Instrument of Money Market susiltripathy / October 17, 2013 Money at Call and Short Notice / Call Money Ii is an inter bank transaction on day to day basis under which one bank may borrow from another banks on a day to day basis. The rate of Interest on such transactions is known as the call money rate,which is the most sensitive segment of the money market.A high call money rate means money market is tight, while low means money market is flush with funds. Time Lending Rate/Benchmark PLR It is the rate of interest which a bank charges from its prime borrowers; ie, high credit worthy,high met worth borrowers,who may generally be corporate borrowers. Every bank has its own prime borrower. Certificate of Deposit It is a financial instrument issued by a bank for raising short term deposit mainly from its corporate clients. whose maturity may be less than one year, It is issued ata a discount to the face value. Commercial Paper It is a financial statement issued by a firm/public company to raise short term deposit from its clients,whose maturity may not be less than one year. Commercial Bill/Bill of Exchange/Hundi It is a financial instrument used essentially for trading purposes on the basis of trader/manufactures may buy goods/ row materials on credit with a maturity of 91 days. This facilitates trade on credit and it is a standardized instrument which can be used by the seller to discount it with a bank and to re-discount it with the RBI in Order to get financial assistance. Basel Norms Thee are norms laid down by the Bank Of International Settlement (BIS) located at Basel, Switzerland. BIS is the Central Bank of Central Banks, of which RBI too is a member. IT lays down time to time norms of capital adequacy , market discipline, risk perception ,supervisory review etc to be taken into account by the banking industry and laying down its Capital Adequacy Ratio accordingly. Capital Adequacy Ration It is a ratio that ensures strength and resilience of a bank and also enforces in the process that a bank has sufficient strength to absorb a reasonable degree of losses. Asset Reconstruction Fund/Company It is a mechanism set up to take care of bad debts of a bank. It may take over a certain portion/ the whole of bad debts at a discount and thereby clean the books of the relevant bank while it recover these bad debts on its own. Sarfaesi Act , 2002 Sarfaesi means Secularization And Reconstruction of Financial Asset and Enforcement of Security Interest It is a landmark legislation in acted in India in 2002, which for the first time empowers Indian Banks to attach and sell the hypothetical property and assets of the defaulters of loans without the prior approval of the court. Important Facts The Government set up Narsimham Committee on Financial Reforms (1991) to recommend overhaul of the banking sector. The recommendations were Reduce SLR and CRR. Reduce priority sector lending from 40% to 10%. There should be no further banking expansion except those in rural areas. Speedy computerization . More and more of private sector and foreign banks should be set up to infuse competitions. Debt Recovery Tribunals should be set up. Asset reconstruction funds/companies to be set up to recover bad debts. Should be a four tier banking structure :3-4 banks of International character,some of national character , some of meet regional requirements and few for local requirement. Banks should classify their assets to identify non-performing assets. Banks should strive a attention capital adequacy ratio of 8% in conformity with Basel Norms. A Board for financial supervision should be set up to prevent banking frauds. All these recommendations excepts (2) and (8) were not accepted. In 1998 a Committee on Banking Sector Reforms , headed by Narshiman was formed in order to make recommendations in the context of globalization . This Committee Reinforce its recommendation of four tire banking structure and speedy Computerization . Recommended margin of strong with strong banks. Evolutions of t
Posted on: Tue, 05 Nov 2013 06:40:11 +0000
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