10 More Banking and Finance Notes | SBI PO Exam

1.         What is Capital Adequacy Ratio ( CAR )  ?

Capital adequacy ratios ("CAR") are a measure of the amount of a bank's capital expressed as a percentage of its risk weighted credit exposures.
CAR = Capital / Risk Weighted Assets

2.         What is World Bank  ? 

 The World Bank is an internationally supported bank that provides financial and technical assistance to developing countries for development programs (e.g. bridges, roads, schools, etc.) with the stated goal of reducing poverty.

3.         What is IMF  ? 

The International Monetary Fund (IMF) is an international organisation that oversees the global financial system by following the macro economic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments. It also offers financial and technical assistance to its members, making it an international lender of last resorts. Its headquarters are located in Washington D.C.
In simple terms, IMF provides credit to coutnries that have negative balance of payment.  India is currently a creditor nation to IMF, meaning India parks its surplus forex with IMF.

4.         What is Islamic Banking  ?

                    Islamic banking refers to a system of banking or banking activity that is consistent with Islamic Law (Sharia) principles and guided by Islamic Economics. In particular, Islamic law prohibits usury, which is the collection and payment of interest, also commonly called riba in Islamic discourse. In addition, Islamic law prohibits investing in businesses that are considered unlawful, or haram(such as businesses that sell alcohol or businesses that produce media such as gossip columns or pornography, which are contrary to Islamic values).
The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba ( usury). Amongst the common Islamic concepts used in Islamic banking are profit sharing(Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus ( Murabahah), and leasing (Ijarah).
In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the fact that it is profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction

5.         What is CRR  ?

CRR is Cash Reserve Ratio.  Each commercial bank has to keep a part of their total demand and time liabilities ( demand deposits and time deposits) in liquid cash with RBI.  This is known as CRR.  CRR is a credit / liquidity controlling measure.
When CRR is hiked, banks will be left with less lendable funds.  When CRR is reduced, banks’ liquidity position will improve and will get more funds to lend.

6.         What is SLR.  ?

SLR is Statutory Liquidity Ratio.  Each commercial bank has to invest a part of their time and demand liabilities ( demand and time deposits)  in government approved securities ( government debts).  This is SLR.  RBI fixes SLR rates from tie to time.  Higher the SLR, lower the funds with banks for discretional lending.

7.         What is CORE Banking solutions  ?

CORE stands for Centralised Online Realtime Electronic Banking.  It is a centralised accounting package.

8.         What are Greenfield and Brownfield Projects  ?

Greenfield projects mean new projects while brownfield projects mean renovation of existing project.

9.         What is Portfolio Management  ?

The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against. performance.

Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.

10.       What are FCNR deposits  ?

  FCNR means Foreign Currency Non Resident.  It is a foreign currency denominated Fixed Deposit account. You can have FCNR deposits in Dollars, Pound Sterling, Euro, and Yen.

15 More Banking And Finance Tips For SBI PO Exam 

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