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 ?
15 More Banking And Finance Tips For SBI PO Exam
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