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How to Analyze a Corporate in Banks

Corporate banking is a very important division within many large commercial and bulge
bracket banks; this team serves as a critical link between the commercial banking group
and the capital markets/investment banking teams.

Corporate banking teams provide financial services like cash management, payment

processing, credit products, and hedging strategies to large corporations. Most of these
corporations are publicly traded.

The term “corporate banking” is often used erroneously by non-finance people when
talking about the provisioning of banking services to corporations (broadly); however,
there is much more nuance when it comes to banking for businesses.

Why corporate analysis

Corporate analysis, also known as company analysis, is an important aspect for
understanding your company's performance as well as future prospects. Skilled
corporate analysis contractors help you achieve insight and results which can be used
to make wise business decisions.

Steps in corporate analysis

Industrian analysis

Company business model

Financial analysis

Management analysis

Account conduct

External factors

What is industrial ananysis

Industry analysis is a tool that gives investors an A to Z insight into any industry. This
encompasses insights about the level of competition in the industry, demand and supply
situation, how easily can new companies enter the industry etc.

Company business modell

Non financial analysis such as

Nature of business

Competation

Dependancy

Company outlook

Recession free

Financial analysis

Financial analysis is the process of evaluating businesses, projects, budgets, and other
finance-related transactions to determine their performance and suitability. Typically,
financial analysis is used to analyze whether an entity is stable, solvent, liquid, or
profitable enough to warrant a monetary investment.

Balance sheet analysis

A company's balance sheet, also known as a "statement of financial position," reveals

the firm's assets, liabilities, and owners' equity (net worth). The balance sheet, together
with the income statement and cash flow statement, make up the cornerstone of any
company's financial statements.

Cash flow

A cash flow analysis determines a company's working capital — the amount of money

available to run business operations and complete transactions. That is calculated as
current assets (cash or near-cash assets, like notes receivable) minus current liabilities
(liabilities due during the upcoming accounting period)

Management analysis

Management discussion and analysis (MD&A) is a section within a company's annual
report or quarterly filing where executives analyze the company's performance. The
section can also include a discussion of compliance, risks, and future plans, such as
goals and new projects.

External factors

Key Terms in External Analysis

To begin the discussion on external analysis, we must define two terms:

 Industry is a group of companies offering products or services that are close substitutes
for each other. Examples of an industry include soft drinks, mobile phones, and
sportswear.
 Market segments are distinct groups of customers within a market that can be
differentiated from each other based on individual attributes and specific demands.
Market segments can be separated by characteristics such as geography, demography,
and behavior.

Supply Chain

In order to conduct a thorough external analysis, the company needs to analyze its supply chain.
A company’s supply chain is the system involved in converting a product or service from raw
materials into finished goods and then transporting finished goods from the supplier to the
consumer. All logistical issues and steps are part of the supply chain.

The image below shows a common supply chain for a manufacturing company: Raw materials
are brought from the supplier. The raw materials are moved to the manufacturer to make
completed goods. The completed goods are distributed and moved across separate retailers, and
then from the retailers, they end up in the hands of consumers.
Consider the supply chain for a smartphone. Raw materials such as glass, lithium, and aluminum
are obtained from suppliers. Manufacturers take these raw materials and build smartphones at
plants. The completed phones are then distributed and sold at retail locations (Best Buy,
Walmart, Staples). The phones are sold to consumers from these retail locations.

Supply Chain for e-Commerce

The supply chain for e-Commerce companies differs from the traditional supply chain of brick
and mortar stores. As the following graphic shows, we begin with the e-Commerce domain.
Consumers select the products they want to purchase, and the payment is dealt with through a
third-party payment manager (e.g., PayPal).

The selected products are moved to a warehouse wherein they are prepared for shipping. The
products are shipped to customers who return to the same site and continue the cycle again. This
is the common supply chain cycle for e-Commerce companies such as Amazon or Alibaba.

Strategic Groups
Strategic groups within an industry can be identified by factors such as:

 Choice of distribution channels

 Market segments
 Level of product quality
 Technological leadership
 The degree of vertical integration
 Pricing policy

A strategic group exists if the performance of a firm in an industry group is a function of group
characteristics, controlling firm and industry characteristics. Customers tend to view products of
companies in the same strategic group as direct substitutes for each other (Coke vs. Pepsi).
Different strategic groups can have different relationships with each of the competitive forces.
Thus, each strategic group may face a different set of opportunities and threats.

An initial step to identifying strategic groups is to build a strategic group map. A strategic
group map plots clusters of rivals in a two-dimensional matrix using strategically relevant
dimensions, which help identify the most probable competitively relevant companies. It is also
useful for realizing mobility barriers that inhibit the repositioning of firms within industries from
one strategic group to another.

Competitive Analysis

We now move into a competitive analysis of the industry. Market structure and competitive
environment are defining factors in the future success of a business. There are six key factors
that determine the level of competition in an industry:

1. Intensity of industry rivalry

It measures the levels of concentration of rivals. Factors to determine the intensity of industry
rivalry include product homogeneity, brand loyalty, and consumer switching costs.

2. Threat of potential entrants (Barriers to entry)

It measures the difficulty for newcomers to enter the industry. Factors to determine barriers to
entry include brand loyalty, excess production capacity, and government regulation.

3. Bargaining power of buyers

This measures how much power consumers have in determining the prevailing price in a market.
Buyers’ bargaining power is high when buyers are large and concentrated, and buyers’ price
sensitivity is high when there are many industry competitors and substitutes.

4. Bargaining power of suppliers

This measures how much a supplier of materials is able to restrict the company’s business
strategy. The bargaining power of suppliers is high when suppliers are large or concentrated.
Purchasers’ price inelasticity is high when there are few alternative suppliers and when there are
few substitute inputs.

5. Threat of substitute goods/services

This measures the chances that competing goods of a similar nature will threaten a company’s
offerings. It is more likely to occur when switching costs are low or when substitutes offer
superior price to performance characteristics.

6. Power of complementary good/service providers

It measures the level of impact of companies that produce complementary products.

Complements add value to products in an industry. If complements are weak and unattractive,
they can become a threat that slows industry growth and limits profitability.

Industry Life Cycle

The industry life cycle describes the natural stages of an industry as time progresses. An industry
life-cycle consists of start-up, growth, shakeout, maturity, and decline stages.

 Start-up is characterized by very low competition. Barriers to entry are based on access to
key technological know-how.
 Growth is characterized by the low threat from potential competitors due to rapid growth
in demand.
 Shakeout is characterized by a rivalry between companies becoming intense; companies
cut prices to increase demand.
 Maturity is characterized by the threat of potential entrants decreasing and product
segmentation.
 Decline is characterized by fierce rivalry between established companies.

PEST Analysis

To round off external analysis, a company must conduct an examination of the Political,
Economic, Social, and Technological landscape of the industry, otherwise known as a PEST
analysis.

 Political: Issues such as international trade barriers and regulatory environment change.

 Economic: Issues such as interest rates, exchange rates, and inflation.
 Socio-demographic (Social): Issues such as population and age cohort changes.
 Technological: Issues such as scientific advances, R&D investment, and emerging
technologies.

The main purpose of PEST analysis is to test for any major external shifts in the industry.
Business plans and strategies need to be updated to conform to prevailing industry trends.
More Resources

Thank you for reading CFI’s guide to External Analysis. To help you keep learning and advance
your career, check out the additional CFI resources below:

 Absolute Advantage
 Comparable Company Analysis
 Demand Curve
 SWOT Analysis
 See all management & strategy resources

Mutual fund

What is mutual fund

A mutual fund is a pool of money managed by a professional Fund Manager. It is a trust
that collects money from a number of investors who share a common investment
objective and invests the same in equities, bonds, money market instruments and/or
other securities.

History
First Phase - 1964-1987
Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At
the end of 1988 UTI had Rs. 6,700 crores of assets under management.
Second Phase - 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June
1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set
up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.
47,004 crores.
Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual
fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was
the year in which the first Mutual Fund Regulations came into being, under which all
mutual funds, except UTI were to be registered and governed. The erstwhile Kothari
Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996. The industry now functions under the
SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual funds with total
assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets
under management was way ahead of other mutual funds.
Fourth Phase - since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with assets under management of Rs. 29,835 crores as at the end of January
2003, representing broadly, the assets of US 64 scheme, assured return and certain
other schemes. The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of
assets under management and with the setting up of a UTI Mutual Fund, conforming to
the SEBI Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth.

Types of Mutual Funds

Schemes Based on the Maturity Period

Types of mutual fund schemes based on the maturity period are as follows-
 Open Ended Funds
 Close Ended Funds
 Interval Funds

Open Ended Scheme

This scheme allows investors to buy or sell units at any point in time. It does not have a
fixed maturity date either. You deal directly with the Mutual Fund for your investment
and redemption.
The key feature is liquidity. You can conveniently buy or sell your units at net asset
value (“NAV”) related prices. The majority of mutual funds, 59% approximately are
open-end funds.

Close Ended Scheme

This type of scheme has a stipulated maturity period and investors can invest only
during the initial launch period known as the New Fund Offer (NFO).
Once the offer closes, no new investments are permitted. The market price at the stock
exchange could vary from the scheme’s Net Asset Value (NAV), because of the
demand and supply situation, unit holder’s expectations and other market factors.
Some close ended schemes will give you an additional option of selling your units
directly to the mutual funds through periodic repurchase at NAV related prices.
SEBI Regulations ensure that at least one of the two exit routes are provided to the
investor.

Interval Funds
It operates as a combination of open and closed ended scheme, it allows investors to
trade units at predefined intervals. They may be traded on the stock exchange or they
may even be open for sale or redemption during pre-determined intervals at NAV
related prices.
When it comes to selecting a scheme to invest in, one should look for customized
advice. Choose the scheme that provides the right combination of growth, stability and
income, keeping your risk appetite in mind.

Structure of mutual fund

Tier 1:Fund sponsor

The fund sponsor is the first layer of the three-tier structure of mutual funds in India. A
sponsor is any person or entity that can set up a mutual fund to earn money through
fund management. Fund management can be done through an associate company that
manages the fund investment. Also, the sponsor can be a promoter for the associate
company

the sponsor must approach SEBI for permission to set up a mutual fund. However, a
sponsor cannot work alone. It must create a Public Trust under the Indian Trust Act,
1882 and register it with SEBI. After creating the Trust, trustees are registered with
SEBI. The trustees are appointed to manage the Trust, protect the unit holder’s interest
and adhere to SEBI Mutual Fund Regulations. Subsequently, the sponsor creates the
asset management company under the Company Act, 1956, to regulate fund
management

The sponsor is the primary entity that promotes the mutual fund company and regulates
the public money. There are specific eligibility criteria to become a sponsor as
mentioned below

1. The sponsor must show profits in at least three out of five years, including the
immediately preceding year
2. They must have a minimum of five years of experience in financial services. 
3. The net worth of the sponsor must be positive for all previous five years
4. Out of the total net worth of the AMC, the sponsor must have at least a 40%
share
Therefore, the role of the sponsor is vital, and they carry the highest credibility.
The strict norms define that the sponsor must have adequate liquidity and fidelity
to return the investors money in case of financial crisis or meltdown

Tier 1:Trustee and Trust

Trust and trustees, also known as protectors of the fund, form the second tier of the
mutual fund structure. The fund sponsor employs them. Also, they play an essential role
in maintaining the investor’s trust and tracking the fund’s growth

The fund sponsor creates a trust in favour of trustees through an agreement called the
trust deed. Trustees manage the Trust. Also, they are primary guardians of funds and
assets. The trustees can be formed through a Trustee Company or Board of Trustees.
Furthermore, the trustees supervise the functioning of the AMC and check its
compliance with SEBI (Mutual Fund) Regulations. In other words, they monitor the
AMC’s systems, procedures and overall work
SEBI mandates the trustees to provide the fund report and functioning of the AMC on a
half-yearly basis. Also, SEBI has tightened the transparency of rules to avoid conflict of
interest between the Sponsor and AMC. Furthermore, the AMC cannot float a new fund
in the market without the approval of the Trust. Therefore, Trustees must act
independently and take appropriate measures to safeguard investors’ money. Trustees
also have to be registered under SEBI, and SEBI regulates their registration by revoking
or suspending the registry if any condition is found breached

Tier 1:Asset management Companies

Asset Management Companies (AMCs) are the third tier in the mutual fund structure. It
is registered under SEBI and created as a company under the Companies Act. The
AMC floats various mutual fund schemes depending on the investor’s needs and the
nature of the market. Also, it acts as a fund manager or investment manager for the
Trust. Furthermore, the AMC is responsible for all fund-related activities, from launching
the scheme and managing it. Thus, an AMC needs to manage funds and provide
services to its investors.

he AMC creates mutual funds with trustees and sponsors and oversees its
development. While creating the scheme, they take help from bankers, brokers, RTAs,
transfer agents, etc. and enter into an agreement with them. Like the trustees, AMC
also needs to ensure that there is no conflict of interest and that certain restrictions are
imposed on the business activities

Tier Type Company (Example)

Tier I Fund Sponsor A joint venture between Sun Life (India) AMC Investment Inc. and Aditya
Birla Capital Limited that is based in Canada.
Tier Trust and Aditya Birla Sun Life Trustee Pvt. Ltd.
II Trustees
Tier AMC Aditya Birla Sun Life AMC Limited.
III

Other participants in the structure of mutual funds

Custodian

A custodian is an entity that is responsible for the safekeeping of securities. They are
registered with SEBI and manage the investment account of mutual funds, ensuring
delivery and transfer of securities. Also, custodians help investors update their holdings
anytime and help them keep track of their investments. Furthermore, they collect and
track the bonus issue, dividends, and interest received on mutual funds investments

Registrar and transfer agent {RTA)

Registrar and Transfer Agents(RTAs) are an important link between investors and fund
managers. To fund managers, they keep them updated about investors’ details. To
investors, they serve by delivering the benefits of the fund
 Processing mutual fund applications
 Keeping a record of investor details
 Helping investors with KYC
 Delivering periodic statements to investors
 Processing the dividend payout
 Updating investor details

Auditor

The auditor is responsible for scrutinising and auditing the books of accounts and
annual reports of various schemes. They are the independent watchdogs that audit the
financials of sponsors, trustees and AMC. Also, they ensure that the funds are being
used for the reasons they have been collected. Auditors certify that there is no evidence
of fraud in any books. Therefore, auditors help keep the entities’ transparency and
integrity intact. Moreover, AMCs can independently appoint an auditor keeping the rules
in mind.

Intermediaries

Investors can buy and sell mutual funds through different types of intermediaries.
Intermediaries can be individual agents, distributor companies, national/regional
brokers, banks, post offices, etc. They are an important link between the investor and
mutual fund house. Intermediaries recommend mutual funds to their investors and
ensure the purchase transactions go through them. In return, the mutual fund house
pays a commission to them

Mutual Fund Fees and Expense

As with any business, running a mutual fund involves costs. For example, there are
costs incurred in connection with particular investor transactions, such as investor
purchases, exchanges, and redemptions. There are also regular fund operating costs
that are not necessarily associated with any particular investor transaction, such as
investment advisory fees, marketing and distribution expenses, brokerage fees, and
custodial, transfer agency, legal, and accountants’ fees.
Some funds cover the costs associated with an individual investor’s transactions and
account by imposing fees and charges directly on the investor at the time of the
transactions (or periodically with respect to account fees). These fees and charges are
identified in the fee table, located near the front of a fund’s prospectus, under the
heading "Shareholder Fees."

Funds typically pay their regular and recurring, fund-wide operating expenses out of
fund assets, rather than by imposing separate fees and charges directly on investors.
(Keep in mind, however, that because these expenses are paid out of fund assets,
investors are paying them indirectly.) These expenses are identified in the fee table in
the fund’s prospectus under the heading "Annual Fund Operating Expenses

In the fee table, under the heading of "Shareholder Fees," you will find:

Sales Loads (including Sales Charge (Load) on Purchases and Deferred

Sales Charge (Load))

Redemption Fee

Exchange Fee

Account Fee

Purchase Fee

In the fee table, under the heading of "Annual Fund Operating Expenses," you will find:

Management Fees

Distribution [and/or Service] (12b-1) Fees

Other Expenses

Total Annual Fund Operating Expenses 

Shareholder Fees

Sales Loads

Funds that use brokers to sell their shares typically compensate the brokers. Funds may
do this by imposing a fee on investors, known as a sales load (or sales charge), which
is paid to the selling brokers. In this respect, a sales load is like a commission investors
pay when they purchase any type of security from a broker. Although sales loads most
frequently are used to compensate outside brokers that distribute fund shares, some
funds that do not use outside brokers still charge sales loads. There are two general
types of sales loads—a front-end sales load investors pay when they purchase fund
shares and a back-end or deferred sales load investors pay when they redeem their
shares.

Sales Charge (Load) on Purchases – Front-End Loads

The category "Sales Charge (Load) on Purchases" in the fee table includes sales loads
that investors pay when they purchase fund shares (also known as front-end sales
loads). The key point to keep in mind about a front-end sales load is it reduces the
amount available to purchase fund shares. For example, if an investor writes a $10,000
check to a fund for the purchase of fund shares, and the fund has a 5% front-end sales
load, the total amount of the sales load will be $500. The $500 sales load is first
deducted from the $10,000 check (and typically paid to a selling broker), and assuming
no other front-end fees, the remaining $9,500 is used to purchase fund shares for the
investor.

Deferred Sales Charge (Load) – Back-End Loads

The category "Deferred Sales Charge (Load)" in the fee table refers to a sales load that
investors pay when they redeem fund shares (that is, sell their shares back to the fund).
You may also see this referred to as a deferred or back-end sales load. When an
investor purchases shares that are subject to a back-end sales load rather than a front-
end sales load, no sales load is deducted at purchase, and all of the investors’ money is
immediately used to purchase fund shares (assuming that no other fees or charges
apply at the time of purchase). For example, if an investor invests $10,000 in a fund with
a 5% back-end sales load, and if there are no other "purchase fees," the entire $10,000
will be used to purchase fund shares, and the 5% sales load is not deducted until the
investor redeems his or her shares, at which point the fee is deducted from the
redemption proceeds.

Typically, a fund calculates the amount of a back-end sales load based on the lesser of
the value of the shareholder’s initial investment or the value of the shareholder’s
investment at redemption. For example, if the shareholder initially invests $10,000, and
at redemption the investment has appreciated to $12,000, a back-end sales load
calculated in this manner would be based on the value of the initial investment—
$10,000—not on the value of the investment at redemption. Investors should carefully
read a fund’s prospectus to determine whether the fund calculates its back-end sales
load in this manner.

The most common type of back-end sales load is the "contingent deferred sales load,"
also referred to as a "CDSC," or "CDSL." The amount of this type of load will depend on
how long the investor holds his or her shares and typically decreases to zero if the
investor holds his or her shares long enough. For example, a contingent deferred sales
load might be 5% if an investor holds his or her shares for one year, 4% if the investor
holds his or her shares for two years, and so on until the load goes away completely.
The rate at which this fee will decline will be disclosed in the fund’s prospectus.
A Word about No-Load Funds

Some funds call themselves no-load. As the name implies, this means that the fund
does not charge any type of sales load. As described above, however, not every type of
shareholder fee is a sales load, and a no-load fund may charge fees that are not sales
loads. For example, a no-load fund is permitted to charge purchase fees, redemption
fees, exchange fees, and account fees, none of which is considered to be a sales load.

Redemption Fee

A redemption fee is another type of fee that some funds charge their shareholders when
the shareholders redeem their shares. Although a redemption fee is deducted from
redemption proceeds just like a deferred sales load, it is not considered to be a sales
load. Unlike a sales load, which is used to pay brokers, a redemption fee is typically
used to defray fund costs associated with a shareholder’s redemption and is paid
directly to the fund, not to a broker. The SEC limits redemption fees to 2%.

Exchange Fee

An exchange fee is a fee that some funds impose on shareholders if they exchange
(transfer) to another fund within the same fund group.

Account Fee

An account fee is a fee that some funds separately impose on investors in connection
with the maintenance of their accounts. For example, some funds impose an account
maintenance fee on accounts whose value is less than a certain dollar amount.

Purchase Fee

A purchase fee is another type of fee that some funds charge their shareholders when
the shareholders purchase their shares. A purchase fee differs from, and is not
considered to be, a front-end sales load because a purchase fee is paid to the fund (not
to a broker) and is typically imposed to defray some of the fund’s costs associated with
the purchase.

Annual Fund Operating Expenses

Management Fees
Management fees are fees that are paid out of fund assets to the fund’s investment
adviser (or its affiliates) for managing the fund’s investment portfolio and for
administrative fees payable to the investment adviser that are not included in the "Other
Expenses" category.

Distribution [and/or Service] (12b-1) Fees

This category identifies so-called "12b-1 fees," which are fees paid by the fund out of
fund assets to cover distribution expenses and sometimes shareholder service
expenses.  12b-1 fees get their name from the SEC rule that authorizes a fund to pay
them. The rule permits a fund to pay distribution fees out of fund assets only if the fund
has adopted a plan (12b-1 plan) authorizing their payment.

“Distribution fees" include fees paid for marketing and selling fund shares, such as
compensating brokers and others who sell fund shares, and paying for advertising, the
printing and mailing of prospectuses to new investors, and the printing and mailing of
sales literature.

Some 12b-1 plans also authorize and include "shareholder service fees," which are fees
paid to persons to respond to investor inquiries and provide investors with information
about their investments. A fund may pay shareholder service fees without adopting a
12b-1 plan. If shareholder service fees are part of a fund’s 12b-1 plan, these fees will be
included in this category of the fee table. If shareholder service fees are paid outside a
12b-1 plan, then they will be included in the "Other Expenses" category.

Other Expenses

Included in this category are expenses not included in the categories "Management
Fees" or "Distribution [and/or Service] (12b-1) Fees." Examples include: shareholder
service expenses that are not included in the "Distribution [and/or Service] (12b-1)
Fees" category; custodial expenses; legal expenses; accounting expenses; transfer
agent expenses; and other administrative expenses.

Total Annual Fund Operating Expenses

This line of the fee table is the total of a fund’s annual fund operating expenses,
expressed as a percentage of the fund’s average net assets

Transfer Agent

What Is a Transfer Agent?

A transfer agent is a trust company, bank, or similar institution assigned by a
corporation for the purposes of maintaining an investor's financial records and tracking
each investor's account balance. The transfer agent records transactions, cancels and
issues certificates, processes investor mailings, and handles a host of other investor
problems, including reissuing lost or stolen certificates

Understanding Transfer Agent

Traditionally, when investors purchased a security, they received a physical paper
certificate. Today, transfer agents issue certificates in book-entry form—an electronic
method of recording securities ownership that saves vast amounts of time and money.
These book-entry securities vary depending on the investment

Conclusion

As we've seen in this blog post, the board of directors of a mutual fund is ultimately responsible
for choosing the fund's custodian. This generally takes the shape of a bank or other reputable
financial organisation. The mutual fund custodian's overarching role is to protect the investors'
assets while maintaining SEC and other regulatory compliance. It aids in process oversight by
requiring comprehensive documentation of all business dealings. The goal of this practice is to
prevent or at least severely limit the occurrence of careless mistakes and foil any malicious
efforts at fraud. Custodians may also provide their customers with tax services, risk and
compliance management, and the settlement or redemption of units or shares.

International Trade

International trade is the exchange of capital, goods, and services across international

borders or territories[1] because there is a need or want of goods or services.
[2]
 (see: World economy)
In most countries, such trade represents a significant share of gross domestic
product (GDP). While international trade has existed throughout history (for
example Uttarapatha, Silk Road, Amber Road, scramble for Africa, Atlantic slave
trade, salt roads), its economic, social, and political importance has been on the rise in
recent centuries.

The international trade regulatory framework

The World Trade Organization (WTO) Agreements and OIE international standards provide the
framework to facilitate the discussion between exporting and importing countries and to agree
on the sanitary requirements to be applied to achieve safe trade of live animals and animal
products.
The WTO agreements, including the Agreement on the Application of Sanitary and
Phytosanitary Measures (SPS Agreement) and the Agreement on Technical Barriers to Trade
(TBT Agreement), as well as the more recent Trade Facilitation Agreement (TFA), define the
legal rights and obligations of trading partners and enshrine general WTO principles such as
transparency, non-discrimination and harmonisation with international standards

Harmonisation
SPS measures shall be based on scientific principles (Article 2.2) A country’s sanitary measures
must be based on International standards

Scientific risk assessment

In the absence of a relevant international standard; or when a Member chooses to adopt a
higher level of protection than the international standards provide, a country’s sanitary
measures must be based on risk assessment

Equivalence
Members shall accept the sanitary measures of other Members as equivalent, even if these
measures differ from their own or from those used by other Members trading in the same
product, if the exporting Member objectively demonstrates that they achieve the importing
Member’s appropriate level of sanitary protection

Regionalisation
Members shall recognise the concept of disease-free areas, whether all of a country, part of a
country, or all or parts of several countries (Article 6) Members shall ensure sanitary measures
take into account (Article 6): • Disease prevalence • The existence of eradication or control
programmes • The criteria or guidelines developed by the relevant international organizations

No discrimination
Members shall ensure that their sanitary measures do not arbitrarily or unjustifiably
discriminate between Members where identical or similar conditions prevail, including between
their own territory and that of other Members Sanitary measures shall not be applied in a
manner which would constitute a disguised restriction on international trade
Transparency
Members shall notify changes in their sanitary measures and shall provide information on their
sanitary measures

Least trade restrictive

When establishing or maintaining sanitary measures, Members shall ensure that their
appropriate level of sanitary protection is achieved through the application of measures that
are least restrictive to trade, taking into account technical and economic feasibility

International trade incoterms

Free On Board
Free Alongside Ship
FCA
EXW
CPT
Delivered Duty Paid
Dap – Delivered At Place
CIF
Cost and Freight
Carriage and Insurance Paid to
DPU
DAT
Cfr – Cost And Freight
Delivered Duty Unpaid
Delivered at Place Unloaded
CFR Cost and Freight
Delivered Ex quay
Cfr (Cost And Freight)
Cif Cost, Insurance & Freight
Dpu: Delivered At Place Unloaded
 Cfr: Cost And Freight
CIP Carriage and insurance Paid
DAF Delivered at Frontier
DES Delivered Ex Ship

Various ways of payment in international trade

Methods of Payment
 Methods of Payment. To succeed in today's global marketplace and win sales against
foreign competitors, exporters must offer their customers attractive sales terms
supported by the appropriate payment methods. ...
 Key Points.
 Cash-in-Advance. ...
 Letters of Credit. ...
 Documentary Collections. ...
 Open Account. ...
 Consignment.

Parties of L/C

A Letter of Credit is an arrangement whereby Bank acting at the request of a customer

(Importer / Buyer), undertakes to pay for the goods / services, to a third party (Exporter /
Beneficiary) by a given date, on documents being presented in compliance with the
conditions laid down.

Types of a Letter of Credit

The letters of credit can be divided into the following categories:

Sight Credit
Under this Letter of Credit, documents are payable at the sight/ upon presentation of the
correct documentation. For example, a businessman can present a bill of exchange to a
lender along with a sight letter of credit and take the necessary funds immediately. A
sight letter of credit is more immediate than other forms of letters of credit.
Acceptance Credit/ Time Credit
The Bills of Exchange that are drawn and payable after a period are called usance bills.
Under acceptance credit, these usance bills are accepted upon presentation and
eventually honored on their respective due dates.

Revocable Letter of Credit

As the name suggests, the issuing bank can revoke a letter of credit without the
beneficiary’s agreement.

Irrevocable Letter of Credit

Suppose an applicant applies for a duty credit scrip/ discharge of EO against a
confirmed irrevocable letter of credit (or bill of exchange that is unconditionally co-
accepted/ avalised/ guaranteed by a bank). In that case, this is confirmed and certified
by the exporter’s bank in a relevant Bank Certificate of Export and
Realization. Payment of export proceeds will be considered to have been realized. For
Status Holders, an irrevocable letter of credit will suffice.

Confirmed Letter of Credit

A confirmed LC is a type of letter of credit in which the advising bank, at the request of
the issuing bank, adds confirmation that payment will be made. The confirming bank’s
liability is similar to the issuing bank. The confirming bank has to honor the payment if
tendered by the beneficiary.

Back-to-Back Letter of Credit

In a back-to-back LC, a 2nd LC is opened by the original beneficiary in favor of the 2nd
beneficiary against the security of the original LC. In general, a back-to-back LC is open
for the suppliers.

Transferable Letter of Credit

If the beneficiary can transfer an LC in whole or part to a second beneficiary (usually a
supplier to the seller), then the LC is transferable. The 2nd beneficiary, however, cannot
transfer the LC further.

Restricted Letter of Credit

A restricted LC is one wherein it designates a specific bank to pay, accept or negotiate
the LC.

Revolving Letter of Credit

In a revolving LC, the applicant can use the LC facility again based on drawings and
payments made against the LCs.

Restricted Letter of Credit

A restricted LC is one wherein it designates a specific bank to pay, accept or negotiate
the LC.

Main types of LC

1. Irrevocable LC. This LC cannot be cancelled or modified without consent of the

beneficiary (Seller). This LC reflects absolute liability of the Bank (issuer) to the other
party.

2. Revocable LC. This LC type can be cancelled or modified by the Bank (issuer) at the
customer's instructions without prior agreement of the beneficiary (Seller). The Bank will
not have any liabilities to the beneficiary after revocation of the LC.

3. Stand-by LC. This LC is closer to the bank guarantee and gives more flexible
collaboration opportunity to Seller and Buyer. The Bank will honour the LC when the
Buyer fails to fulfill payment liabilities to Seller.

4. Confirmed LC. In addition to the Bank guarantee of the LC issuer, this LC type is
confirmed by the Seller's bank or any other bank. Irrespective to the payment by the
Bank issuing the LC (issuer), the Bank confirming the LC is liable for performance of
obligations.
5. Unconfirmed LC. Only the Bank issuing the LC will be liable for payment of this LC.

6. Transferable LC. This LC enables the Seller to assign part of the letter of credit to
other party(ies). This LC is especially beneficial in those cases when the Seller is not a
sole manufacturer of the goods and purchases some parts from other parties, as it
eliminates the necessity of opening several LC's for other parties.

7. Back-to-Back LC. This LC type considers issuing the second LC on the basis of the
first letter of credit. LC is opened in favor of intermediary as per the Buyer's instructions
and on the basis of this LC and instructions of the intermediary a new LC is opened in
favor of Seller of the goods.

8. Payment at Sight LC. According to this LC, payment is made to the seller

immediately (maximum within 7 days) after the required documents have been
submitted.
9. Deferred Payment LC. According to this LC the payment to the seller is not made
when the documents are submitted, but instead at a later period defined in the letter of
credit. In most cases the payment in favor of Seller under this LC is made upon receipt
of goods by the Buyer.

10. Red Clause LC. The seller can request an advance for an agreed amount of the LC
before shipment of goods and submittal of required documents. This red clause is so
termed because it is usually printed in red on the document to draw attention to
"advance payment" term of the credit

Trade finance

What Is International Trade Finance?

International trade finance meaning: "The financial activities involved in international

trade transactions, such as the import and export of goods and services, are referred to
as international trade finance. These financial activities can include a variety of tasks
such as financing,risk,management,and,payment,processing."Or
Global trade finance instruments are simply the financial help provided by banks or
financial institutions in the field of international trade through various types of financial
instruments like bank guarantee, letter of credit etc. These varieties of financial
instruments and products helps importer & exporters to execute business transactions
without facing any financial inconveniences. It bridges the gap between importers &
exporters by adding a third party and covers activities like issuance of letter of credit,
lending or forfaiting, etc.
The parties involved are:

International trade finance transactions involve multiple parties, each with their own

set of roles and responsibilities. In most international trade finance transactions, the
following parties are involved:

1. Importers: The party who buys goods or services from a foreign provider and
imports them into their own nation. The importer is in charge of making all arrangements
for delivery and shipping as well as payment for the products or services.

2. Exporters: The party who sells goods or services to a foreign

customer/buyer/importer and get paid for the goods or services they have provided.

3. Freight forwarders: Specialize in arranging the transportation of goods from one

country to another. They can handle all aspects of shipping, including customs
clearance, insurance, and documentation.

4. Banks: Banks are key players in transactions involving the financing of international

trade. In addition to processing payments and issuing letters of credit, they can offer
financing of foreign trade to importers and exporters and offer other financial services
that support global trade.

5. Insurance: Insurance companies offer trade credit insurance to shield exporters from

the possibility of nonpayment by international clients. Also, they can offer additional
insurance to guard against other dangers involved with global trade, like damage to
products during shipping.

Conclusion.

Economic theory indicates that international trade raises the standard of living. A

comparison between the performance of open and closed economies confirms that the
benefits of trade in practice are significant.

Tools for Desigion Making

Business leaders make hundreds of decisions every day, many of which influence the
success of the business as a whole. No pressure, right? That’s why one of the top skills
sought after for managers is the ability to make efficient, informed, and effective
business decisions.
 The typical decision-making process involves defining the problem, gathering
information, identifying alternatives, choosing among the alternatives, and
reviewing/monitoring the results. There are many different decision-making techniques
that are used by managers to help them choose among the alternatives and make a
decision. In some instances, it may be a combination of a couple of different decision
making strategies that help them achieve the best results. What works for some
organizations may not work for others, and what works for making one decision may not
work for the next. We’ve compiled this list to help narrow things down and give you an
idea of what some of the more popular tools and strategies for decision-making are.

 Strengths, weaknesses, opportunities and threats (SWOT) analyses and other

techniques help leaders organize their thoughts to make long-term decisions.
 Formal decision-making methods help leaders avoid common fallacies, such as
extrapolation or sunk-cost bias.
 Artificial intelligence platforms use both internal and external data to improve decision-
making.

 This article is for business owners and managers who want to optimize their
business decision-making process.

Decision-making occurs at every business level, including mundane decisions made

daily by lower-level employees and far-reaching executive decisions that may require
years of deliberation.

Many decisions will be executed by an employee under a rulebook, company guidelines

or the company handbook. However, day-to-day decisions can be just as consequential.

Here’s a look at five basic steps for decision-making, how decision-making tools can
help, and some techniques that will help you weigh your options.

5 steps of decision-making
While numerous entities – such as academic institutions or advice blogs – have
attempted to distill the decision-making process into a series of five to seven steps (the
University of Massachusetts-Dartmouth’s seven basic steps is an oft-cited one), all
processes more or less follow this format:

1. Identify your goal. This may sound like a no-brainer for personal goals, but
for setting achievable business goals, the more stakeholders involved, the more
likely your goals will be misaligned.
2. Gather relevant information. This includes identifying courses of action and
alternatives, and researching both of these.
3. Evaluate your options. At this point, decision-makers must weigh the evidence.
4. Make your choice.
 5. Evaluate your decision. This includes both short-term and long-term
evaluations

Conclusion

Common decision-making tools include cost-benefit analysis, multi-criteria analysis,

decision trees, force field analysis, and scenario planning.

Introduction to Risk Management

Risk Management in Banking Sector is sectioned under the Finance &

Management paper of RBI Grade B Mains Exam. It is one of the most important
topics to prepare in this paper as a lot of questions are asked from it.
The banking sector has a huge role to play in the development of the economy.
Certainly, it is the driver of the economic growth of the country. It plays an
important role in identifying the idle resources for their efficient utilization to
attain maximum productivity. However, this process involves risk. And since
the risk is directly proportional to returns, the more risk a bank take, the higher
it can generate profits. Hence, it is very important to manage the risks and
identify if they are worth taking.
what is risk?

Risks in the banking sector are defined as the possibility of loss that may rise due to
myriad reasons and uncertainties. Risks in the banking sector are of many forms.
However, they are mainly categorized as a chance wherein an outcome or investment's
actual return will not be the same as expected.

Types of financial risks:

1. Credit Risk

Credit risk, one of the biggest financial risks in banking, occurs when borrowers or
counterparties fail to meet their obligations. When calculating the involved credit risk,
lenders need to foresee and predict the possibility of them making back the loan,
principal, interest, and all.

2. Market Risk

Market risk is the risk of losing value on financial instruments on the back of adverse price
moments driven by changes in equities, interest rates, credit spreads, commodities, and
FX.

3. Liquidity Risk

Liquidity refers to a bank’s ability to meet its collateral and cash obligations while avoiding
major losses. Liquidity risk is the risk of incurring losses where certain commodity or
investment cannot be traded without impacting its market price.

4. Model Risk

Model use at large banks is growing by more than 20% each year (IDC), which in turn
leads to greater model risk. Banks must manage model accuracy to prevent significant
financial losses when assumptions grow, models are misused, or other forms of
malfunction occur. 

5. Environmental, Social and Governance (ESG) Risk

Environmental, social, and governance events, from climate change to diversity and
inclusion policies, can have material impact on the value of investments. Banks must
proactively measure and manage these risks, integrating ESG data, scoring models, and
climate models into the investment process and credit risk evaluations.

Types of non-financial risk:

6. Operational Risk

Operational risk is the risk of losses incurred by inadequate internal processes, people,
and systems, or from external events.

7. Financial Crime

Money laundering, corruption, fraud are examples of financial crime, leading to economic
benefits for individuals through illegal ways. Banks need to make sure they develop fool
proof techniques to avoid the losses posed by financial crime.

8. Supplier Risk

Banks often have large, global supply chains. In the event that suppliers disrupt business
continuity or put customer data at risk, banks are increasingly held responsible by
regulators.

9. Conduct Risk

Conduct risk occurs when banks incur financial loss due to inaccurate management
choices or decisions by the employees and team members.

With the many risks banks and financial organizations face, time is of the essence
especially as global economies and markets try to recover from the uncertainty brought
on by the pandemic.

Conclusion

In conclusion, the risk management should be an integral part of the bank management,
promoting operational efficiency rather than bureaucracy, by permanently analysing the
cost/benefit generated by the reaction to risks.

News wire

SBI Life shall take over the policy liabilities of around two lakh policies of SILIC

Financial express

Learnings:

Regulator Irdai on Friday directed SBI Life Insurance Company to take over the policy
liabilities of around two lakh policies along with assets of Sahara India Life Insurance
Co. Ltd (SILIC) with immediate effect.The decision was taken at the meeting of the
Insurance Regulatory and Development Authority of India (Irdai) in view of deteriorating
financial health of the SILIC.

“As identified SBI Life Insurance Company Limited (SBI Life), which is one of the
largest life insurers in the country with satisfactory financials, as the acquirer insurer of
the life insurance business of SlLIC.”SBI Life shall take over the policy liabilities of
around two lakh policies of SILIC, backed by the policyholders’ assets, with immediate
effect,” Irdai said in its order.In a statement, the Irdai said it has also taken necessary
steps to ensure the smooth transition for all policyholders of SILIC. 

SBI Life shall take over the policy liabilities of around two lakh policies of SILIC, backed
by the policyholders' assets, with immediate effect," Irdai said in its order. In a
statement, the Irdai said it has also taken necessary steps to ensure the smooth
transition for all policyholders of SILIC.

PRIVATE BANKS GROW DEPOSITS AT A FASTER PACE IN FY23

Learnings:

While public sector banks (PSBs) continue to gather deposits at a brisk pace, the rate of
growth of deposits was higher for private sector banks in FY23.

The top five PSBs – State Bank of India, Punjab National Bank, Bank of Baroda,
Canara Bank and Union Bank of India – mobilised a total of Rs 8.43 trillion in deposits in
FY23. SBI’s total deposits grew the highest incrementally, at Rs 3.72 trillion. Analysts
attribute the rise in deposits to the large branch network of PSU banks, the high comfort
level that borrowers have with a sovereign-backed bank, and growing partnerships of
PSU banks with third party players, including business correspondents and fintechs

In comparison, the top five private banks – HDFC Bank, ICICI Bank, Axis Bank, Kotak
Mahindra Bank, and IndusInd Bank – garnered a total of Rs 6.60 trillion of deposits in
FY23. In a first, HDFC Bank came close to SBI in terms of incremental deposit
accretion, gaining over Rs 3.24 trillion of deposits in the previous fiscal, on account of
ongoing merger of Housing Development Finance Corp (HDFC) with the bank.

Overall, aggregate deposit of all scheduled commercial banks grew at about 9.6% year-
on-year (YoY) compared to the last year’s growth of 8.9% YoY, SBI chairman Khara
said in a recent analyst call.
The deposit mobilisation gap between PSBs and private lenders was the highest during
FY20, when large PSU banks garnered a total of Rs 15.17 trillion of deposits, against
Rs 4.78 trillion by private banks. Union Bank alone garnered Rs 4.53 trillion of deposits,
higher than even SBI’s Rs 3.30 trillion in that fiscal. The sharp rise in incremental
deposits of PSU banks in FY20 was led by customers shifting their money from private
banks to PSU banks in view of crises at YES Bank and IL&FS, among others, analysts
say.

However, the gap between the two set of lenders decreased after FY20. For instance,
while large PSBs reported Rs 6.55 trillion of incremental deposits in FY21, private banks
reported a total of Rs 4.87 trillion in incremental deposits. In FY22, PSBs reported
incremental deposits of Rs 6.73 trillion while private lenders reported Rs 5.40 trillion of
incremental deposits.

CASA ratio falls

While both PSBs and private banks have managed to deliver a near double-digit growth
in deposits in FY23, their low-cost current account and savings account (CASA) ratio
has moderated due to customers shifting towards term deposits.

While SBI’s total deposits rose 9.2% YoY Rs 44.23 trillion as on March end, its CASA
ratio fell to 43.80% from 45.28% a year ago. Meanwhile, term deposits, which
accounted for 54.7% of total deposits during Q4FY22, now form 56.2% of the total. In
the case of ICICI Bank, total deposits grew 11% YoY to Rs 11.80 trillion as on March
31, while the CASA ratio fell to 43.6% from 45.2% a year ago.

“Of course it’s an industry-level experience, when the higher interest regime is there and
there is a competition in the market and every bank is sourcing resources to meet their
requirement. When they are offering at 8% for retail term deposits, it will be tempting for
the customer to keep a part of her savings into term deposits,” said K Satyanarayna
Raju, MD & CEO at Canara Bank, in a post-earnings call.

3 years of PM SVANidhi: Among fastest growing micro credit schemes by govt,

says Hardeep S Puri

While the Reserve Bank of India’s move to withdraw circulation of Rs 2,000 currency

notes will bring temporary relief to banks on raising deposit rates, higher credit growth,
expanding credit-deposit ratio and competition with peers will likely result in higher cost
of deposits in later half of the current fiscal, and shall subsequently impact lenders’ net
interest margin (NIM).

“Cost of deposit is 4.54% the last quarter and it is bound to increase, because entire
repricing of the deposit will take place at the time of the maturity of the term deposit,
because most of the deposit are within the range of one year or two year,”
said Atul Goel, MD & CEO at PNB. He said PNB’s NIM stood at 3.38% in the last
quarter domestically and because the bank is pencilling in a higher deposit cost, it is
guiding for lower NIM in FY24, in the range of 2.90- 3%.

Anindya Banerjee, CFO at ICICI Bank, said, “… deposit costs have also started to
reflect the higher rates at which deposits are being raised incrementally. So, I think, we
would believe that the NIMs are at kind of peak or near-peak levels. And from here, we
should see a moderation.

INDIA’S LARGEST LENDER, SBI IS INDIA’S SECOND-MOST PROFITABLE

BUSINESS

Learnings:

State Bank of India (SBI), the largest lender in the nation, saw its earnings increase by
41 percent over the previous three years, making it the second-most profitable company
behind Reliance Industries in FY23. As a result of higher net interest revenue and lesser
provisions, the state-owned institution on Thursday announced a 57 percent year-over-
year (y-o-y) increase in net profit to Rs 55,648 crore for the fiscal 2022–2023 period.

Interestingly, other than Reliance Industries, no other Indian business has ever
achieved a profit of more than Rs 50,000 crore. The third most profitable company,
HDFC Bank, made a net profit of Rs 45,997 crore for the fiscal year that ended in
March, while the most prominent company, Reliance Industries, declared a net profit of
Rs 66,702 crore.

On the other hand, Bloomberg consensus estimates predict that ONGC, due to release
its Q4 results on 29 May, would have a net profit of roughly Rs 48,000 crore.

Bank’s credit growth has been strong across all segments.

Dinesh Kumar Khara, the chairman of SBI, commented on the results and noted that
the bank’s credit growth has been strong across all segments. Our international
operations have maintained strong performance, and asset quality has improved. The
gross NPA ratio is at its lowest point in the last ten years, Khara continued. At the end of
March 2023, the bank’s gross NPA ratio was 2.78 percent instead of 3.14 percent a
quarter earlier.

RIL has maintained its top spot since FY16

RIL has maintained its top spot since FY16. However, according to Bloomberg data,
TCS, HDFC Bank, SBI, ONGC, and IOC have alternated over the past many years for
the following three positions in terms of profitability.
SBI’s rise in the Stock Exchange
Since 2021, State Bank of India stock has experienced an incredible rise on the stock
exchanges. Compared to the benchmark Nifty50 throughout the same period, the SBI
stock has increased by more than twice its original value.

Like many of its competitors in the banking industry, SBI also stated that loans grew
more quickly than deposits. SBI’s loan book increased by 15.99% YoY to 32.69 lakh
crore in Q4, while deposits increased by 9.19% YoY to 44.24 lakh crore, a far slower
rate. The bank’s cost of deposits climbed by 16 basis points YoY to 3.99% due to rising
interest rates. For the fourth quarter in a row, deposit fees have climbed.

Retail loan growth exceeded corporate loan growth in Q4 with a YoY increase of
17.64% to 11.79 lakh crore compared to 12.52% for corporate loan growth to 9.8 lakh
crore. Home loans increased by 14.07% to $6.41 lakh crore.

The consolidated net profit of Rs55,648 crore for FY23. This is the highest profit that
SBI ever reported in any year in the past and makes SBI the second most profitable
company in India. Of course, the equations may change going ahead.

NOW MAKE RUPAY CREDIT CARD, DEBIT CARD PAYMENTS WITHOUT CVV.
HOW IT WORKS?

Learnings:

The NPCI said that when a cardholder opts to save their card for a domestic e-
commerce transaction, they authenticate the transaction through the card details (Card
number, CVV, Card expiry date) as a one-time activity followed by entering the OTP
(two-factor authentication). The details are then Tokenized and saved with the
merchant. This safeguards the card details of the customer from cyber frauds as real
details are not saved with the merchant

On the merchants live for CVV-less payments, for the subsequent transactions
customer, can complete the payment by just entering the OTP without the need to enter
the CVV or other card details again, the NPCI said.

With the auto-read OTP feature enabled on customers’ devices, this payment
experience will become smoother than ever.
The new CVV-less payments feature has been made live along with RazorPay for
merchants like Rapido, Porter, etc. RuPay is also working with major
aggregators/gateways like PayU, CyberSource, Firstdata, Paytm, etc. to extend this
feature to other merchants, the NPCI said.

Commenting on the new feature, Denny Thomas, Head RuPay said, “Having worked
with the payments industry extensively for implementation of Card on File Tokenization,
which ensures utmost security of sensitive card information, now we are aiming at
making the payment experience of a tokenized card seamless.”

SBI, HDFC, Axis, ICICI or any other credit card user? Check new IRDAI rule for
loan payment

He further said that this new CVV-less experience will ensure that the cardholder will
not have to reach out to their wallet or remember any card details if they have saved
(tokenized) their card on the e-commerce merchant which supports this feature.

They will just have to enter the OTP or their device will auto-populate the OTP during
the domestic ecommerce transaction and the payment will be done.

DEBIT CARDS FACE UPI CHALLENGE

Learnings:

Debit cards may struggle to retain their utilities intact at a time when the preference for the
Unified Payments Interface (UPI) platform across India has been on the rise. The recent move of
the National Payments Corporation of India (NPCI) to allow prepaid payment instruments to
become a part of the interoperable UPI ecosystem will bolster UPI payments, say experts.
“Earlier, debit cards were the only channel for you to spend money online if you wanted to spend
using your bank account. Now that there is UPI, those access channels are changing with
additional data security available on these channels. I think debit cards usage will definitely be
on the downslide,” said Amit Tyagi, chief executive officer, Payworld.
 6
WHY GOLD LOANS WITNESS SURGE IN DEMAND, IS IT SUSTAINABLE?

Learnings:

Gold prices have seen a jump as investors rushed to safe-haven assets after banking
crises in the US and Europe. The recent surge in gold prices along with other factors
has led to an increase in the demand for gold loans. As a result, the gold loan industry
has seen an uptick in business, recently. 

“Although customers will be eligible for a higher loan amount per gram of gold, gold
price is not the only factor that directly impacts the demand for gold loans. However, we
are witnessing a surge in demand driven by the revival in the economy, adding to the
fact that the demand for gold loans is always need-based,” said George Alexander
Muthoot, MD, Muthoot Finance.

Gold price opened today with an upside gap at Rs 59,231 per 10 gm levels on the back
of US Fed rate hike. Gold crossed the mark of Rs 60,000 per 10 gm on Monday. 

Alexander added that there are some trends observed in the demand for gold loans in
the recent times. “We at Muthoot Finance, have observed a hike in demand from
youngsters. With a spike of more than 50 per cent YoY, youngsters are now giving more
preference to experiences over material possessions. They are spending more on
travel, concerts, and other allied leisure activities. Further, the company has also
witnessed a 12 per cent year-on-year growth in demand for gold loans from HNIs.

The recent macroeconomic climate has led investors to seek safety of gold, thereby
leading to an increase in gold prices. “Rising gold prices provide an additional
opportunity for borrowers, where they can extract greater value from the gold, and
hence a greater amount of loan given that the loan value is pegged to the overall value
of gold ornaments. Progressive lending organizations provide opportunities proactively
to borrowers in case they would need to enhance the loan amount against the gold
ornaments pledged,” said Sumit Sharma, Founder & Director - Radian Finserv, a
Bengaluru-based gold loan non-banking financial company.

What should existing gold loan borrowers do? Should one use the enhanced limit due to
the rise in gold prices? “Smart borrowers can use this effectively to use the enhanced
limit, though also need to be aware of the enhanced demands this can place on
repayment and interest. The increase in interest payment is particularly relevant as
there is a trend of increasing interest rates, and this would in any case lead to higher
interest payments; and when coupled with higher loan amounts, borrowers should be
cognizant of the additional demands placed to service the interest,” said Sharma. 
“Overall the demand for gold loans has increased around 15 percent as compared to
last year. Gold loans have been a popular financing option for a long time, as they are
easy to obtain and offer relatively low interest rates. The demand for gold loans tends to
increase during times of economic uncertainty especially by people in need of urgent
money," said Rajesh Shet, CEO and Co-Founder, SahiBandhu, a gold loan platform
backed by The Manipal Group. 

BANK FDS BECOME MORE ATTRACTIVE

Learnings:

If you thought that fixed deposits were not attractive any longer, think again. A lot has
changed in the last few weeks and months. The RBI has hiked the repo rates by 190
basis points between May and September this year and that has had an obvious impact
on the cost of loans and the cost of deposits. Obviously, conservative investors are
laughing all the way to the bank. FD rates of interest are not only starting to match
inflation but are also starting to look attractive. In the midst of all this disruption in global
markets and fears of global recession, bank FDs are once again starting to look like a
virtuous proposition.

A slew of private banks like ICICI Bank, Kotak Bank and Axis Bank have sharply hiked
their deposit rates by 100-125 basis points in the last couple of months. Other banks are
likely to follow suit, sooner rather than later. For long, the FDs have been favoured
products, which gradually became less preferred as rates started falling. Now debt
funds are getting hit by higher interest rates, equities are being hit by volatility while the
FDs are suddenly looking like an island of peace amidst an ocean of turmoil. It has just
added to the pool of options to invest hard-earned money and depositors are not
complaining about the choice.

In India FDs are offered by banks, NBFCs and other financial institutions. On the risk
scale, the bank FDs are the safest as they have a deposit insurance guarantee. These
FDs are also liquid in the sense that you can take loan at short notice against these
FDs. The returns are assured, irrespective of which way the stock market turns or the
interest rate changes. This is assured through the tenure. Above all, if you are willing to
take a long term 5-year FD and above, then you also get tax exemptions under Section
80C of the Income Tax Act. And, if you are a senior citizen, then you are anyways
entitled to 50 bps higher rates of interest.

One objection to the FDs is that they are tax inefficient. But they there are basic
exemptions available in case you are a senior citizens. The higher rates also makes the
FDs very attractive for the people in the lower tax brackets to also opt for the FDs.
Today the typical retail term deposits offers 5.75% to 6.10%, while the wholesale FDs
offer rates in the range of 6.0% to 6.5%. With RBI planning to hike rates by another 50
bps, this is only likely to become all the more attractive to investors. Let us take a quick
look at what are the actual rates that some of the leading private banks are offering on
FDs.

NATIONAL PENSION SCHEME SUBSCRIBERS INCREASES BY 23%: PFRDA DATA

Learnings:

The number of subscribers under the two flagship pension schemes of

PFRDA increased nearly 23 per cent to over 5.23 crore by April-end 2022.
The subscriber base of the two schemes combined was 4.26 crore in April
last year, Pension Fund Regulatory and Development Authority (PFRDA) data
showed.

. The flagship schemes -- National Pension System (NPS) and Atal Pension Yojana
(APY) -- had total asset under management of Rs 7,38,765 crore at April-end 2022,
rising by 25.25 per cent from the yearago period. "The number of subscribers in various
schemes under NPS rose to 523.87 lakh by end-April 2022 from 426.75 lakh in April
2021 showing a year-on-year increase of 22.76 per cent," it said. The number of
subscribers under APY grew nearly 30 per cent to 3.65 Representative Image SAVE
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pension schemes up 23 pc to 5.23 cr y 12, 2022, 04:57 PM IST SHARE FONT SIZE
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Funds and more 6/12/23, 2:43 PM pfrda: Number of subscribers under PFRDA pension
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https://economictimes.indiatimes.com/news/economy/policy/number-of-subscribers-
under-pfrda-pension-schemes-up-23-pc-to-5-23-cr/articleshow/915… 2/2 crore by April
this year. The rest 1.58 crore subscribers belonged to various categories under NPS --
the pension scheme which mainly caters to the government sector and corporate sector
employees

IDBI BANK APPOINTS JAYAKUMAR S. PILLAI AS DEPUTY MD

Learnings:

IDBI Bank Limited announced that the Board of Directors on May 22, 2023 has
approved the appointment of Shri Jayakumar S. Pillai as Deputy Managing Director on
the Board of IDBI Bank for a period of 3 years with effect from the date of his taking
charge as specified in the RBI approval received in this regard. The Brief Profile of Shri
Jayakumar S. Pillai is as under: Shri Jayakumar S. Pillai has 32 years and 7 months of
experience in Canara Bank. He has headed branches in various scales across different
geographies and has rich experience in branch banking, mobilization of retail resources,
Credit delivery in sectors like Retail, Agriculture, MSME and Recovery.

He has also worked as Chief Executive of Canara Bank's UK operations for over 4
years and gained experience in International banking. Further, also worked as Wing
Head in Bank's mid corporate credit department in HO. Worked as Chairman of Bank's
Credit Committee at HO as well as Chairman of General Manager's Credit approval
committee-thus gained experience in RAM sectors, Corporate Credit, handling of
stressed assets.

He is presently working as Chief General Manager and Circle Head in Canara Bank,
Mumbai
 10

AUTO, HOME AND PERSONAL LOANS BECOME EXPENSIVE WITH BANKS RAISING RATES

Learnings:

Home, car and personal loans are now more expensive as top banks like State Bank of
India (SBI), Punjab National Bank (PNB), Union Bank of India, Kotak Mahindra Bank
Ltd, Allahabad Bank, ICICI Bank and housing finance company , HDFC, on Friday
increased their lending rates — the marginal cost of funds based lending rate or MCLR.
The rates were increased by 5-20 basis points for both short-and-long-term loans.

The MCLR is the benchmark lending rate for all new loans, and banks are not allowed
to lend below it. One basis point is one-hundredth of a percentage point.
SBI, the country’s largest lender, increased MCLR by 10 basis points (bps) across
tenures with effect June 1. The one-year MCLR is up from 8.15% to 8.25%. This is
SBI’s second MCLR hike in four months and comes after the bank increased interest
rates on fixed deposits of select tenure by up to 25 bps. For the one-year FD of up to ₹1
crore, the bank’s interest rate is 6.65%, up from 6.40% earlier. PNB raised its interest
rate in four MCLR brackets — the six-month, one-year, three-year and five-year ones —
by 5-10 bps. PNB’s one-year MCLR is 8.40% compared to the earlier 8.30%. The bank
has also increased its base rate by 10 bps, from 9.15% to 9.25%. The one-year MCLR
at Union Bank of India, Kotak Mahindra Bank Ltd and Allahabad Bank are at 8.45%,
8.90% and 8.35%, respectively.
Housing Development Finance Corp. Ltd, one of the largest lenders in the country for
home loans, also raised its lending rate by 10 bps, effective June 2.
The lender will now give home loans at 8.50% onwards, compared to 8.40% earlier .
ICICI Bank Ltd, the largest private sector bank, increased MCLR by 10bps, one-year
MCLR up from 8.30% to 8.40%.