RepublicBuy.com

What is Different about Bad Credit Loans?

These days, banks offer a range of products and services designed to meet the needs and wants of all their customers. Many branches will have a different advisors and customer relations managers who are assigned to the different customers of the bank. So for example, there will be a student and graduate advisor who will begin to build a personal relationship with these customers, then there will be a small business advisor who will be trained and up to date on the needs of business, and they may also have a corporate manager who will liaise and meet the needs of the larger corporate customers.

Banks and General Loans

It is the exact same story with bank loans. There are loans targeted at all kinds of borrowers. All borrowers will have different needs and requirements from credit. Some will need short term credit with a lot of flexibility and for that they will be willing to pay relatively high interest rates. Then there will be much longer and less flexible loans such as a mortgage. While this will generally be for a much larger amount, it will be far less flexible with the term of the loan and the interest rates locked for years into the future. If you wish to alter any of these terms, such as repay the loan early, then you will probably be charged extra fees or fines. However, for this reduction in flexibility, and the extra certainty that the bank will get as a result, you will get your mortgage at a far lower rate of interest than shorter forms of credit.

The Bad Credit Loan

One class of loans that will always charge relatively high rates of interest is the bad credit loan. This reflects the added risk that banks are taking in making this loan. Generally speaking, all bank lending will be carried out on the basis of credit ratings. Virtually all adults these days will have a file on a computer database that will record all sorts of important details that banks can use to assess the likelihood of you repaying the loan. If the information they have puts you at a low risk of defaulting, then they will be very willing to lend you money and will offer you favourable terms. If however, your credit rating shows that you are more at risk of failing to meet your obligations then banks will be far less likely to wish to lend to you, after all, their sole concern is with being repaid.

Do You Have A Poor Credit History?

Therefore, if you are considered by banks and other lenders as having bad credit, then they will be less than enthusiastic to lend to you. If they are willing to lend to those with bad credit, then they will have specifically set up bad credit loans with terms and rates of interest that will match the increased risk that they are taking in making the loan.

Terms that are likely to accompany bad credit loans will be less attractive for borrowers, but given that lenders will not otherwise be willing to make the loan, and also the fact that the borrower is unlikely to have too many alternative sources of credit, the terms will probably be accepted if the loan is badly needed.

You Should Have Loan Security

The most common feature of bad credit loans is that security will be needed. You may have noticed in advertisements on the TV for bad credit loans that are open to all borrowers no matter what their credit history. Well these advertisements will almost always state that they are open only to home owners. The reason is that the loan will have to be secured over the home. It is for this reason that you should be very careful about taking out bad credit loans. Securing credit over an asset gives the lender a direct right to take the asset and sell it should the borrower fail to keep up with repayments. What this means is that if you have secured the loan over your home, then your home will be a risk of repossession if you are unable to meet your obligations under the loan. For most people, this will be a risk that they cannot afford to lose so if you are in any way worried about your ability to repay the loan, then you should avoid taking out any kind of secured loans.

How Much Are These Bad Credit Loans?

Another common feature of bad credit loans will be high interest rates. As has been previously stated, providing bad credit loans represents an increased risk for lenders and they will seek to cover this risk by charging higher rates. As well as higher interest rates, the loan will also have strict repayment rules with the result that should you ever miss a payment, it is likely that the entire balance will fall due and you will have to come up with the funds.

Bad credit loans are more expensive and stricter than other forms of credit and you should consider carefully before agreeing to take one on.

http://www.e-loanfinder.blogspot.com/

In the preceding years, the banking domain of the country was not like as it is now. It has matured a lot in past 10 years or so and has gone through some important transformations over a period of time. The banking system has modified itself to satisfy the needs of its growing customers. At present, with the emergence of foreign and private sector banks, the environment has changed drastically.

At present, banking entities are adopting a customer-focused approach, so as to fulfill the requirements of their clients. At the same time most of them have even unveiled a number of new products and services.

However, it is the saving account, that people of this nation are heedful of. Simply because, it is the best place to park money and get interest.

One of the remarkable feature of this type of account is that the account-holder gets interest amount on parked savings/funds every month. Depositing funds in a saving account is similar to making an no-loss investment which will only yield interest (in other words ‘profit’) for the consumer. Nevertheless, the interest rates are not impressive enough and are fully dependent on the policies of independent banks and supervisory authority of the country, RBI.

Meanwhile, financial institutions like ICICI Bank, Axis Bank, State Bank of India, HDFC Bank and Allahabad Bank are few names giving a potential saving account to their consumers. The State Bank of India which offers enormous number of savings account products in India provides two excellent types of savings accounts to their customers. One is the state-of-the-art savings account which all the people in the country are already aware of and the another one is the savings plus account which has all the attributes of a simple savings account but the bank has encased it with a term deposit as an another characteristic for this products.

Besides this, there is also a electronic fund transfer functionality, by which transferring funds to other accounts is quite an uncomplicated process. The Online banking functionality for operating saving account is also supplied by almost all banking institutions through which one can check out bank balance and can carry out all the required dealings by the banking institution’s official Internet site. This also helps a person in doing away with long waiting lines in banks. But remember, a person had better choose his/her kind of saving account according to budgetary needs.

The author is a business writer for finance and credit products. Know more on online banking, SBI internet banking visit www.paisawaisa.com/.

Article Source:http://www.articlesbase.com/banking-articles/start-saving-money-via-savings-accounts-1390954.html

PNC Bank offers PNC Bank Online Banking service to its customers and account holders. As a result, clients can access their accounts from any place according to their convenience. The most distinctive aspect of PNC Bank Online Banking is that it can be accessed round the clock, through the week.

Benefits of PNC Bank Online Banking Service

Accountholders of the PNC Bank Online Banking do not need to be present on the bank premises to access their accounts. They can use Online Banking service to do the following tasks:

• Access their accounts even when they are outside the country.
• View all the necessary details of all the transactions from their account.
• Receive bills over the net.
• Pay their bills from their checking account free of cost. This bill payment facility is hassle free and convenient to use. This facility also saves on the time spent in queues or writing and posting checks.
• Get their account statement generated. These statements can then be forwarded to their email address, making it easier to preserve them as a record. These online statements are accepted by all institutions as documentation. In addition to this, the PNC Bank also allows its accountholders to download the transaction history of their accounts on their personal computer. This helps customers preserve the transaction details for as long as they wish.
• Use the various money management tools offered by the bank from anywhere in the world.

PNC Bank Online Banking also provides its customers the facility of reminding them of the balance in their respective accounts. These reminders, also called alerts, send email alerts to accountholders:

• If the balance in their account reaches zero or becomes negative.
• When they receive online bill

To use the PNC Bank Online Banking service, customers need to first enroll themselves. Once you enroll to the service, you achieve peace of mind that your identity and account information are secure.

About the Author: The author is an internet marketing professional and is affiliated with Veda Informatics, a website design, web & content development company offering content development, website design, web development, SEO, SEM, PPC management and other web services.

Article Source:http://www.articlesbase.com/banking-articles/pnc-bank-online-banking-1363360.html

So, you are about to embark upon the fun task of switching banks, opening an account for the first time or perhaps just looking around to see what is out there. Think about what you need and then look into your choices.

Consider how fast you can get results. Does the bank or credit union utilize <a title=”Learn More About Automated Decsioning at Zoot!” Href=http://www.zootweb.com/additional_information/automated_decisioning.html>automated decisioning</a> so that you can get results in an instant? Automated decisioning is a way that financial institutions can get you answers regarding loans, credit card approvals and line of credit increases right away.

Are you thinking about starting a business? Consider <a title=”Learn More About Small Business Lending at Zoot!” Href=http://www.zootweb.com/additional_information/small_business_lending.html>small business lending</a> program. Look to see if you would qualify for the loan and perhaps all the hoops through which you will need to jump.

A simple thing to ask yourself is how convenient is the institution’s location. Maybe you don’t drive so you’ll want to make sure they are on your bus route or within walking distance of your home. If not, maybe there is a satellite location close to you or an ATM where you can do your deposits. Ask yourself how much you will need to visit the bank so you can choose one that is convenient.

Next, think about the difference between banks and credit unions. There are several key differences when f figuring out which way you should go. First, credit unions are owned by its members. The members are often limited to a certain select group of people, depending on the credit union. Investors, on the other hand, own banks. Second, credit unions are not-for-profit. Banks, since they are investor owned are out to make a profit for their investors. So, when a credit union reaps profits it is coming back to the members in the form of lower interest rates and higher dividends.

Think about the type of service you’d like to receive. So far I haven’t met anyone who would choose a bank if they were choosing purely because of customer service. Generally speaking, since credit unions are smaller they get to know their customers better. This may mean that they will look out for you a bit more than a bank. However, there are many people that swear by the bank they use and don’t really care about the customer service as long as there are no errors. It is up to you.

Maybe online banking and bill pay is important to you. If so, check out their web site and maybe their news releases to find out what they offer and if there is a fee for their services. Those little fees can really add up rather quickly if you are not watching out for them. And, make sure they are compatible with your budget software or be prepared to invest in some new software. You may also want to keep in mind whether or not you want the option of having a safety deposit box and if they are offered.

A bank or a credit union? The choice is yours. But, ask around. Find out from friends and family what kind of experiences they’ve had and you’ll be on your way to finding a good fit.

About the author: Jason Ausmus is a web content producer for Innuity. For more information regardingautomated decisioning or small business lending go to Zoot

Article Source:http://www.articlesbase.com/banking-articles/how-are-banks-and-credit-unions-different-1364543.html

Since the beginning of this year, banks have been buried in new federal regulations. Every week has brought something new that a bank will have to put in place, often, it seems, with little warning.

 

Here is a partial list of recent regulatory changes:

• Regulation Z: Closed-end; Changes in coverage; Early TIL; Disclosure delivery; Dis­closure timing; When you can close; When you can collect fees; HOEPA; Higher priced mortgage loans and documenting ability to repay; Mandatory escrow; Reg­ular homes and manufactured housing; Open-end disclosures; 21-day timing of statements; 45-day timing for notification of changes; New appraisal coercion rules; New adverting rules; New commentary
• RESPA: GFE changes; HUD changes; Escrow changes; Ac­count analysis
• BSA: Exemptions – rules relaxed; Guidance on 314(b) information sharing; MSB registration list
• Reg D: Changes in reserve re­quirements; Relaxation of the 3 transaction limit on checks pay­able to third parties
• Reg CC: Combining check pro­cessing districts; In November 2008, the Fed announced that it had altered its restructuring plan substantially to ultimately make the Cleveland office the single paper check processing and ad­justments site, and the Atlanta of­fice the single electronic check processing site for the Federal Reserve System.
• Servicemembers Civil Relief Act: The protection given to service members in terms of the amount of time they have to respond to a proceeding or foreclosure is ex­tended from 90 days to 9 months after they leave military ser­vice. These changes are in effect through December 31, 2010.
• Flood: Final Revised Interagency Q & A
• Appraisals: 2008 code of conduct; Appraiser independence; Reg Z ap­praiser coercion – new rules
• FCRA: Accuracy of information re­ported to credit bureaus; FAQs on ID theft rules; Technical correc­tions; FTC “Red Flags Website”
• Proposed SAFE Act: A national reg­istry of mortgage originators – fin­gerprint requirements
• FTC proposal to curb unfair and deceptive mortgage practices
• Federal Reserve proposal to change disclosure for closed-end mortgages and HELOCs

 

Conclusion

Each of these new or proposed regulations will affect different departments in your bank, and to comply, you may have to change processes, procedures, and checklists; train the appropriate personnel; and develop audit or process tracing techniques to make sure you are in compliance.

This task can be mammoth; you have a bank to run. One solution is to involve some outside experts that can help you make the changes, train the appropriate personnel, and then leave.

For more information about the new regulations, please visit <a target=”_blank” href=”http://www.younginc.com”>www.younginc.com</a>

Article Source:http://www.articlesbase.com/banking-articles/an-avalanche-of-new-compliance-regulations-1355162.html

The use of offshore banking is no longer disreputable because the policies are now strictly regulated.  People who utilize offshore banking in places that are secure are oftentimes expatriates and businesspeople involved in international transactions.  However, offshore banking may not be a viable option for people who have filed for bankruptcy or those who have a tainted credit history.

Jersey offshore banking is a feasible alternative because Jersey is considered to be one of the safest locations for offshore accounts.  This is due to its stable local economy and political structure.  The Banking Business Law of 1991 is used to regulate these open offshore banks.  In Jersey, there are hundreds of investment, fund management, and banking institutions.  This provides a person with a wide range of entities to choose from, which permit him to opt for the best offshore banking service suitable to his needs.  One way to check if the provider is reputable is to make sure that it is regulated by the Jersey Financial Services Commission (JSC).  You can verify that a provider is regulated by JSC by checking the list published on the JSC website.

Offshore banking accounts have several advantages over local bank accounts, especially for expatriates.  The foremost benefit is that they can gain access to these accounts anywhere in the world.  Another benefit offered by offshore banking is you do not have to transfer your money to your home country or to an onshore bank, for whatever your reasons.

Business men and women who need to work in several countries may also find that offshore bank accounts are ideal for their lifestyle.  Offshore accounts may also offer better privacy and security than onshore bank accounts.  With offshore banking, it is also easier to handle different currencies.  For example, you can be paid in a particular currency, you can deposit the money in the form of another currency into your offshore pension, and you can also send money back to your homeland in your own currency.

The reduction of taxes is another significant benefit of an offshore account.  For example, if your home country has a law that does not impose a tax on income obtained from a foreign country, but only computes tax for money sent home, then you could minimize taxes by keeping your money in an offshore bank account.  Offshore banking services provided by a reputable bank may also be more secure than keeping your funds in a local bank onshore.  Finally, higher interest rates may be enjoyed with an offshore bank account compared to an onshore bank.

There is a lot to learn about offshore banking – it is not a trivial topic and it is certainly not for everybody. Check out the author’s website for more information on Jersey offshore bank account.

Article Source:http://www.articlesbase.com/banking-articles/uses-of-offshore-banking-1338492.html

Financial System

It is an institutional framework existing in a country to enable financial transactions.  There are three main parts in Indian financial system. They are as follows:

lFinancial assets comprises of loans, deposits, bonds, equities, etc.

lFinancial institutions such as banks, mutual funds, insurance companies, etc.

lFinancial markets include money market, capital market, forex market, etc.

lRegulation is another aspect of the financial system. The regulatory authorities are RBI, SEBI, IRDA, FMC

Financial assets/instruments

 It Enable channelising funds from surplus units to deficit units. There are instruments for savers such as deposits, equities, mutual fund units, etc.Also there are instruments for borrowers such as loans, overdrafts, etc. Just Like corporate, governments too raise funds through issuing of bonds, Treasury bills, etc. The Instruments like PPF, KVP, etc. are available to savers who wish to lend money to the government

Financial Institutions

 Influence generation of savings by the community and gives long term loans to business community. .  Further, it offers the following;

Mobilisation of savings

Effective distribution of savings

Institutions are banks, insurance companies and mutual funds- promote/mobilize savings

Individual investors, industrial and trading companies- borrowers

Financial Market: It includes,

Money Market- for short-term funds (less than a year)

Organized (Banks)

Unorganized (money lenders, chit funds, etc.)

Capital Market- for long-term funds

Primary Issues Market

Stock Market

Bond Market

Growth of Money Market:

The developments made in the Money Market are mentioned below:                            

Prior to mid-1980s participants depended heavily on the call money market

The volatile nature of the call money market led to the activation of the Treasury Bills market to reduce dependence on call money.

Emergence of market repo and collateralized borrowing and lending obligation (CBLO) instruments.

Turnover in the call money market declined from Rs. 35,144 crore in 2001-02 to Rs. 14,170 crore in 2004-05 before rising to Rs. 21,725 crore in 2006-07. 

Purpose of the money market          

The Banks can borrow in the money market to:

To fill the gaps or temporary mismatch of funds.

To meet the CRR and SLR mandatory requirements as stipulated by the central bank.

To meet sudden demand for funds arising out of large outflows (like advance tax payments)

Call money market serves the role of equilibrating the short-term liquidity position of the banks

Organized Money Market:

 It is meant for short tem securities, which include

Call money market

Bill Market

Treasury bills

Commercial bills

Bank loans (short-term)

Organized money market comprises RBI, banks (commercial and co-operative)

Call money market

Is an integral part of the Indian money market where day-to-day surplus funds (mostly of banks) are traded?

The loans are of short-term duration (1 to 14 days). Money lent for one day is called ‘call money’; if it exceeds 1 day but is less than 15 days it is called ‘notice money’. Money lent for more than 15 days is ‘term money’

The borrowing is exclusively limited to banks, which are temporarily short of funds. Call loans are generally made on a clean basis- i.e. no collateral is required. The main function of the call money market is to redistribute the pool of day-to-day surplus funds of banks among other banks in temporary deficit of funds .The call market helps banks economize their cash and yet improve their liquidity. It is a highly competitive and sensitive market. It acts as a good indicator of the liquidity position

 Call Money Market Participants

Those who can both borrow and lend in the market – RBI (through LAF), banks and primary dealers. Once upon a time, select financial institutions viz., IDBI, UTI, Mutual funds were allowed in the call money market only on the lender’s side.These were phased out and call money market is now a pure inter-bank market (since August 2005)

Bill Market   

Treasury bill market- Also called the T-Bill market

These bills are short-term liabilities (91-day, 182-day and 364-day) of the Government of India

It is an IOU of the government, a promise to pay the stated amount after expiry of the stated period from the date of issue

They are issued at discount to the face value and at the end of maturity the face value is paid

The rate of discount and the corresponding issue price are determined at each auction

RBI auctions 91-day T-Bills on a weekly basis, 182-day T-Bills and 364-day T-Bills on a fortnightly basis on behalf of the central government

Money Market Instruments

Money market instruments are those which have maturity period of less than one year.

The most active part of the money market is the market for overnight call and term money between banks and institutions and repo transactions

Call money/repo are very short-term money market products

Certificates of Deposit

Commercial Paper

Inter-bank participation certificates

Inter-bank term money

Treasury Bills

Bill rediscounting

Call/notice/term money

CBLO

Market Repo

Certificates of Deposit (CD)

CDs are short-term borrowings in the form of UPN issued by all scheduled banks and are freely transferable by endorsement and delivery.

Introduced in 1989.

Maturity of not less than 7 days and maximum up to a year. FIs are allowed to issue CDs for a period between 1 year and up to 3 years

Subject to payment of stamp duty under the Indian Stamp Act, 1899

Issued to individuals, corporations, trusts, funds and associations

They are issued at a discount rate freely determined by the market/investors.

Commercial Papers

Short-term borrowings by corporates, financial institutions, primary dealers from the money market

Can be issued in the physical form (Usance Promissory Note) or demat form

Introduced in 1990

When issued in physical form are negotiable by endorsement and delivery and hence, highly flexible

Issued subject to minimum of Rs. 5 lakhs and in the multiple of Rs. 5 lakhs after that

Maturity is 7 days to 1 year

Unsecured and backed by credit rating of the issuing company

Issued at discount to the face value

Market Repos

Repo (repurchase agreement) instruments enable collateralized short-term borrowing through the selling of debt instruments

A security is sold with an agreement to repurchase it at a pre-determined date and rate

Reverse repo is a mirror image of repo and reflects the acquisition of a security with a simultaneous commitment to resell.

Average daily turnover of repo transactions (other than the Reserve Bank) increased from Rs.11, 311 crore during April 2001 to Rs. 42,252 crore in June 2006

Collateralized Borrowing and Lending Obligation (CBLO)

Operationalised as money market instruments by the CCIL in 2003

Follows an unspecified, order-driven and online trading system. On the lenders side main participants are mutual funds, insurance companies.

Major borrowers are nationalized banks, PDs and non-financial companies

The average daily turnover in the CBLO segment increased from Rs. 515 crore (2003-04) to Rs. 32, 390 crore (2006-07)

Capital Market

   It is a Market for long-term capital. Demand comes from the industrial, service sector and government.The Supply of funds comes from individuals, corporates, banks, financial institutions, etc. It can be classified into:

Gilt-edged market

Industrial securities market (new issues and stock market)

Development Financial Institutions

Industrial Finance Corporation of India (IFCI)

State Finance Corporations (SFCs)

Industrial Development Finance Corporation (IDFC)

Financial Intermediaries

Merchant Banks

Mutual Funds

Leasing Companies

Venture Capital Companies

Industrial Securities Market: It refers to the market for shares and debentures of old and new companies

New Issues Market- also known as the primary market- refers to raising of new capital in the form of shares and debentures. Stock Market- also known as the secondary market. Deals with securities already issued by companies.

Financial Intermediaries

Mutual Funds- Promote savings and mobilize funds which are invested in the stock market and bond market

Indirect source of finance to companies

Pool funds of savers and invest in the stock market/bond market

Their instruments at saver’s end are called units

Offer many types of schemes: growth fund, income fund, balanced fund

Regulated by SEBI

Merchant banking- manages and underwrites new issues; undertake syndication of credit, advice corporate clients on fund raising and Subject to regulation by SEBI and RBI.

SEBI regulates them on issue activity and portfolio management of their business.

RBI supervises those merchant banks which are subsidiaries or affiliates of commercial banks and they have to adopt stipulated capital adequacy norms and abide by a code of conduct

Development Oriented Banking

Historically, close association between banks and some traditional industries- cotton textiles in the west, jute textiles in the east. Banking has not been mere acceptance of deposits and lending money; included development banking. Lead Bank Scheme- opening bank offices in all important localities providing credit for development of the districtMobilising savings in the district. ‘Service area approach’

Progress of banking in India

Nationalization of banks

 In 1969: 14 banks were nationalized

Branch expansion: Increased from 8260 in 1969 to 71177 in 2006

Population served per branch has come down from 64000 to 16000

A rural branch office serves 15 to 25 villages within a radius of 16 kms

However, at present only 32,180 villages out of 5 lakh have been covered.

Indian Banking System

Central Bank (Reserve Bank of India)

Commercial banks (222)

Co-operative banks

Banks can be classified as:

Scheduled (Second Schedule of RBI Act, 1934) – 218

Non-Scheduled – 4

Scheduled banks can be classified as:

Public Sector Banks (28)

Private Sector Banks (Old and New) (27)

Foreign Banks (29)

Regional Rural Banks (133)

Indigenous bankers (IB)

Individual bankers like Shroffs, Seths, Sahukars, Mahajans, etc. combine trading and other business with money lending. It Vary in size from petty lenders to substantial shroffs.  Further it acts as money changers and finance internal trade through hundis (internal bills of exchange). Indigenous banking is usually family owned business employing own working capital. At one point it was estimated that IBs met about 90% of the financial requirements of rural India

RBI and indigenous bankers

The Methods employed by the indigenous bankers are traditional with vernacular system of accounting.RBI suggested that bankers give up their trading and commission business and switch over to the western system of accounting. It also suggested that these bankers should develop the deposit side of their business; Ambiguous character of the hundi should stop. Some of them should play the role of discount houses (buy and sell bills of exchange).  IB should have their accounts audited by certified chartered accountants. They should submit their accounts to RBI periodically. As against these obligations the RBI promised to provide them with privileges offered to commercial banks. Being entitled to borrow from and rediscount bills with RBI,the Indigenous bankers declined to accept the restrictions as well as compensation from the RBI.Therefore, the indigenous Bankers remain out of RBI’s purview.

 

Deposit mobilization:

1951-1971 (20 years) – 700% or 7 times

1971-1991 (20 years) – 3260% or 32.6 times

1991- 2006 (11 years) – 1100% or 11 times

 

Expansion of bank credit:

 Growing at 20-30% p.a. thanks to rapid growth in industrial and agricultural output

Development oriented banking: priority sector lending.

Diversification in banking: Banking has moved from deposit and lending to

Merchant banking and underwriting

Mutual funds

Retail banking

ATMs

Internet banking

Venture capital funds

Factoring

Profitability of Banks

Reforms have shifted the focus of banks from being development oriented to being commercially viable

Prior to reforms banks were not profitable and in fact made losses for the following reasons:

Declining interest income

Increasing cost of operations

Declining interest income was for the following reasons:

High proportion of deposits impounded for CRR and SLR, earning relatively low interest rates.

System of directed lending

Political interference- leading to huge NPAs

Rising costs of operations for banks was because of several reasons: economic and political.

As per the Narasimham Committee (1991) the reasons for rising costs of banks were:

Uneconomic branch expansion

Heavy recruitment of employees

Growing indiscipline and inefficiency of staff due to trade union activities

Low productivity

Declining interest income and rising cost of operations of banks led to low profitability in the 90s.

 Suggestions to improve Bank profitability:

Following suggestions made by Narasimham Committee are:

1. Establish an Asset Reconstruction Fund to take over doubtful debts.

2. SLR should be reduced to 25% of total deposits.

3. CRR to be reduced to 3 to 5% of total deposits.

4. Banks to get more freedom to set minimum lending rates.

5. Share of priority sector credit is reduced to 10% from 40%.

6. All concessional rates of interest should be removed.

7. Banks should go for new sources of funds such as Certificates of Deposits.

8. Branch expansion should be carried out strictly on commercial principles.

9. Diversification of banking activities.

Almost all suggestions of the Narasimham Committee have been accepted and implemented in a phased manner since the commencement of Reforms.

NPA Management

The Narasimham Committee recommendations were made, among other things, to reduce the Non-Performing Assets (NPAs) of banks. To tackle this, government enacted the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act (SARFAESI) Act, 2002. Further more, it enabled banks to realise their dues without intervention of courts.

 SARFAESI Act

Enables setting up of Asset Management Companies to acquire NPAs of any bank or FI (SASF, ARCIL are examples).NPAs are acquired by issuing debentures, bonds or any other security. As a second creditor can serve notice to the defaulting borrower to discharge his/her liabilities in 60 days, failing which the company can take possession of assets, takeover the management of assets and appoint any person to manage the secured assets. Borrowers have the right to appeal to the Debts Tribunal after depositing 75% of the amount claimed by the second creditor

 Conclusion

There are other financial intermediaries such as NBFCs, Venture Capital Funds, Hire and Leasing Companies, etc.  India’s financial system is quite huge and caters to every kind of demand for funds. Banks are at the core of our financial system and therefore, there is greater expectation from them in terms of reaching out to the vast populace as well as being competitive.

 

 

 

 

Dr.R.SRINIVASAN is a Post graduate in commerce and Management. He received his doctoral degree from Alagappa University in 1997. He is now Working as an ASSOCIATE PROFESSORin Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry.He currently teaches Accounting ,financial management and Research Methodology Subjects. Before Joining BGCW, he was teaching in SNR College, Coimbatore, Sindhi college, Chennai& T.S.Narayanasamy College, Chennai for eight years. He was with the industry for a short term at Salzar Electronics Pvt. Ltd, Coimbatore. He has about 20 years of teaching experience and having research experience of 15 years. His interests are in Accounting and finance, Capital Market, Quantitative Methods. He underwent the Faculty Development Programme at Indian Institute of Management Ahmedabad during 2000-01. He has presented 20 papers in national and international conferences and has published twenty papers in the areas of Finance and Human resource Management in National Journals. Co-authored a book titled, ‘Investors Protection, published by Raj Publications, New Delhi He has delivered lectures in contemporary finance topics at Pondicherry University. He is involved in consultancy projects for Godrej Saralee, Chennai in the areas of Statistical Applications. He has supervised a number of research projects in the area of corporate finance and Human Resource Management. He is the Board of examiner in corporate Secretaryship and Management for the past two decades.
.

Article Source:http://www.articlesbase.com/banking-articles/indian-financial-system-an-appraisal-1333863.html

While most community banks may not have had the difficulty that the large money center banks have had since the mortgage market began to unravel, this is, none-the-less, a time that is testing bank managers and bank directors in banks of all sizes throughout the country – and the world for that matter. My banking career dates back to 1977, and the tough economic times and record-high interest rates of the late 1970s and early 1980s at times still seem fresh in my mind. That is the only period during my career that rivals today’s banking environment.

Then and Now – Major Differences and Similarities

The main difference between the economic environment back then and the current environment is that high unemployment caused a real estate crisis back then, but in today’s crisis, a real estate crisis caused high unemployment. Also, at that time, we had record-high interest rates and very high inflation versus the record low interest rates and the possibility of deflation now. The double-edge sword of high credit losses and deposit costs exceeding large segments of the average financial institution’s loan yields may have made our fundamental issues even greater to overcome then than now. As an industry, we were not as well capitalized back then as we are today. The greatest fear now is that we don’t know where the bottom is. The major similarity of then to now is that we see many banks that, by most measures, are considered to be well-managed, having less than desirable regulatory examinations and, in many cases, entering into a regulatory agreement.

Be Proactive in Your Response

While we are always sorry to learn that a bank is having difficulties, we understand that a regulatory enforcement action or just-less-than-ideal examination is a very tough experience. It is, however, very important for the board and management to remain positive and to aggressively lead the organization through this difficult but necessary regulatory process. It has been our experience that institutions that have been proactive and have embraced this trying time have fared relatively well, and often have stated that the organization was significantly improved by those changes. Institutions that fought the process or that proceeded from the prospective of only meeting regulatory demands ultimately did not fare as well. We urge you to not just do the minimum that is required, but to do more than is required. Don’t just meet a deadline, but beat the deadline.

Types of Regulatory Enforcement Actions

The current regulatory environment poses significant challenges for financial institutions, large and small. The regulatory agencies are closely scrutinizing how your bank does business and making demands for improvement. These challenges can come in two forms. If you are lucky, you may receive an informal enforcement action. Or, if issues are more serious, the bank may receive a formal enforcement action. The primary types of enforcement actions against banks and savings institutions are briefly summarized as follows:

Informal Actions

Commitment Letter: A Commitment Letter is a document signed by the bank’s board of directors on behalf of the bank and is acknowledged by an authorized regulatory official, reflecting specific written commitments to take corrective actions in response to problems or concerns identified by the regulator in its supervision of the bank. The document may be drafted by either the regulatory agency or the bank. A Commitment Letter is not a binding legal document. However, failure to honor the commitments provides strong evidence of the need for formal action.

Memorandum of Understanding: A Memorandum of Understanding (MOU) is a bilateral document signed by the bank’s board of directors on behalf of the bank and an authorized regulatory representative. An MOU is drafted by the regulator and in form and content looks very much like a formal regulatory enforcement action. It legally has the same force and effect as a Commitment Letter.

Safety and Soundness Plans: Safety and Soundness Plans are a less common form of informal action. A regulator issues to the bank a determination and notification of failure to meet safety and soundness standards and requires the submission of a safety and soundness compliance plan (collectively called a Notice of Deficiency). If the Safety and Soundness Plan is approved, it functions as an informal enforcement action. However, if the bank fails to submit an acceptable Safety and Soundness Plan or fails to in any material respect to implement an approved plan, the regulator will require the bank to correct the deficiencies.

Formal Actions

Consent Orders: A Consent Order is the title given by the regulator to an Order to Cease and Desist, which is entered into and becomes final through the board of directors’ execution on behalf of the bank of a Stipulation and Consent document. Consent Orders are signed by an authorized regulatory official. Its provisions are set out in article-by-article form and prescribe those restrictions and corrective and remedial measures necessary to correct deficiencies or violations in the bank and return it to a safe and sound condition. Violations of a Consent Order can provide the legal basis for assessing civil money penalties (CMPs) against directors, officers, and other institution-affiliated parties.

Cease and Desist Orders: Aside from its title, a Cease and Desist Order is identical in form and legal effect to a Consent Order. However, a Cease and Desist Order is imposed on an involuntary basis after issuance of a Notice of Charges, hearing before an administrative law judge, and final decision and order issued by the Comptroller. Any Cease and Desist Order is reviewable by a U.S. court of appeals. Cease and Desist Orders can be used to order affirmative corrective action. Moreover, a willful violation of a final Cease and Desist Order is itself grounds for receivership.

Temporary Cease and Desist Orders: A Temporary Cease and Desist Order is an interim order issued by the regulator and is used to impose measures that are needed immediately pending resolution of a final Cease and Desist Order. Such orders are typically used only when immediately necessary to protect the bank against ongoing or expected harm. A Temporary Cease and Desist Order may be challenged in U.S. district court within ten days of issuance, but is effective upon issuance and remains effective unless overturned by the court or until a final order is in place.

Formal Written Agreements: A formal written agreement (“Formal Agreement”) is a bilateral document signed by the board of directors on behalf of the bank and an authorized regulatory official. Like a Consent Order, its provisions are set out in article-by-article form and prescribe those restrictions and corrective and remedial measures necessary to correct deficiencies or violations in the bank and return it to a safe and sound condition. Violations of a Formal Agreement can provide the legal basis for assessing civil money penalties (CMPs) against directors, officers and other institution-affiliated parties. However, unlike a Consent Order, Formal Agreements are not enforceable through the federal court system. Another important difference between a Formal Agreement and a Consent Order is that willful violation of a Consent Order may be used as grounds for appointment of a receiver while with a Formal Agreement it may not. The decision to utilize a Formal Agreement instead of a Consent Order is largely driven by negotiation strategy and the discretion of the delegated decision-making official.

PCA Directives: Under 12 USC 18310 and 12 CFR 6 (Prompt Corrective Action or PCA), insured banks are subject to various mandatory and discretionary restrictions and actions depending upon the bank’s PCA capital category. Mandatory restrictions and actions are effective upon the bank being noticed that it is in a particular PCA capital category. Discretionary restrictions and actions are imposed on the bank through the issuance of a PCA Directive. If circumstances warrant, the regulator may issue a PCA Directive that is immediately effective. Otherwise, the normal process for issuing such a PCA Directive begins with the issuance of a Notice of Intent to Issue a Directive. The bank is given an opportunity to respond to the Notice of Intent, explaining why the proposed directive is not necessary or offering suggested modifications to the proposed directive. A PCA Directive is preferred when the supervisory office anticipates the bank may be a candidate for early resolution. A PCA Directive can enhance the regulator’s use of resolution options later because, e.g., failure to submit or implement a capital restoration plan required in a PCA Directive is grounds for receivership.

Safety and Soundness Orders: The regulator issues to the bank a determination and notification of failure to meet safety and soundness standards and requires the submission of a safety and soundness compliance plan (collectively called a Notice of Deficiency). If the bank fails to submit an acceptable plan or fails in any material respect to implement an approved plan, the regulator must, by order, require the bank to correct the deficiencies, and the regulator may, by order, require the bank to take any other action that the regulator determines will better carry out the purposes of 12 USC 1831p-1. The regulator must also take certain additional action against a bank that has not corrected a deficiency if the bank has experienced either extraordinary growth over the past 18 months, or within the past 24 months commenced operations or underwent a change in control. If circumstances warrant, the regulator may issue an order that is immediately effective.

Otherwise, the normal process for issuing such an order begins with the issuance of a Notice of Intent to issue an order. The notice identifies the safety and soundness deficiencies, and describes the proposed actions which would be included in the order and the time-frame for complying with the proposed actions. The bank is given an opportunity to respond to the Notice of Intent, explaining why the proposed order is not necessary or offering suggested modifications to the proposed order. A Safety and Soundness Order has essentially the same force and effect as a Cease and Desist Order. However, unlike a Cease and Desist Order, a willful violation of a Safety and Soundness Order is not itself grounds for receivership.

Young & Associates
www.younginc.com

Article Source:http://www.articlesbase.com/banking-articles/regulatory-enforcement-actions-in-todays-banking-environment-1294640.html

Importance of CRM

Customer relationship management is a broad approach for creating, maintaining and expanding customer relationships. CRM is the business strategy that aims to understand, anticipate, manage and personalize the needs of an organization’s current and potential customers. At the heart of a perfect strategy is the creation of mutual value for all parties involved in the business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering and developing existing customer relationships in addition to creating and keeping new customers. So the concept of product life cycle is giving way to the concept of customer life cycle focusing on the development of products and services that anticipate the future need of the existing customers and creating additional services that extend existing customer relationships beyond transactions.

Present and Future of CRM in banking

Bank merely an organization it accepts deposits and lends money to the needy persons, but banking is the process associated with the activities of banks. It includes issuance of cheque and cards, monthly statements, timely announcement of new services, helping the customers to avail online and mobile banking etc. Huge growth of customer relationship management is predicted in the banking sector over the next few years. Banks are aiming to increase customer profitability with any customer retention. This paper deals with the role of CRM in banking sector and the need for it is to increase customer value by using some analytical methods in CRM applications. It is a sound business strategy to identify the bank’s most profitable customers and prospects, and devotes time and attention to expanding account relationships with those customers through individualized marketing, pricing, discretionary decision making.

In banking sector, relationship management could be defined as having and acting upon deeper knowledge about the customer, ensure that the customer such as how to fund the customer, get to know the customer, keep in tough with the customer, ensure that the customer gets what he wishes from service provider and understand when they are not satisfied and might leave the service provider and act accordingly.

CRM in banking industry entirely different from other sectors, because banking industry purely related to financial services, which needs to create the trust among the people. Establishing customer care support during on and off official hours, making timely information about interest payments, maturity of time deposit, issuing credit and debit cum ATM card, creating awareness regarding online and e-banking, adopting mobile request etc are required to keep regular relationship with customers.

The present day CRM includes developing customer base. The bank has to pay adequate attention to increase customer base by all means, it is possible if the performance is at satisfactory level, the existing clients can recommend others to have banking connection with the bank he is operating.  Hence asking reference from the existing customers can develop their client base. If the base increased, the profitability is also increase. Hence the bank has to implement lot of innovative CRM to capture and retain the customers.

There is a shift from bank centric activities to customer centric activities are opted. The private sector banks in India deployed much innovative strategies to attract new customers and to retain existing customers. CRM in banking sector is still in evolutionary stage, it is the time for taking ideas from customers to enrich its service. The use of CRM in banking has gained importance with the aggressive strategies for customer acquisition and retention being employed by the bank in today’s competitive milieu. This has resulted in the adoption of various CRM initiatives by these banks.

Steps to follow

The following steps minimize the work regarding adoption of CRM strategy. These are:

Identification of proper CRM initiatives

Implementing adequate technologies in order to assist CRM initiative

Setting standards (targets) for each initiative and each person involved in that circle

Evaluating actual performance with the standard or benchmark

Taking corrective actions to improve deviations, if any

Conclusion

Customer Relationship Management is concerned with attracting, maintaining and enhancing customer relationship in multi service organizations. CRM goes beyond the transactional exchange and enables the marketer to estimate the customer’s sentiments and buying intentions so that the customer can be provided with products and services before the starts demanding. Customers are the backbone of any kind of business activities, maintaining relationship with them yield better result

Article Source:http://www.articlesbase.com/banking-articles/crm-in-banking-1302680.html

I needed to transfer some funds from Ireland to France and posted a cheque drawn on an Irish Building Society to my bank in Juan-Les_Pins, France. I posted this by signed for delivery as I wanted to ensure it arrived there ok  A few days after sending the cheque I went online and there was no credit. My first reaction was that they had not received it.

The bank my wife and I use are not the best at communicating and a couple of months earlier they had written to say that one of our new bank cards was waiting for collection at the local branch. We wrote to them twice requesting it be posted as we are not resident in France and so rather difficult to collect and the third copy went with the cheque we wanted banking.  Whenever we are in the area, you can find that they are not always open, it could be a Monday and because they work Saturday mornings they close on a Monday, or arriving just when they close for a long lunch hour on the remaining days of the week that they actually open on.

When I had posted this cheque, I had also enclosed yet a third copy of the letter requesting the card be posted. As I was concerned that the cheque had gone missing, I contacted the Irish Building Society who immediately posted out a replacement cheque to a relative who could bank it at the local branch. I t was lodged on the 3rd September.  We were also in France at that time and decided to call into the branch to see if they had the bank card, yes they had it was in a desk drawer in an addressed  envelope waiting to be posted, I have no idea how long it had been there, but had we not gone in, would probably still be there now. When we got back home from France, in our post was a second bank card that someone had decided to post!

On the 25th September the funds were finally credited to our account, three weeks after they had been put in and being charged over €94.59 for processing the cheque. I contacted a major French bank that has a department specialising  for English speaking clients. They told me that “The currency has no bearing on a foreign cheque. This is an International or Foreign cheque and therefore follows International procedures. It can take 4-6 weeks on occasions. Cheques get sent back to their bank of origin and it then depends on that banks procedures, security checks etc. before they send the funds back, then the funds are cleared.”

Well so much for having one currency for several countries when it comes to trying paying in a cheque from another member county within the Euro zone. Unfortunately the Irish Building Society can only make payments by cheque, which is a somewhat old fashioned method as we approach 2010. They use a clearing bank for their payments, however with the way technology is these days should really have a more advanced system.

Philip Suter is a Director of jml Property Services; http://www.jmlproperty.co.uk a UK based company offering Insurance products on line at http://www.jml-insurance.co.uk and a holiday home advertising service and management training within the UK. He is a very experienced property consultant with over 30 years work in the Residential letting business in the UK and served on the National Council of ARLA. He is a Fellow of the National Association of Estate Agents (NAEA) and a Member of The association of Residential Letting Agents (ARLA)

Article Source:http://www.articlesbase.com/banking-articles/sending-a-cheque-from-one-euro-zone-country-to-another-is-frustrating-and-very-expensivedont-bother-1297002.html