Bankers Notebook by -Anuj Kumar

  There are a total of  12 Public Sector Banks  in India after the Mega-Merger. Among these, there are six merged banks and six independent public sector banks. Merged Banks - SBI, PNB, BoB, Indian Bank, Canara Bank and Union Bank of India Independent Banks - Uco Bank, BoM, Punjab & Sindh Bank, BoI, Central Bank of India, and Indian Overseas Bank.  Oriental Bank of Commerce (OBC)  and  United Bank of India (UBI)  are merged into  Punjab National Bank.  After the merger, the  PNB  will become  the second-largest PSB  after SBI. Syndicate Bank  is merged with  Canara Bank  and the combined entity will be the  fourth largest PSB. Allahabad Bank  is merged with  Indian Bank  and all its branches will be treated as the branches of Indian bank. Andhra Bank  and  Corporation Bank  is merged with  Union Bank of India. 

  Liquidity? Liquidity is a relative term. For assets:  Rs.1 crore worth gold is more liquid than Rs.1 crore worth farmhouse. Because you can quickly sell the gold in a few days, but for selling farmhouse you’ll have to deal with so many prospective customers, real-estate agents, paper work, stamp duty etc., this would take more than 15 days= not so liquid. For banking:  if yesterday SBI had Rs.100 to give as loan today SBI has Rs.200 to give as loan, then we say liquidity has increased. (And vice versa). In winter, supply of green vegetables increases (compared to summer) so selling price of green vegetables decreases in winter (compared to summer). Similarly when liquidity (money supply) increases, the cost of borrowing (=interest rates) goes down. Very high liquidity can create demand pull inflation=bad. for more,  click me Very less liquidity=cost of borrowing is extremely high for businessman = bad because he cannot easily start or expand his business=less peopl...

  What is cheque clearing house? Suppose a party from Delhi pays you via cheque of Citibank and you have account in SBI, Ahmedabad. You deposit this cheque in your area’s SBI branch. Now the SBI branch manager would send his [overworked, underpaid] Bank PO to Citibank’s office in A’bad. He’d show the cheque, collect the cash and return to deposit the money in your account. But SBI would be getting thosands of cheques everyday- some from ICICI, some from Citibank, some from axis and so on. SBI cannot send its staff to every other bank to get the cash, that’d be extremely time consuming. Therefore To simplify this cheque transection process, each bank will send a representative to a central place and exchange cheques drawn on each other. This centralized place is called clearing house/processing house. Reserve bank of India is act as clearing house. In cities where RBI’s office doesnot exist, usually SBI or other public sector bank acts as the clearing house. What is MICR code? By se...

  What is ARC? Asset reconstruction company (ARC). They buy NPA (Bad loans) from Banks and try to extract maximum money out of it=profit. They’ve to register with Reserve Bank of India. Examples: ARCIL (India’s first and largest asset reconstruction company (ARC)) Reliance Asset Reconstruction Company Limited by Anil Ambani In our example, SBI has NPA worth Rs.40 crores. ARC will buy the NPA file from SBI at a lower rate say 35 crores. (well, SBI is making loss, yes, but something is better than nothing.) Besides, banks have hundreads of bad loan cases, they donot have time or manpower to pursue individual case, sometimes no bidders are interested in auction. All the filework and donkey labour, In such cases, it’s better for bank to transfer NPA to ARC. But that doesn’t mean ARC will give 35 crores to the SBI from its own pocket! Then how will the Asset reconstruction company (ARC) arrange for the money?= via Security Reciepts. What are Security Reciepts (SR)? In above example, ARC...

  Payment in due Course is defined in Section 10 of Negotiable Instruments Act 1991. Any person legally responsible to make payment under negotiable instrument must make the payment of the amount due under in due course with the purpose of obtaining a valid discharge against the holder. Payment in due course refers to a payment in keeping with the evident tenor of the instrument, in good faith & without negligence to any person in possession thereof. A payment will be regarded as a payment in due course if: (a) It is in agreement with the apparent tenor of instrument, that is, according to what comes into view on the face of instrument to be the intention of the parties; (b) It is made in good faith & without negligence, & under conditions which do not meet the expense of a ground for believing that the person to whom it is made is not allowed to receive the amount; (c) It is made to the person who possesses the instrument who is entitled as holder to obtain payment; (d...

  Current context:  RBI has introduced a new  Prepaid Payment Instrument (PPI)  to make daily payments for the purchase of  daily household goods and services  on 24th Dec 19.   The instrument has been introduced to give increased impetus to small ticket digital payments to merchants, local shops and retail outlets. The  new semi-closed Prepaid Payment Instrument (PPI)  can be used only for making retail payments and will come with  a monthly rechargeable limit of Rs 10,000. The Rs 10,000 amount can only be uploaded only from a bank account linked with the customer's verified mobile number. An annual limit of Rs 1.2 lakh  has also been fixed by the RBI, that can be recharged on these accounts. The banks and existing non-bank PPI players  can issue the new payment instrument and would verify the credentials of customers. The verification process involves the  use of an OTP sent to the user's verified mobile number  and...