal framework relating to commercial transactions lagged behind the rapidly changing commercial practices and financial sector reforms. The SARFAESI Act has been largely perceived as facilitating asset recovery and reconstruction. it has “enabled banks and FIs to realize long-term assets. It was to suggest a comprehensive legislation to deal with the problem of industrial sickness. 1985 or SICA: To examine and recommend remedy for high industrial sickness in the eighties. the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act was put in place to allow banks and FIs to take possession of securities and sell them. the SICA came into existence and BIFR started functioning from 1987. manage problems of liquidity. which led to slow recovery of defaulting loans and mounting levels of NPAs of banks and financial institutions. Thus in 1985. the Tiwari committee was set up by the Government. foremost through nationalisation of banks and relief measures. Since Independence.
The system was not favourable for the banking sector as it provided a sort of shield to the defaulting companies.Reg no # 511017114 The objective of SICA was to proactively determine or identify the sick/potentially sick companies and enforcement of preventive. • Recoveries of Debts due to Banks and Financial Institutions (RDDBFI) Act. suggested formation of Special Tribunals for recovery of overdue debts of the banks and financial institutions by following a summary procedure. The need for a speedy recovery mechanism through which dues to the banks and financial institutions could be realised was felt. the BIFR SARFAESI ACT 2002: An Assessment process was cumbersome and unmanageable to some extent. For the effective and speedy recovery of bad loans. remedial or other measures with respect to these companies. the RDDBFI Act was passed suggesting a special Debt Recovery Tribunal to be set up for the recovery of NPA. However. this act also could not speed up the recovery of bad loans. Different committees set up to look into this. However. 13/39 . and the stringent requirements rendered the attachment and foreclosure of the assets given as security for the loan as ineffective. financial restructuring as well as management overhaul. 1993: The procedure for recovery of debts to the banks and financial institutions resulted in significant portions of funds getting locked. Measures adopted included legal.
it largely takes care of the interest of bankers 14/39 . For the revival of such businesses. a CDR system was established with the objective to ensure timely and transparent restructuring of corporate debts of viable entities facing problems. which are outside the purview of BIFR. The system has addressed the problems due to the rise of NPAs. With this view. as well as.Reg no # 511017114 • Corporate Debt Restructuring (CDR) System: Companies sometimes are found to be in financial troubles for factors beyond their control and also due to certain internal reasons. the system aimed at preserving viable corporate/businesses that are impacted by certain internal and external factors. Although CDR has been effective. thus minimising the losses to the creditors and other stakeholders. DRT and other legal proceedings. timely support through restructuring in genuine cases was required. In particular. for the security of the funds lent by the banks and FIs.
the SARFAESI Act. and empowering banks and FIs to take possession of the securities and sell them without the intervention of the court and without allowing borrowers to take shelter under provisions of SICA/BIFR. empower SCs/ARCs to raise funds by issuing security receipts to qualified institutional buyers (QIBs). out of investments made by a QIB and ensure that realisations of such financial asset is held and applied towards redemption of investments and payment of returns assured on such investments under the relevant scheme. namely: • Securitisation: It means issue of security by raising of receipts or funds by SCs/ARCs. was passed in 2002 to legalise securitisation and reconstruction of financial assets and enforcement of security interest. A securitisation company or reconstruction company may raise funds from the QIBs by forming schemes for acquiring financial assets. Acting on these suggestions. The act envisaged the formation of asset reconstruction companies (ARCs)/ Securitisation Companies (SCs).Reg no # 511017114 and ignores (to some extent) the interests of borrower’s stakeholders. 15/39 . • SARFAESI ACT 2002: By the late 1990s. facilitate securitisation of financial assets of banks. through CDR merely. The banks do not go for a one time large write-off of loans in initial stages. These committees suggested a new legislation for securitisation. address the financial structure of the company by deferring the loan repayment and aligning interest rate payments to suit company’s cash flows. empowering banks and FIs to take possession of securities given for financial assistance and sell or lease the same to take over management in the event of default. The Act provides three alternative methods for recovery of NPAs. The secured lenders like banks and FIs. Provisions of the SARFAESI Act The Act has made provisions for registration and regulation of securitisation companies or reconstruction companies by the RBI. rising level of Bank NPAs raised concerns and Committees like the Narasimham Committee II and Andhyarujina Committee which were constituted for examining banking sector reforms considered the need for changes in the legal system to address the issue of NPAs. The SC/ARC shall keep and maintain separate and distinct accounts in respect of each such scheme for every financial asset acquired.
as the case may be. under section 7 of the Act. limiting or extinguishing any right. or take over of.Reg no # 511017114 • Asset Reconstruction: The SCs/ARCs for the purpose of asset reconstruction should provide for any one or more of the following measures: • the proper management of the business of the borrower. shall not require compulsory registration. Exemption from registration of security receipt: The Act also provides. declaring. title or interest to or in immovable property except in so far as it entitles the holder of the security receipt to an undivided interest afforded by a registered instrument. notwithstanding anything contained in the Registration Act. • The Guidelines for SCs/ARCs registered with the RBI are: • • • act as an agent for any bank or FI for the purpose of recovering their dues from the borrower on payment of such fees or charges act as a manager between the parties. act as receiver if appointed by any court or tribunal. and not creating. 1908. the management of the business of the borrower • the sale or lease of a part or whole of the business of the borrower • rescheduling of payment of debts payable by the borrower • enforcement of security interest in accordance with the provisions of this Act • settlement of dues payable by the borrower • taking possession of secured assets in accordance with the provisions of this Act. Apart from above functions any SC/ARC cannot commence or carryout other business without the prior approval of RBI. or (b) any transfer of security receipts. without raising a financial liability for itself. for enforcement of security without Court intervention: (a) any security receipt issued by the SC or ARC. by change in. 16/39 . assigning.
Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 1 Q. Outsourcing is usually used if one of the following applies to the specific function required: 1. Ans: Outsourcing has quickly become a commonly used tool in organizations. Why Outsource then? Organizations make use of outsourcing when a certain function has a potential to become more economic with little strategic cost to the organization.5 Outsourcing raises a variety of concerns such as operational. reputation and legal risk. Special skills are required and it is unwise to invest in their development within the organization . outsourcing has some inherent risks which should be identified and dealt with preemptively. Detail the pros and cons of such array on SBI for offering mobile banking semi in partnership with Airtel.It is wise to outsource if it is not economically sound to invest in developing a set of skills. Another consideration should be the quality of skills developed in comparison to those available outside the organization. What has made outsourcing so popular? The popularity of outsourcing is well justified as it generates significant advantages. 17/39 . However. Airtel extended into MOU with IBM for managing its back office operation.Reg no # 511017114 Master of Business Administration – MBA Semester 3 MA0037 .
Sometimes outsourcing enables using the advantages of the third party company to the organization's advantage (for example in negotiations.Outsourcing certain function may simplify the organization and enable management to focus on core-competencies and core-functions with greater clarity. Lowering organizational complexity for increased 'management ability'. Outsourcing might have many potential benefits. Inner oppositions to outsourcing . networks etc. 4.By outsourcing a function given up on.Outsourcing functions results in personnel changes.If a specific function required to an organization is not a part of its core competencies or core strategy there is little sense in performing that function within the organization. If a technology is a means and not an end outsourcing should be considered as a specializing company will be more effective. 3. Improving organizational effectiveness by utilizing a third party .Obviously when a function is outsourced interface with another organization are set up. Information leaks . Specialization produces greater effectiveness and advantages to scale . Naturally organizations should expect employee opposition to outsourcing. Organizations carefully select focal points in adherence to their competitive advantage. Need for constant technological improvement and upkeep Technology requires high investments in maintenance. 5. 4. Not a core-competence of the organization . Losing the ability to re-establish outsourced functions . 3. 2.Obviously outsourced functions are performed by employees with little or no organizational relevance. This results in losing professional know-how and infrastructure in case the organization decides to reestablish the function within itself.) 6.Some functions have significant scale advantages. However organizations should also be wary of potential risks.Reg no # 511017114 2. These may be a source for information leaks which might damage the organization's ability to compete. The following is a list of the common risks of outsourcing: 1. 18/39 . Lowered employee loyalty . Outsourcing these functions will often result in better outputs with lower costs. updates and r&d.
Master of Business Administration – MBA Semester 3 MA0037 . Advantages to scale and learning curves force organizations to outsource functions and abilities which are not at the core of their business. stock. insurance and real-estate brokerage) providing both banking and financial services through a single window. Keeping an eye on outsourced functions is crucial to ensure the quality of product or service outsourced.Reg no # 511017114 5. 6.Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 2 Q 1. Ans: Core Banking is a multi-purpose and multi-functional financial supermarket (a company offering a wide range of financial services e. consistency and oversight Outsourcing requires setting up an oversight function within the organization as there is a requirement for quality and consistency. Unclear borders for cooperation .Co operating with another organization is not a clear cut undertaking. Outsourcing holds many benefits but many risks as well. Explain the pros and cons of extending core banking facility . 19/39 . There is a risk of creating unclear borders between the organizations.g. Problems with quality. In today's global and dynamic environment speed and effectiveness is important.
a Core Banking is a superstore for financial products under one roof. large banks operate extensive network of branches. In Germany. amalgamations and acquisitions between the banks and financial institutions resulted in the growth in size and competitive strengths of the merged entities. Housing Finance. 20/39 . i. Reforms in the insurance sector in the late 1990s. Since the early 1990s structural changes of profound magnitude have been witnessed in global banking systems. Large scale mergers.e. It includes not only services related to savings and loans but also investments. all the restrictions on project financing were removed and banks were allowed to undertake several in-house activities. Insurance etc. while can deposit and borrow. For example. IRDA (Insurance Regulatory and Development Authority). as there is in the United States. By the mid-1990s. and opening up of this field to private and foreign players also resulted in permitting banks to undertake the sale of insurance products. Factoring. hold several claims on firms(including equity and debt) and participate directly in the Corporate Governance of firms that rely on the banks for funding or as insurance underwriters". "In Core Banking. and act as investment advisors to large corporations. lend money. there has never been any separation between commercial banks and investment banks. At present. in Germany commercial banks accept time deposits. beyond the commercial banking functions like Mutual Funds. Merchant Banking. Investment banking. only an 'arm's length relationship between a bank and an insurance entity has been allowed by the regulatory authority. In a nutshell. Retail loans. emerged new financial conglomerates that could maximize economies of scale and scope by building the production of financial services organization called Core Banking. Credit Cards. provide many different services. THE CONCEPT OF CORE BANKING The entry of banks into the realm of financial services was followed very soon after the introduction of liberalization in the economy. Auto loans. Thus. However in practice the term 'Core banking' refers to those banks that offer a wide range of financial services.Reg no # 511017114 Definition of Core Banking: As per the World Bank. Corporate can get loans and avail of other handy services. This is most common in European countries. underwrite corporate stocks.
Automatically. So. Advantages of Core Banking • • • • • • Economies of Scale. which can be further analyzed by the pros and cons. CORE BANKING – PROS AND CONS The solution of Core Banking was having many factors to deal with. a bank can reach the client even in the remotest area without having to take resource to an agent. diversifiable and non diversifiable risk analysis. is useful for other clients and information seekers. Many Committees and reports by Reserve Bank of India are in favour of Core banking as it enables banks to explit economies of scale and scope. A data collection about the market trends. Mutual Funds without spending much efforts on marketing.Reg no # 511017114 The phenomenon of Core Banking as a distinct concept. as the branch will act here as a parent company or source. In this way. The main advantage of Core Banking is that it results in greater economic efficiency in the form of lower cost. acts as a signal for other investor on to the health of the firm since the lending bank is in a better position to monitor the firm's activities. Investor Friendly Activities. Resource Utilization. etc. A bank's existing branches can act as shops of selling for selling financial products like Insurance. It is beneficial for the bank as well as its customers. By diversifying the activities. the bank can use its existing expertise in one type of financial service in providing other types. 21/39 . The idea of 'one-stop shopping' saves a lot of transaction costs and increases the speed of economic activities. higher output and better products. risk and returns associated with portfolios of Mutual Funds. a bank will get the benefit of being involved in the researching Easy Marketing on the Foundation of a Brand Name. Profitable Diversions. Another manifestation of Core Banking is bank holding stakes in a form : a bank's equity holding in a borrower firm. One-stop shopping. which can be used to pursue other activities with the same clients. A bank possesses the information on the risk characteristics of the clients. as different from Narrow Banking came to the forefront in the Indian context with the Narsimham Committee (1998) and later the Khan Committee (1998) reports recommending consolidation of the banking industry through mergers and integration of financial activities. it entails less cost in performing all the functions by one entity instead of separate bodies.
term. an area where DFIs tread carefully. The biggest one is overcoming the differences in regulatory requirement for a bank and DFI. Project finance and Infrastructure finance are generally long. Unlike banks. DFIs are not required to keep a portion of their deposits as cash reserves.Reg no # 511017114 Disadvantages of Core Banking • • • Grey Area of Core Bank. For the DFIs and Core Banking or installation of cutting-edge-technology in operations are unlikely to improve the situation concerning NPAs. becoming a bank may not make a big difference to a DFI. the transformation into a bank may not be of great assistance in lending long-term. In the case of traditional project finance.gestation projects and would require DFIs to borrow long. The path of Core banking for DFIs is strewn with obstacles. The most serious problem that the DFIs have had to encounter is bad loans or NonPerforming Assets (NPAs). 22/39 . No Expertise in Long term lending. Therefore. NPA Problem Remained Intact.
Secured lending is achieved by making appropriate legal arrangements to ensure that in the event of a borrower defaulting on their payments. other forms will typically include: .Life assurance policies 23/39 .Land . From the lender's point of view. In the case of mortgage lending. The main benefit of taking security is that it provides the lender with a safety net in the event that an individual ceases to make their repayments. The most common of which is property however.Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 2 Q 2. financial self-discipline and the likelihood of being able to keep up repayments grows stronger. the prospect of losing one's home through repossession strikes a significant amount of fear through most individuals. so as to enforce a recovery. The flip side to this reason is that it also has a large impact on a borrower's attitude towards debt repayment. Ans: Secured Advances When a borrower arranges secured finance they are giving the lender some means of assurance which is usually the security or collateral over their property. Distinguish between secured and unsecured advance. In this way. Security or collateral can be taken over many different types of assets. the only viable method to grant finance on a larger scale is by way of a secured loan.Reg no # 511017114 Master of Business Administration – MBA Semester 3 MA0037 . or limit exposure to loss. the lender can stake a claim to certain assets or rights.
ie when or if the property is sold the mortgage loan gets repaid first A secured loan will therefore normally always be 'second charge'. pooled investment schemes. that does not mean to say that secured lending is completely risk free on the part of the lender as it is common for there to be shortfalls in cases of repossession.Types of investments such as equities.Loan repayment in this case is completely dependant on the borrower's intention and ability to repay. In an ideal world. Many Banks and Finance houses will have a standard format for loan assessments such as a credit scoring model.Reg no # 511017114 . a lender will not make a secured loan advance if the applicant is unable to fit their stringent set of criteria . The asset over which security is taken will typically belong to the borrower however this will not always be the case.Cash . the lender will automatically have the right to apply to the Courts to repossess your home and sell it to recover the money owing to them. the form of lending is then described as being 'unsecured'. In contrast.The security simply gives the lender a greater degree of comfort. Unsecured lending inevitably involves a much higher degree of risk than its secured counterpart . the original mortgage has what's called the 'first charge'. ie it is secured on the value of the property after the mortgage has been repaid • The most important point to understand about secured borrowing is that if you default on the repayments. The traditional 'personal' approach to unsecured lending has very much been taken away in recent years by the emergence of computer based automated filters with statistical analysis and credit scoring functions. • • The money lent via a 'secured loan' is secured against a property or other asset As most people who take out a secured loan already have a mortgage on their property. Finance can also be secured by the use of guarantees and third party security. The traditional methods of loan assessment have had to change in 24/39 . Unsecured Advances In any case where security or collateral is not required for a loan advance. stocks and bonds.
This means your monthly payments will be lower but the total amount of interest paid over the lifetime of the loan can be absolutely huge 4. The problem with these companies is that 1. Again. The loans offered are only ever secured on your property which means if you default on the loan there's a good chance your home will be repossessed 2.Bank/Building Society overdraft facilities .Reg no # 511017114 recent times due on the main part to the sheer volume of loan applications which are handled these days. especially if you have a default or CCJ (County Court Judgment) against your name 3. as its name suggests. ie 25/39 .Various types of personal loans • With an unsecured loan. lenders view these loans as riskier than secured ones as they can't force an asset sale (usually of your property) to get money back Unsecured loans are therefore normally offered for smaller amounts of money of between £500 .£25. Typically these forms will include: . there is no security offered as a guarantee to the lender As such. The interest rates are often extremely high. The loans themselves are often extremely restrictive. The loan period is often too long in the 10-20 year range.000 with a repayment period set at anywhere from 1-10 years Credit card debt and personal loans are good examples of unsecured loans • • • Borrowing money is fine as long as you can afford to pay it back and the accompanying interest rate is fair.Credit cards and store cards . there are many different forms of unsecured lending. As a rule of thumb it's far better to borrow via an unsecured loan and it's even better to steer clear of the 'debt consolidation' companies that you see advertising on cable TV.
26/39 .Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 2 Q 3 Explain the procedure for re-dressal of grievances under Banking Ombudsman Scheme Ans: PROCEDURE FOR REDRESSAL OF GRIEVANCE A: GROUNDS OF COMPLAINT (1) Any person may file a complaint with the Banking Ombudsman having jurisdiction on any one of the following grounds alleging deficiency in banking including internet banking or other services.Reg no # 511017114 in most cases you are unable to pay them off early if you are able to due to expensive early repayment charges Master of Business Administration – MBA Semester 3 MA0037 .
deposits and other bank related matters. but not with regard to its employees). or failure to service or delay in servicing or redemption of Government securities.. (o) refusal to issue or delay in issuing. of coins tendered and for charging of commission in respect thereof. (n) refusal to accept or delay in accepting payment towards taxes. pay orders or bankers’ cheques.Reg no # 511017114 (a) non-payment or inordinate delay in the payment or collection of cheques. (d) non-payment or delay in payment of inward remittances . if any. without sufficient cause. (l) non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/Debit card operations or credit card operations. (r) non-adherence to the fair practices code as adopted by the bank. current or other account maintained with a bank . (s)non-adherence to the provisions of the Code of Bank's Commitments to Customers issued by Banking Codes and Standards Board of India and as adopted by the bank . 27/39 . (f) non-adherence to prescribed working hours . (g) failure to provide or delay in providing a banking facility (other than loans and advances) promised in writing by a bank or its direct selling agents. and (u) any other matter relating to the violation of the directives issued by the Reserve Bank in relation to banking or other services. as required by Reserve Bank/Government. (j) refusal to open deposit accounts without any valid reason for refusal. (e) failure to issue or delay in issue of drafts. (m) non-disbursement or delay in disbursement of pension (to the extent the grievance can be attributed to the action on the part of the bank concerned. drafts. non-credit of proceeds to parties' accounts. (i) complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad. (p) forced closure of deposit accounts without due notice or without sufficient reason. bills etc. without sufficient cause. of small denomination notes tendered for any purpose. non-payment of deposit or non-observance of the Reserve Bank directives. (b) non-acceptance. (q) refusal to close or delay in closing the accounts. and for charging of commission in respect thereof. (h) delays. (k) levying of charges without adequate prior notice to the customer. (c) non-acceptance. (t) non-observance of Reserve Bank guidelines on engagement of recovery agents by banks. applicable to rate of interest on deposits in any savings.
(iv) the nature and extent of the loss caused to the complainant. (b) delays in sanction. make a complaint to the Banking Ombudsman within whose jurisdiction the branch or office of the bank complained against is located. (b) The complainant shall file along with the complaint. (ii) the name and address of the branch or office of the bank against which the complaint is made. (iii) the facts giving rise to the complaint.Reg no # 511017114 A complaint on any one of the following grounds alleging deficiency in banking service in respect of loans and advances may be filed with the Banking Ombudsman having jurisdiction: (a) non-observance of Reserve Bank Directives on interest rates. and (f) non-observance of any other direction or instruction of the Reserve Bank as may be specified by the Reserve Bank for this purpose from time to time. which he proposes to rely upon and a declaration that the complaint is maintainable under sub-clause (3) of this clause. (2) (a) The complaint in writing shall be duly signed by the complainant or his authorized representative and shall be. himself or through his authorised representative (other than an advocate). (c) non-acceptance of application for loans without furnishing valid reasons to the applicant. PROCEDURE FOR FILING COMPLAINT (1) Any person who has a grievance against a bank on any one or more of the grounds mentioned in Clause 8 of the Scheme may. shall be filed before the Banking Ombudsman within whose territorial jurisdiction the billing address of the customer is located. 28/39 . in the form specified in Annexure ‘A’ or as near as thereto as circumstances admit. copies of the documents. stating clearly: (i) the name and the address of the complainant. Provided that a complaint arising out of the operations of credit cards and other types of services with centralized operations. as the case may be. (e) non-observance of Reserve Bank guidelines on engagement of recovery agents by banks. and (d) non-adherence to the provisions of the fair practices code for lenders as adopted by the bank or Code of Bank’s Commitment to Customers. disbursement or non-observance of prescribed time schedule for disposal of loan applications. (3) The Banking Ombudsman may also deal with such other matter as may be specified by the Reserve Bank from time to time in this behalf. if any. as far as possible. and (v) the relief sought for.
29/39 . tribunal or arbitrator or any other forum is pending or a decree or Award or order has been passed by any such court. 1963 for such claims. (d) The Banking Ombudsman shall also entertain complaints covered by this Scheme received by Central Government or Reserve Bank and forwarded to him for disposal. (3) No complaint to the Banking Ombudsman shall lie unless:(a) the complainant had. where no reply is received. (d) the complaint does not pertain to the same cause of action. arbitrator or forum. not later than one year and one month after the date of the representation to the bank. made a written representation to the bank and the bank had rejected the complaint or the complainant had not received any reply within a period of one month after the bank received his representation or the complainant is not satisfied with the reply given to him by the bank. (e) the complaint is not frivolous or vexatious in nature. tribunal.Reg no # 511017114 (c) A complaint made through electronic means shall also be accepted by the Banking Ombudsman and a print out of such complaint shall be taken on the record of the Banking Ombudsman. before making a complaint to the Banking Ombudsman. (c) the complaint is not in respect of the same cause of action which was settled or dealt with on merits by the Banking Ombudsman in any previous proceedings whether or not received from the same complainant or along with one or more complainants or one or more of the parties concerned with the cause of action . for which any proceedings before any court. (b) the complaint is made not later than one year after the complainant has received the reply of the bank to his representation or. and (f) the complaint is made before the expiry of the period of limitation prescribed under the Indian Limitation Act.
It is evident that the charges levied on the customers vary from bank to bank and also vary according to the ATM network that is used for the transaction. You are a customer of State Bank of Mysore. It is. To increase the usage of ATMs as a delivery channel. internationally. As at the end of December 2007. Banks have been deploying ATMs to increase their reach. while using an ATM of another bank. Offer your views from marketing perspective Ans: Automated Teller Machines (ATMs) have gained prominence as a delivery channel for banking transactions in India. Consequently. There is also a move.342. the number of ATMs deployed in India was 32. larger banks have deployed more ATMs. a customer is not aware. to regulate the fee structure by the regulator from the public policy angle.Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 2 Q 4. bank customers have access to all ATMs in the country.Reg no # 511017114 Master of Business Administration – MBA Semester 3 MA0037 . Commensurate with the branch network. their main utility has been for cash withdrawal and balance enquiry. Germany and France. essential to ensure greater transparency. While ATMs facilitate a variety of banking transactions for customers. free of charge except when cash is withdrawn from white label ATMs or from ATMs managed by non-bank entities. This generally discourages the customer from using the ATMs of other banks. The ideal situation is that a customer 30/39 . However SBM is charging service charges for transaction you make through SIB’s ATM. therefore. before hand. Most banks prefer to deploy ATMs at locations where they have a large customer base or expect considerable use. Nearby your house you can have an ATM of South India Bank [SIB] & you find it convenient to utilize SIB’s ATM. of the charges that will be levied for a particular ATM transaction. banks have also entered into bilateral or multilateral arrangements with other banks to have inter-bank ATM networks. International experience indicates that in countries such as UK.
000. It will give time to effect suitable modifications in the ATM programmes to implement it.500-4.Reg no # 511017114 should be able to access any ATM installed in the country free of charge through an equitable cooperative initiative by banks.000 ATMs in India. there were some customers who withdrew miniscule amounts.000 are in semi-urban centres with only a sprinkling in rural areas. and individual banks can also inform their customers about the proposal and whether or not they would charge their customers. of which nearly 30. the IBA studied the entire gamut of ATM transactions. However. Taking into account these and related aspects. There are around 80 public sector. the intended purpose to serve the common man was achieved.000 are in urban centres and metros.” Unnikrishnan said.000. 3. and 90 percent of all transactions were below Rs. private. The remaining 10. “We found that a majority of the ATM transactions were in the range of average withdrawals of Rs. After the ATM transactions fees on using other banks’ ATMs was scrapped in April. Hence. there was a small minority of users who withdrew very large sums on account of high card limits given by some banks to privileged customers. At the other extreme. he said.” Unnikrishnan said. cooperative and foreign participating banks in the ATM network in the country. There are a little over 40. This created several logistics problems causing avoidable expenditure for banks at the cost of the common user. “We shall give sufficient notice to the customers before implementing it. 10. the IBA submitted a proposal to RBI last month. or made other kinds of inquiries. 31/39 .
Ans: The need for primary (urban) co-operative bank (PCBs) for providing credit to priority sectors had been examined by the Standing Advisory Committee for PCBs constituted by Reserve bank of India in May1983. the targets for lending to Priority Sector and weaker sections have been prescribed for the PCBs as given below: 32/39 . The recommendations of the Committee were accepted by Reserve Bank of India and accordingly the targets for lending to priority sector and weaker section by the PCBs were stipulated.Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 2 Q 5. 1 LENDING TARGETS 1.Reg no # 511017114 Master of Business Administration – MBA Semester 3 MA0037 . Explain the RBI guidelines for advances to priority sector and credit guarantee fund scheme.1 Based on the recommendations made by the Standing Advisory Committee for CBs.
1. For example. should be adopted as the criteria for classification of the priority sector advances and advances given to weaker sections of the society.4 Therefore.1 60% of total loans and advances to priority sector and 1. if necessary. 2 CLASSIFICATION OF PRIORITY SECTOR AND WEAKER SECTION ADVANCES 2.2 Of the stipulated target for priority sector advances. Mere security of jewels coupled with indication of "housing" as purpose in the loan application should not satisfy the bank for classification of priority sector advances. 2. Similarly.Reg no # 511017114 1. by calling for documentary evidence in support thereof. 2.1.1 The types of advances to be reckoned as priority sector advances and those of it to be considered as advances to weaker sections are indicated in Annexure I. it would have to be satisfied that the borrower has the land and his construction plans bear the approval of the competent authority or he has joined some cooperative society to construct the house.4 The banks should make concerted efforts to achieve the targets and. 1. loans against gold ornaments (jewel loans) which are in a majority of cases availed of by the weaker sections of the society. the purpose of the loan and the loan amount actually sanctioned to each borrower and not the security therefor. in the case of a loan for construction of a house. at least 25% (or 15% of the total loans and advances) to weaker sections. 33/39 .1. suitably simplify the systems and procedures keeping in view the types of beneficiaries to be financed. 2. it may be noted that the banks should not merely take into account the purpose of the loan mentioned in the borrower’s loan application but also the amount involved and should satisfy themselves that the amount borrowed would be utilised for the purpose for which it was sanctioned.3 The stipulation regarding priority sector lendings is not applicable to the Salary Earners' Banks.3 For classifying priority sector advances under various categories.2 The definition of weaker section in priority sectors broadly corresponds to the beneficiaries under the 20-Point Economic Programme aimed at improving the standard of living of the weaker sections of the society. loans to small traders or small businessmen are essentially in the nature of working capital loans and they have to be given primarily against the hypothecation or pledge of the goods in which they are dealing and therefore loans to small traders or small businessmen against gold or jewellery may not necessarily be the loans for undertaking trade or business. wherever considered necessary.
3. the following norms may be adhered to by all the banks provided the loan applications received are complete in all respects and duly accompanied by a check list.2 The bank’s officials/branch managers should be made aware of the importance of the SSI Sector from the point of view of creation of additional employment opportunities. There should be an interaction between the banks’ staff and the SSI borrowers as part of the training programme. full working capital limits determined on the basis of “need” related to the rated capacity of the unit should be sanctioned at the commencement itself. preferential treatment in providing credit to tiny industries. The credit requirements of the tiny industries should be given preferential treatment while providing credit to this sector. exports etc. The bank’s decision regarding credit assistance should be communicated to the applicant as early as possible.Reg no # 511017114 3 FLOW OF CREDIT TO SSI INDUSTRIES 3.3 All such loan applications which are complete in all respects and accompanied by check list where prescribed.3. Banks’ staff should be imparted proper training and the aforesaid aspects should form part of inputs in the training provided. Requests for increase in the limits should be considered expeditiously and decisions may be taken and conveyed promptly.3 With a view to providing better customer service and to ensure that all loan applications relating to SSI/Small borrowers are disposed of expeditiously. The minority communities notified in this regard are Sikhs. 3.1 Primary (urban) co-op. 4 FLOW OF CREDIT TO MINORITY COMMUNITIES 4.000/. 34/39 .1 The banks should step up the credit flow to meet the legitimate requirements of tiny and SSI. 3.25.3. etc. 3. on the day the application is received. 3. Muslims.5 lakh may be disposed of within a period of four weeks from the date of receipt of duly completed loan application. cobblers. Besides.1 Loan applications in respect of loans up to Rs. Christians. banks should initiate steps to enhance/augment flow of credit under priority sector to artisans and craftsmen as also to vegetable vendors. cart pullers. may be disposed of within two weeks from the date of receipt of loan application. Zorastrians and Buddhists. if prescribed. should be acknowledged by the bank/branch. 3.to SSI/Small borrowers etc. A healthy growth of the sector will facilitate smooth loan recovery in the SSI borrowal accounts and timely assistance will prevent the accounts from becoming sticky. belonging to minority communities.2 Other cases of loans upto Rs.
On Saturday finance Minister Pranab Mukherjee released RBI report in which it has proposed that banks should not insist for collateral or guarantees from small businesses for loans up to Rs 10 lakh.2 The banks should submit a half yearly statement (as on 31 March/30 September) within 15 days of the close of the relevant half year. indicating the steps taken/proposed to be taken for improving the bank's performance. 5. 5 MONITORING AND EVALUATION OF PRIORITY SECTOR AND WEAKER SECTION ADVANCES 5.2 In order to ensure that due emphasis is given to lending under priority sector. to the concerned Regional Office of this department under whose jurisdiction they function. The Reserve Bank of India panel has put forward a proposal to double the guarantee provided under a government scheme.e. apart from the usual reviews. it is considered desirable that the performance is reviewed periodically. This will enable the small businessmen to get collateral-free loans for up to Rs 10 lakh from banks. which the banks are periodically undertaking. a memorandum may be submitted to the Board of Directors at halfyearly intervals i. specific reviews by the Board of Directors of the respective banks may be made on half-yearly basis.1 Primary (urban) co-operative banks should take effective steps to achieve the above recommended targets and monitor the priority sector lendings from the quantitative and qualitative aspects. as on 30 September and 31 March of each year giving a detailed critical account of theperformance of the bank during the period showing increase/decrease over the previous half-year as per the proforma given in Annexure III.Reg no # 511017114 4. 5. Report stated for such loans the security will be provided under a guarantee by Credit Guarantee Fund Trust for medium and small enterprises (CGTSME). For this purpose. showing the progress made in deployment of credit to these communities. 35/39 . in the format given in Annexure II. The report should reach the Regional Office within a month from the end of the period to which it relates. Accordingly.3 A copy of the annual review as on 31 Marc h may be forwarded to the concerned Regional Office of the Reserve Bank with the Board's observations.
the price rise in wholesale basket is largely due to food items. the finance minister held discussion with the members of the board of RBI. “Cereals are not un-available but cereal prices increased because procurement price have been benchmarked at a high level. “Various aspects of budget proposal were analysed and board members gave their comments and inputs about budgetary proposals”. if you procure one quintal of paddy at Rs 1. 36/39 . on Saturday.Reg no # 511017114 The report also suggested for reducing guarantee fees for women entrepreneurs and for enterprises in the North-East. After the meeting with Sebi. because of these prices farmers are producing enough there is no shortage of food stock”.050 after conversion charges. Regarding the food inflation the finance minister said there has been a trade off between the increase in the prices of cereals and food security. “There is a cost push ingredient in the high prices of these cereals. He added.” RBI report has been launched seven months after RBI had instructed banks that they cannot ask for collateral security for loans up to Rs 5 lakh given to micro and small enterprises in manufacturing and service sector.45”. But it was inevitable if farmers do not get remunerative prices they will not produce enough. “So far the regional rural banks have come forth and consolidation among RRBs have taken place. The finance minister said. and other taxes rice at retail level cannot be more than Rs 19. Mr Mukherjee said. Similarly. While launching the report the finance minister said. Later on the finance minister said the government will be taking up the consolidation among the public sector banks in consultation with RBI if the banks themselves contacted with the proposals. If you procure one quintal of wheat at Rs 1.100 and your total procurement is 34% of total production. I have also made proposal that there should be licenses for new banks and of course they should meet the criteria fixed by the RBI”. Indicating towards the current inflation the finance minister said it is not because of monetary expansion. naturally the retail benchmark cannot be less than Rs 13-14 per kg. “This constitutes an important initiative by government for MSMEs to avail bank credit without the hassle of collateral or third-party guarantee. In April’09 RBI in its monetary policy had set up a working group to review the Credit Guarantee Scheme of the Credit Guarantee Fund Trust. mandi charges. The minister said.
6 Outsourcing raises a variety of concerns such as operational. One of the reasons we could with stand the pressure of the international financial crisis was because of our fiscal consolidation and adherence to FRBM which also achieved for three years high growth performance at the rate of 9%”. Without fiscal consolidation growth will not be sustainable.Banking Related Laws & Practices (Book ID: B1203) Assignment Set – 2 Q. Master of Business Administration – MBA Semester 3 MA0037 . reputation and legal risk. “Fiscal consolidation does not contradict growth. Ans: 37/39 . Detail the pros and cons of such array on SBI for offering mobile banking semi in partnership with Airtel. Airtel extended into MOU with IBM for managing its back office operation.Reg no # 511017114 Giving a reply of a question on the pace of fiscal consolidation the finance minister said.
Sometimes outsourcing enables using the advantages of the third party company to the organization's advantage (for example in negotiations. Why Outsource then? Organizations make use of outsourcing when a certain function has a potential to become more economic with little strategic cost to the organization. Special skills are required and it is unwise to invest in their development within the organization .It is wise to outsource if it is not economically sound to invest in developing a set of skills. Not a core-competence of the organization .Reg no # 511017114 Outsourcing has quickly become a commonly used tool in organizations. Need for constant technological improvement and upkeep Technology requires high investments in maintenance. 4. Specialization produces greater effectiveness and advantages to scale . 5. Outsourcing is usually used if one of the following applies to the specific function required: 1. However organizations should also be wary of potential risks. Organizations carefully select focal points in adherence to their competitive advantage. 2. Outsourcing might have many potential benefits.If a specific function required to an organization is not a part of its core competencies or core strategy there is little sense in performing that function within the organization. networks etc. Lowering organizational complexity for increased 'management ability'.Outsourcing certain function may simplify the organization and enable management to focus on core-competencies and core-functions with greater clarity. The following is a list of the common risks of outsourcing: 38/39 . Another consideration should be the quality of skills developed in comparison to those available outside the organization. However. If a technology is a means and not an end outsourcing should be considered as a specializing company will be more effective. Improving organizational effectiveness by utilizing a third party . What has made outsourcing so popular? The popularity of outsourcing is well justified as it generates significant advantages. outsourcing has some inherent risks which should be identified and dealt with preemptively. 3. Outsourcing these functions will often result in better outputs with lower costs. updates and r&d.Some functions have significant scale advantages.) 6.
Lowered employee loyalty . Advantages to scale and learning curves force organizations to outsource functions and abilities which are not at the core of their business.Reg no # 511017114 1. 4.By outsourcing a function given up on. In today's global and dynamic environment speed and effectiveness is important. 5.Obviously when a function is outsourced interface with another organization are set up. 3. Inner oppositions to outsourcing . consistency and oversight Outsourcing requires setting up an oversight function within the organization as there is a requirement for quality and consistency. Information leaks . Unclear borders for cooperation . Problems with quality. Keeping an eye on outsourced functions is crucial to ensure the quality of product or service outsourced. Outsourcing holds many benefits but many risks as well. These may be a source for information leaks which might damage the organization's ability to compete. This results in losing professional know-how and infrastructure in case the organization decides to reestablish the function within itself. 2. 6. 39/39 . Losing the ability to re-establish outsourced functions .Obviously outsourced functions are performed by employees with little or no organizational relevance. There is a risk of creating unclear borders between the organizations.Outsourcing functions results in personnel changes.Co operating with another organization is not a clear cut undertaking. Naturally organizations should expect employee opposition to outsourcing.