Non-Performing Asset (NPA)

A Non-Performing Asset (NPA) is defined as a credit facility in respect of which the interest and/or installment of principle has remained ‘past due’ for a specified period of time. In simple terms, an asset is tagged as non performing when it ceases to generate income for the bank.

A non-performing asset (NPA)is a loan or an advance where;

• Interest and/or installment of principal remain overdue for a period of more than 91 days in respect of a term loan,
• The account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC),
• The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,
•  The installment of principal or interest thereon remains overdue for two crop seasons for short duration crops.
• The installment of principal or interest thereon remains overdue for one crop season for long duration crops.
• Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.
• Non submission of Stock Statements for 3 Continuous Quarters in case of Cash Credit Facility.
• No active transactions in the account (Cash Credit/Over Draft/EPC/PCFC) for more than 91days

‘Out of Order’ status

An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as 'out of order'.

 ‘Overdue’

Any amount due to the bank under any credit facility is ‘overdue’ if it is not paid on the due date fixed by the bank

Further classify non-performing assets into the following three categories based on the period for which the asset has remained non-performing and the realisability of the dues:

1.   Sub-standard assets: a sub standard asset is one which has been classified as NPA for a period not exceeding 12 months.

2.   Doubtful Assets: a doubtful asset is one which has remained NPA for a period exceeding 12 months.

3.   Loss assets: where loss has been identified by the bank, internal or external auditor or central bank inspectors. But the amount has not been written off, wholly or partly.

Sub-standard asset is the asset in which bank have to maintain 15% of its reserves. All those assets which are considered as non-performing for period of more than 12 months are called as Doubtful Assets. All those assets which cannot be recovered are called as Loss Assets.

Reasons For NPA

NPAs result from what are termed “Bad Loans” or defaults. Default, in the financial parlance, is the failure to meet financial obligations, say non-payment of a loan installment. These loans can occur due to the following reasons:

·         Usual banking operations /Bad lending practices

·         A banking crisis (as happened in South Asia and Japan)

·         Overhang component (due to environmental reasons, natural calamities, business cycle, Disease Occurrence.

·         Incremental component (due to internal bank management, like credit policy, terms of credit, etc...)

Effect of NPA

NPAs do not just reflect badly in a bank’s account books, they adversely impact the national economy. Following are some of the repercussions of NPAs:

·         Depositors do not get rightful returns and many times may lose uninsured deposits. Banks may begin charging higher interest rates on some products to compensate NPA losses

·         Bank shareholders are adversely affected

·         Bad loans imply redirecting of funds from good projects to bad ones. Hence, the economy suffers due to loss of good projects and failure of bad investments.

Ref: Master circular RBI, Wikipedia

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Electronic mode of Transdaction/Payment gateway

There are many type of payment gateway through which we payment and transfers fund from one bank to another, one country to another.

1.       SWIFT

Ø  It is a society, stands for Society for Worldwide Interbank Financial Telecommunications.

Ø  Owned by member banks and financial institutions

Ø  Built in security system with an automatic authentication of financial message, through Bilateral Key Exchange (BKE) , 24 hour & 365 day.

Ø  Authentication key exchange between themselves through RMA ( Relationship Management Application) or BIC ( Bank Identification Code)

Ø  Comprised of 8 or 11 alphanumeric character  

2.       CHIPS

Ø  Stands for Clearing House Interbank Payment System.

Ø  The system uses CHIP participant code to identify the participants and UID numbers to identify the beneficiary account.

Ø  It is operative only in New York and mainly used for foreign exchange Interbank settlement and Euro dollar settlement.

3.       FEDWIRE

Ø  Another US payment system operated by Federal Reserve Bank

Ø  All US banks maintain account with Federal Reserve Bank and allotted an “ABA number” to identify and receivers of payments

4.       CHAPS

Ø  Clearing House Automated Payment System (CHAPS) , is a British equivalent to CHIPS.

Ø  Payment in London with 16 member bank

5.       TARGET

Ø  Trans-European Automated Real-time Gross Settlement Express Transfer system is an EURO payment system comprising 15 national RTGS system working in EUROPE.

6.       RTGS-plus and EBA

Ø  Euro clearing system with RTGS plus

7.       RTGS/NEFT in India

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Correspondent Banking

Correspondent Banking is the relationship between two banks which have mutual accounts with each other, or one of them having account with the other.

In other word, Correspondent Banking is a practice, where a bank is able to handle business in another city or country, through local bank (that is present at that city or county, which act as an agent of former and charging fees for the services.

Function of correspondent Banking:-

A.      Account Services

1.        To handling of outward payment, receipts of inward payments and collections, through the account maintained with it.

2.       As agent for collection of export/import bills as well as checks in their country

3.       Handle and executes all payment instruction of the client bank, by debiting to the account maintained with it.

4.       Also grant overdraft for temporary needs, say overnight o fill up short-term funding gaps.

5.       Offers services to investment of overnight surplus balance, investment of funds in short-term deposits, cash management services

B.      Other Services

1.       Letter of credit advising

2.       LC confirmations

3.       Bankers Acceptances

4.       Issuance of Guarantees

5.       Foreign exchange services

6.       Custodial services

BANK ACCOUNT

1.       NOSTRO account – “Our account with You”

2.       VOSTRO account – “Your account with Us”

3.       LORO account – “His account with Them”

4.       MIRROR account – Shadow of Nostro account . It is maintained in two currencies, one of which is the foreign currency and the other one is the home currency.

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Pradhan Mantri Suraksha Bima Yojana

Pradhan Mantri Suraksha Bima Yojana is a government-backed accident insurance scheme in India. It was originally mentioned in the 2015 Budget speech by Finance Minister Arun Jaitely in February 2015.  It was formally launched by Prime Minister Narendra Modi on 9 May in Kolkata. As of May 2015, only 20% of India's population has any kind of insurance, this scheme aims to increase the number

DETAILS OF THE SCHEME

Ø The scheme will be a one year cover, renewable from year to year, Accident Insurance Scheme offering accidental death and disability cover for death or disability on account of an accident.

Ø The scheme would be offered / administered through Public Sector General Insurance Companies (PSGICs) and other General Insurance companies willing to offer the product on similar terms with necessary approvals and tie up with Banks for this purpose.

Ø Participating banks will be free to engage any such insurance company for implementing the scheme for their subscribers.

ELIGIBILITY

Ø All savings bank account holders in the age 18 years (completed) and 70 years (age nearer birthday) years in participating banks will be entitled to join & give their consent to join / enable auto-debit.

Ø In case of multiple saving bank accounts held by an individual in one or different banks, the person would be eligible to join the scheme through one savings bank account only.

Ø Aadhar would be the primary KYC for the bank account.

ENROLLMENT PERIOD

Ø The cover shall be for the one year period stretching from 1st June to 31st May for which option to join / pay by auto-debit from the designated savings bank account on the prescribed forms will be required to be given by 31st May of every year, extendable up to 31st August 2015 in the initial year.

Ø Initially on launch, the period for joining may be extended by Govt. of India for another three months, i.e. up to 30th of November, 2015.

Ø Joining subsequently on payment of full annual premium may be possible on specified terms. However, applicants may give an indefinite / longer option for enrolment / auto-debit, subject to continuation of the scheme with terms as may be revised on the basis of past experience.

Ø Individuals who exit the scheme at any point may re-join the scheme in future years.

Ø New entrants into the eligible category from year to year or currently eligible individuals who did not join earlier shall be able to join in future years while the scheme is continuing.

BENEFITS

	Type of Accident	Sum Assured
1	Death	Rs.  2,00,000/-
2	Total and irrecoverable loss of both eyes or loss of use of both hands or feet or loss of sight of one eye and loss of use of hand or foot	Rs.  2,00,000-
3	Total and irrecoverable loss of sight of one eye or loss of use of one hand or foot	Rs.  1,00,000/-

 PREMIUM

Ø Rs.12/- per annum per member. The premium will be deducted from the account holder’s savings bank account through ‘auto debit’ facility in one installment on or before 1 st June of each annual coverage period under the scheme.

Ø However, in cases where auto debit takes place after 1st June, the cover shall commence from the first day of the month following the auto debit.

Ø The premium would be reviewed based on annual claims experience. However, barring unforeseen adverse outcomes of extreme nature, efforts would be made to ensure that there is no upward revision of premium in the first three years.

MASTER POLICY HOLDER

 Participating Bank will be the Master policy holder on behalf of the participating subscribers. A simple and subscriber friendly administration & claim settlement process shall be finalized by the respective general insurance company in consultation with the participating Banks.

TERMINATION

 The accident cover for the member shall terminate on any of the following events and no benefit will be payable there under:

Ø On attaining age 70 years (age nearest birth day).

Ø Closure of account with the Bank or insufficiency of balance to keep the insurance in force.

Ø In case a member is covered through more than one account and premium is received by the Insurance Company inadvertently, insurance cover will be restricted to one only and the premium shall be liable to be forfeited.

Ø If the insurance cover is ceased due to any technical reasons such as insufficient balance on due date or due to any administrative issues, the same can be reinstated on receipt of full annual premium, subject to conditions that may be laid down. During this period, the risk cover will be suspended and reinstatement of risk cover will be at the sole discretion of Insurance Company.

Ø Participating banks will deduct the premium amount in the same month when the auto debit option is given, preferably in May of every year, and remit the amount due to the Insurance Company in that month itself.

APPROPIATION OF PREMIUM

Ø Insurance Premium to Insurance Company:  Rs.10/- per annum per member

Ø Reimbursement of Expenses to BC/Micro/Corporate/Agent : Rs.1/- per annum per member

Ø Reimbursement of Administrative expenses to participating Bank: Rs.1/- per annum per member

 The proposed date of commencement of the scheme will be 1st June 2015.The next Annual renewal date shall be each successive 1 st of June in subsequent years. The scheme is liable to be discontinued prior to commencement of a new future renewal date if circumstances so require.

CLAIM PROCESS

PMSBY claim process is like claiming other insurance from either private or governmental bank. You need to be prepare with each supporting document and must inform bank. Below steps can be summarized as claim process of Pradhan mantri suraksha Yojana.

Ø Need to inform the bank ( There are more than 25 banks) regarding accident.

Ø Claim should be submitted to the Bank from which PMSBY has been bought.

Ø Claim Form should be submitted within 30 days after incidence.

Ø Submit claim supporting document like FIR, death certificate, report of post mortem, disability certificate (if any) and the discharge certificate.

Ø After Verification Bank will provide insurance amount to nominee or legal heir.

NATIONAL TOLL FREE NUMBER - 1800 110 001 / 1800 180 1111

Source - wikipedia

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Sukanya Samriddhi Account

Sukanya Samriddhi Account  is a Government of India  backed saving scheme targeted at the parents of girl children. The scheme encourages parents to build a fund for the future education and marriage expenses for their female child.

The scheme was launched by Prime Minister Narendra Modi on 22 January 2015 as a part of the “Beti Bachao, Beti Padhao”  campaign. The scheme currently provides an interest rate of 8.6% (for FY2016-17) and tax benefits. The account can be opened at any India Post office or a branch of some authorized national/commercial banks.

OPENING OF ACCOUNT

The Account can be opened for maximum of two girl children per family but more than two accounts may be opened for girl children in the family if such children are born in the first and in the second order of birth, on production of certificate from competent medical authority regarding the birth of such multiple girl children.

It should be noted that the above provision shall not apply to girl children of second order of birth if the first order of birth in a particular family results in two or more surviving girl children.

DEPOSIT

Ø  Minimum initial deposit of Rs 1000/- and thereafter any amount in multiples of Rs 100/-

Ø  Minimum of Rs. 1000/- shall be made as. deposit in a financial year in one account

Ø  The total money deposited in an Account shall not exceed Rs 1,50,000/-in a financial year.

(Provided that the deposit in excess of 1,50,000/-, maybe withdrawn anytime by the depositor).

Ø  Deposits maybe made in account till the completion of fifteen years from the date of opening of such account.

Ø  If the minimum amount has not been deposited shall be considered as an Account under default:

(Provided that the account under default maybe regularized on payment of penalty of Rs 50/- (Fifty rupees) per year along with such minimum specified amount for the year or years of default.

Ø  lf in the case the default is not regularized within fifteen years of opening of account then the whole deposit, including the deposits made prior to the date of default, shall be eligible only for interest rate prescribed for Post Office Saving Bank at the time of its maturity and any amount credited wrongly by way of interest into an Account under default shall be reverted to government account as soon as it comes to notice of the Bank"

MODE OF DEPOSIT

The Deposit may be made

Ø  ln cash

Ø  by cheque or demand draft drawn in favour of manager of bank concerned where the account is opened with an endorsement on the back of such instrument made and signed by the depositor indicating the name of the Account holder and Account number in which the deposit is to be credited.

Ø  Through electronic means (e-transfer) in the concerned post office or Bank if such post office or bank has access to the facility of CBS.

DATE OF CREDIT

The date of credit of deposit to the Account shall be determined as under:-

Ø  Where the deposit is made by cheque, the date of encashment of cheque;

Ø  Where the deposit is made by demand draft, the date of submission of the same to the bank.

Ø  where the deposit is made by e- transfer, the date of deposit.

PREMATURE CLOSER

Ø  ln the event of death of Beneficiary Account holder, the Account shall be closed immediately, on production of death certificate issued. by competent medical authority, and the balance at the credit of the Account and interest due thereon till the date of death shall be paid to the guardian.

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TRANSFER OF ACCOUNT

Ø  The account maybe transferred anywhere in lndia and from or to post offices and from or to Banks and between post office and Bank, free of cost on furnishing of proof of shifting of residence either of guardian or account holder and otherwise on payment of a fees of one hundred rupees to the post office or the bank to which the transfer is made.

Ø  The process of transfer shall be effected electronically if the post office or bank concerned, has access to the facility of CBS.

WITHDRAW

Ø  Withdrawal up to a maximum of 50% (fifty per cent) of the balance in the Account at the end of financial year preceding the year of application for withdrawal, shall be allowed for the purpose of higher education of the account holder"

Ø  Provided that such withdrawal shall not be allowed unless the account holder attains the age of eighteen years or has passed tenth standard, whichever is earlier"

 Source : Bank of Baroda, Wikipedia

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