Unit II

Financial Institutions

2.1 Financial Institutions: A brief historical perspective

A bank is an institution that accepts and manages deposits from people and provides credit or loans to clients. The term bank comes from the medieval Italian word banca (English bench or table). The term came to be used because early financial transactions took place on tables and benches.

The banking operations we know today began in the Italian city-states of the Middle Ages, but these operations did not emerge out of nowhere. They were the culmination of centuries of development. Italy became the birthplace of banks in the 12th and 13th centuries because it was the center of a global trading network that exposed Italian traders and their lenders to a variety of money management methods. The Italians then used this knowledge to create new and better ways to deal with financial exchanges.

In 1202, Leonardo Fibonacci published a book called Liber Abaci. Today, famous for the Fibonacci sequence, Fibonacci was the son of a customs officer (a person who collects taxes on imported goods), so he had a lifetime of trading and financial experience. In his book, Fibonacci explained how to use mathematical concepts developed in India and the Middle East and apply them to the business of trade and money management. Finance and commerce were nothing new to Europe, but the methods Fibonacci introduced allowed for much more complex financial calculations.

Trade and credit

In the Middle Ages, long-distance trade was dangerous due to the high initial costs and the potential for ventures to fail. Paying for a medieval trade voyage required several steps, including purchasing goods that could be exchanged at the destination, equipping ships and pack animals, and hiring people who actually travelled.

The cost of initiating a trade voyage was considered a worthwhile investment, as the success of a trade voyage can be very profitable. However, the trade took a long time. The delay between funding the voyage and making a profit was considerable (assuming the voyage was successful). It can take months or years to sell a new product and return it to its original location on a single trade voyage.

Credits helped close the gap between voyage payments and profit recovery. Credit is the lending and borrowing of money that is promised to be repaid one day in the future. The idea of ​​lending money to traders in exchange for some of the profits of a venture has existed in many societies. For example, partnerships in which investors fund trader ventures in exchange for a portion of their profits were common in the Abbasid, Song China, and European trading cities.

In any of these settings, the trader may have had to borrow money in advance to finance his voyage. He knew that he could repay his debt if he sold the goods (almost all medieval merchants were men), so he promised to pay the lender a portion of his profits if the trade venture was successful. I got a loan.

The emergence of Italian banks

This practice of lending money to traders in exchange for some of their potential profits was an established practice before the advent of banking in Italy. Lending money and collecting interest (the fee for borrowing money in addition to the amount of the principal loan) was the easiest way to make money from a loan, but due to religious bans, most people do it. Could not be done. The Catholic Church and the Islamic law of Riva regarded interest as a usury. In Judaism, it was forbidden to charge interest to fellow Jews, but it was allowed to charge interest to other Jews. In all these cases, the ban on interest claims was driven by a combination of concerns that the way to make money is ethical, especially since these practices tend to be the most damaging to the poor.

The changes that took place in Italy in the 13th century regarding banking and finance were not the invention of credit. Rather, the new idea was that one could make money by buying and selling financial products (essentially financial contracts) (such as bills of exchange). Profit gained through legitimate transactions or through the natural increase in the value of items has avoided potential usury claims.

The exchange invoice was a written agreement that entitles the invoice owner to receive certain payments from a third party. Exchange invoices can be considered valuable as they promise future payments. Instead of lending money to traders and waiting for them to come back to share their profits, bankers began buying and selling these bills of exchange for their own worth.

For example, suppose an investor lent money to a trader, but needed the money before the trader returned. Investors can write exchange invoices that give the owner the right to give a portion of the investor's interests. Then he could now sell the invoice at a slightly discounted price to make money. The invoice purchaser can recover the shares of the original investor from the trader.

Expansion of banking business

The Medici family in Florence were not the first Italian family to start banking, but they were the most successful. From the late 14th century to the end of the 15th century, the Medici set up bank branches in major cities across Europe. By having branches in different cities, the Medici were able to make money by avoiding usury crimes by taking advantage of exchange rate changes.

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Banknote-respecting banks in many cities have also made it possible to send large sums of money across the continent. Medici banknotes can be redeemed at any branch, allowing people to move money without risking the physical transportation of coins. Not only merchants and merchants, but also kings and popes borrowed from the Medici and other major bankers. This was partly because, for example, no one else could lend the amount needed to fund the war. This has made bankers a very powerful and important player in both politics and economy.

Key takeaways:

1. A bank is an institution that accepts and manages deposits from people and provides credit or loans to clients.
2. The banking operations we know today began in the Italian city-states of the Middle Ages, but these operations did not emerge out of nowhere.
3. In 1202, Leonardo Fibonacci published a book called Liber Abaci. Today, famous for the Fibonacci sequence, Fibonacci was the son of a customs officer (a person who collects taxes on imported goods), so he had a lifetime of trading and financial experience.
4. In the Middle Ages, long-distance trade was dangerous due to the high initial costs and the potential for ventures to fail
5. . The idea of ​​lending money to traders in exchange for some of the profits of a venture has existed in many societies.
6. . In Judaism, it was forbidden to charge interest to fellow Jews, but it was allowed to charge interest to other Jews.
7. The exchange invoice was a written agreement that entitles the invoice owner to receive certain payments from a third party.
8. The Medici family in Florence were not the first Italian family to start banking, but they were the most successful.
9. Banknote-respecting banks in many cities have also made it possible to send large sums of money across the continent.

2.2 An update on the performance of IDBI, ICICI, IFCI and SFCs, LIC &GIC

IDBI Bank is an economic offerings corporation owned via way of means of the Government of India, previously called the Indian Industrial Development Bank, situated in Mumbai, India. Founded via way of means of Parliamentary Law in 1964, it furnished credit score and different economic centers for the improvement of rising Indian industries. IDBI Bank is equal to kingdom-owned banks and SBI Group as a long way as authorities possession is concerned. It is one in every of 27 industrial banks owned via way of means of the Government of India. IDBI Bank is taken into consideration to be a financial institution owned via way of means of the Government of India. Currently, it's far the tenth biggest improvement financial institution within side the international in phrases of reach. It has 3000 cr of legal capital.

History

The Indian Industrial Development Bank (IDBI) became installed as a Development Finance Institution (DFI) beneath the Indian Industrial Development Bank Act of 1964 and became installed on July 1, 1964 as a completely owned subsidiary of RBI. In 1976, IDBI's possession became transferred to the Government of India, turning into a chief economic organization for coordinating the sports of establishments engaged in financing, selling and growing Indian industry. It became taken into consideration a public economic organization beneath Article 4A of the Corporate Law of 1956. It endured to function a DFI for forty years earlier than being transformed to a financial institution in 2004.

Indian Industrial Development Bank Limited: In reaction to the wishes felt, because of industrial prudence, it became determined to show IDBI right into a financial institution. To that end, the 2003 Industrial Development Bank (Business Transfer / Abolition) Act [Abolition Act] became passed, and the 1964 Indian Industrial Development Bank Act became abolished. According to the provisions of the abolition law, the brand new corporation became installed via way of means of the Indian Industrial Development Bank (IDBI Ltd.) as a authorities. A corporation primarily based totally at the Companies Act of 1956 on September 27, 2004. After that, IDBI's commercial enterprise became transferred to IDBI Ltd. From October 1, 2004, and the rights had been vested. IDBI Ltd concerning the provisions of the abolition law. Has functioned as a financial institution further to its former position as an economic organization.

IDBI Bank and IDBI Bank Merger: To acquire quicker inorganic increase of banks, IDBI Bank, a completely owned subsidiary of IDBI Bank, has merged with IDBI Bank pursuant to the provisions of Section 44A. The Banking Regulation Act of 1949, which regulates the voluntary merger of banking companies. The merger took impact on April 2, 2005.

Change of corporation call from IDBI Bank, Ltd. To IDBI Bank, Ltd .: In order for the call of the Bank to genuinely replicate its feature, the call of the Bank became modified to IDBI Bank, Ltd., and the brand new call got here into impact in May 2007. Rice field. , 2008, Issuance of a brand new company established order certificates via way of means of the Maharashtra Corporate Registration Bureau. Therefore, we're functioning beneath the contemporary call of IDBI Bank Limited.

Narsimham Commission: To make IDBI's coordinating position extra effective, the Narsimham Commission (1991) said that IDBI deserted its direct economic feature and refinanced with the top of advertising for different establishments inclusive of SFC and SIDBI. Suggested to carry out handiest the position. The direct lending feature should be outsourced to some other economic corporation specifically installed for this purpose.

Control

IDBI Bank is an enterprise controlled via way of means of the Board of Directors. The obligation for every day commercial enterprise control of the Bank lies with the chairman and dealing with director, deputy dealing with directors, and ten dealing with directors.

IDBI Bank subsidiary

1. IDBI Capital Market Services Limited (ICMS)
2. IDBI Intec Limited (IIL)
3. IDBI Asset Management Limited (IAML)
4. IDBI MF Trustee Company Limited (IMTCL)
5. DBI Trusteeship Services Ltd (ITSL)

Role of IDBI

IDBI's number one position as a pinnacle improvement financial institution is to coordinate the sports of different improvement banks and time period finance establishments within side the country's capital markets.

It presents technical and administrative assist for the advertising, control and enlargement of the industry, thereby appearing promotional and improvement functions.

Direct Assistance: IDBI presents loans and prepayments for commercial issues. This financial institution ensures loans rose via way of means of public marketplace commercial issues from kingdom co-operative banks, potential banks, the Indian Industrial Finance Corporation (IFCI), and different "notified" economic establishments. ..

Indirect assist: Provides refinancing centers to authorities-authorised IFCIs, SFCs and different economic establishments. IDBI subscribes to economic organization shares and bonds, thereby offering supplementary resources.

Coordinate the sports of economic establishments for the promoting and improvement of industry.

IDBI is a leader, coordinator, and innovator within side the subject of business finance in Japan. Its foremost sports are constrained to financing, improvement, coordination and promoting functions.

Industrial planning, promoting and improvement aimed toward bridging the gaps within side the business shape through devising, making ready and highlighting new projects.

Functions executed through IDBI

1. IDBI's unique hobby within side the improvement of small industries is tested through the status quo of the Small Industry Development Fund (SIDF) in May 1986, the National Stock Fund Scheme (NEFS) in 1988, and the status quo of voluntary executives. It has been. Corporation Cell (VECC) for imparting aid within side the nature of equity to small and small industries engaged in manufacturing, the value does now no longer exceed Rs. 50,000 rupees. This scheme is controlled through IDBI via a nationalized bank.
2. IDBI has additionally added a single-window aid scheme to offer time period mortgage and operating capital aid to new, small and small businesses. According to be had data, IDBI is increasing approximately one-0.33 of its general business aid to the small region only.
3. IDBI's commercial enterprise scope has been elevated to consulting, service provider banking, and settlement sports.

The Bank's Board of Directors is pleased to publish a report on its business and operations for the fiscal year ended March 31, 2019.

India slowed in 2018-19 compared to the previous year due to a slowdown in the agriculture and services sector. While the slowdown in India's economic activity was partly due to domestic factors such as monsoon shortages and in homogeneities, calm consumption and investment demand, global volatility also affected overall growth momentum. Banks play a major role in India's growth story as they continue to be the primary source of debt funding by a large margin compared to any other source. With this in mind, various reform measures have been initiated to strengthen the banking sector, including recapitalization of public sector banks and resolution of stressed assets under bankruptcy and bankruptcy laws. These measures are expected to improve the financial position of banks and subsequently lead to credit offtakes in the economy. While these measures can improve banks' financial position, the overall recovery in banking sector performance will be delayed. It is important to look at your bank's performance in this context.

Financial highlights

As of March 31, 2019, the total of bank deposits and down payments reached Rs. 2,27,372 rupees and rupees. 1, 46,790 crore respectively. Table 1 shows the highlights of the bank's business during the period under consideration.

Table 1: Key Financials (In Rs. Crore)

* Net of Current Income Tax and Deferred Income Tax

During the year, your bank's total income reached rupees. 25,372 rupees including interest income of Rs. Income of 22,071 rupees and other rupees. 3,300 crores. Interest expense was rupees. It costs 16,166 rupees and operating expenses. It accounts for 515.4 billion rupees, total expenditure of Rs. 21,319 Crore (excluding provisions and contingencies).

Given the ongoing stress of banks' corporate loan portfolios, total bank provisioning has increased. Regulations include Rs. Rs 2.5747 billion for non-performing assets, bad debt amortization and investment reserves. As a result, your bank suffered a net loss of Rs. 15,116 crores in 2018-19.

Annual earnings per share (EPS) was negative due to losses, but book value per share (excluding intangible assets) was rupees. 14.40 per share as of the end of March 2019. The board does not recommend dividends for the year, given the losses incurred.

Report on the Performance and Financial Position of Subsidiaries and Joint Venture included in the Consolidated Financial Statement as on March 31, 2019

-For PIPDICL, statistics now no longer included above as we've got now no longer obtained monetary statements and transaction info from the company. We have written down our funding in PIPDICL to Rupee 1.

Significant modifications and commitments (if any) that have an effect on IDBI Bank's monetary function on the cease of the financial 12 months and among the dates of the board record.

There aren't anyt any huge modifications or commitments that have an effect on our monetary function on the cease of our financial 12 months, that is, among March 31, 2019 and the date of the Board of Directors reporting.

Details concerning the adequacy of inner monetary control almost about monetary statements.

According to Section 143 (3) (i) of the Companies Act 2013, w.e.f. In the 2015-sixteen financial 12 months, the Audit & Supervisory Board's record states within side the context of monetary statements whether or not the Bank has the perfect inner monetary control (IFC) machine in area and the operational effectiveness of such control. There should be. The IFC stated in Section 143 (3) (i) of the Companies Act is associated with Internal Financial Management (IFC-FR) for monetary reporting. Our control is inner primarily based totally on our inner manage over monetary reporting standards, considering the important thing factors of inner manage contained within side the IFC-FR Audit Guidance Note issued with the aid of using the Association of Certified Accountants. Responsible for organising and preserving monetary manage. Of India. These duties encompass right inner finance that laboured efficiently to make sure the orderly and green implementation of the business, which includes compliance with World Bank policies, asset protection, fraud and mistakes prevention and detection. Includes control design, implementation and maintenance. The accuracy and completeness of accounting information and the well timed practise of dependable monetary statistics, as required below the Companies Act 2013, the Banking Regulation Act 1949, and the tips issued with the aid of using the Reserve Bank of India.

Your financial institution has applied an IFC-FR framework to assess present inner monetary control systems, verifying compliance with control documentation, certification and reporting tactics throughout all industries / departments, and the whole lot approximately monetary reporting. The appropriateness and effectiveness of our manage within side the crucial respects of.

In 2018-19, experts will trouble a quarterly inner compliance certificates from June 2018 to March 2019 after trying out and validating all underlying tactics according with the financial institution's IFC-FR framework. I submitted it.

Details of huge modifications in key monetary ratios (ie, modifications of 25% or extra as compared to the preceding financial 12 months), and an in depth description of them (which includes:

Regarding compliance with SEBI (Listing Obligations & Disclosure Requirements) (Amendment) Regulations 2018, the Bank's key monetary ratios are:

ICICI bank

History of Indian Industrial Credit Investment Corporation (ICICI)

The creation of India's Industrial Credit Investment Corporation (ICICI) is another milestone in the growth of the Indian capital markets. It was founded in 1955 as a company registered under the Companies Act. ICICI was established to fund small and medium-sized industries in the private sector.

IFCI and SFC were allowed to apply for and underwrite company stock and bonds, but limited to lending activities and avoided underwriting and investing in businesses. As a result, many up-and-coming companies faced ongoing challenges in raising capital markets.

Moreover, they were not in a position to secure the desired amount of loan assistance from financial institutions due to their thin equity base. In order to promote the industrialization of private sector, it was considered necessary to provide a considerable underwriting facility to accelerate the stage of industrialization. ICICI was established to fill these gaps.

Purpose of ICICI

ICICI's main purpose was to meet the industry's needs for permanent and long-term funding in the private sector. In general, the main purposes of Kosha are:

1. Support the creation, growth and modernization of non-public sector enterprises.

2. Encourage and promote the involvement of internal and external sources of funding in such companies.

3. Motivate ownership of industrial investment to promote and support market expansion.

4. Provide equipment funding.

5. Provide funding for rehabilitation of industrial units.

Functions of ICICI

To achieve the above objectives, we perform the following functions.

1. Fund in the form of long-term or medium-term loans or equity participation.

2. Sponsoring and underwriting of new issuance of shares and other securities,

3. Guarantee loans from other private investment sources.

4. Make the funds available for reinvestment by turning the investment as quickly as possible.

5. Providing project advisory services, that is, providing advice –

For private sector companies in the pre-investment stage on government policies and procedures, feasibility studies and joint venture research

To the central and state governments on specific policy-related issues.

Role of ICICI

Kosha established the Merchant Banking Division in 1973 to selectively advise customers, raise funds in an appropriate manner, and reorganize existing company funds. It also advises clients on merger proposals. We support the submission to financial institutions and banks, and the preparation of proposals for negotiations such as financing and underwriting. This department acts as an administrator of capital issues. Assistance is also provided for completing procedures related to public affairs and for completing legal procedures to raise a loan.

In 1982, ICICI took a new dimension in the merchant banking sector by proposing to provide counselling for industrial investment in India to non-resident Indians and people from India living abroad. This may prove to be not only the cheapest route for technological improvement, but also a source of foreign currency funding from risk capital.

Established a venture capital fund to promote green field companies and invest in risk capital, and cooperated with other financial institutions to establish SHCIL, CRISIL and OTC Exchange of India Ltd. Recently, we have established a mutual fund with our own bank. UTI.

Kosha's vision goes far beyond its immediate function of funding industrial projects. It has investigated all sectors of the economy and has designed new concepts or new means, or even new institutions to meet them, wherever the need is recognized. In this regard, its development activities have covered diverse areas such as technology, financing, project promotion, rural development, human resources development and publishing.

ICICI Brokerage Services Limited was established in March 1995. It is a wholly owned subsidiary of I-SEC. We started securities brokerage activities in 1996. It is registered on the Indian National Stock Exchange and the Mumbai Stock Exchange.

ICICI established ICICI Credit Corporation in 1997 and was subsequently renamed ICICI Personal Financial Services Limited in 1999. We offer a wide range of products and services to retail customers.

ICICI Capital Services Ltd. Become installed in 1994 as SCICI Securities Ltd. As an entirely owned subsidiary of SCICI Ltd. Its reason is to offer institutional traders with inventory brokerage services, which includes underwriting, number one marketplace placement and distribution. Since April 1, 1996, it has emerge as an entirely owned subsidiary of ICICI.

ICICI installed ICICI Bank in 1994 to carry out industrial banking functions. The financial institution gives numerous home and worldwide banking services.

Performance Evaluation: Quarter Ended June 30, 2021

• Core operating income (profit excluding financial income and income before income taxes) increased 23% year-on-year to ¥ 8,605 (US $ 1.2 billion) in the quarter ended June 30, 2021 (Q1 2022). Became.

• After-tax profit increased 78% year-on-year to 4,616 chlores (US $ 621 million) in the first quarter of 2022.

• As of June 30, 2021, total deposits increased 16% year-on-year to 926,224 chlores (US $ 124.6 billion).

• Average ordinary and savings (CASA) deposits in the first quarter of 2022 increased by 24% year-on-year. The average CASA ratio for the first quarter of 2022 was 44%

• Time deposits increased 9% year-on-year as of June 30, 2021.

• Domestic loan portfolio increased 20% year-on-year.

• The retail loan portfolio grew 20% year-over-year.

• The net NPA ratio was 1.16% as of June 30, 2021, compared to 1.14% as of March 31, 2021.

• Reserve coverage was strong at 78.2% as of June 30, 2021 and is higher than 77.7% as of March 31, 2021.

• On June 30, 2021, the World Bank announced that it was related to Covid-19.

6,425 Clore (US $ 864 million)

• As of June 30, 2021, the total capital adequacy ratio on a non-consolidated basis was 19.27% ​​and the Tier-1 capital adequacy ratio was 18.24% (including profits in the first quarter of 2022).

The board of directors of ICICI Bank Limited (NSE: ICICIBANK, BSE: 532174, NYSE: IBN) was held today in Mumbai and was held by the Bank in the quarter ending June 30, 2021 (first quarter of 2022). Approved independent and consolidated accounts. ). The Audit & Supervisory Board Members conducted a limited review and issued an unadjusted report on the independent and consolidated financial statements for the quarter ended June 30, 2021.

Profit and loss statement

• Core operating income (profit excluding financial income and income before income taxes) was 8,605 chlores (US $), up 23% year-on-year.

From 7,014 Chlore (US $ 944 million) in the quarter ended June 30, 2020 (Q1 2021) to $ 1.2 billion in the first quarter of 2022)

• Net interest income (NII) increased 18% year-on-year to 10,936 chlores (US $ 1.5 billion) in the first quarter of 2021 from 9,280 chlores (US $ 1.2 billion) in the first quarter of 2021.

• Net interest margin was 3.89% in the first quarter of 2022, compared to 3.84% in the quarter ended March 31, 2021 (fourth quarter of 2021) and 3.69% in the first quarter of 2021.

• Non-interest income, excluding financial income, increased 56% year-on-year from 2,380 chlores (US $ 320 million) in the first quarter of 2021 to 3,706 chlores (US $ 499 million) in the first quarter of 2022. Bottom.

• Commission revenue increased 53% year-on-year from 2,104 chlores (US $ 283 million) in the first quarter of 2021 to 3,219 chlores (US $ 433 million) in the first quarter of 2022. Fees from retail, business banking, and SME customers increased 65% year-over-year, accounting for approximately 76% of total fees in the first quarter of 2022.

• Treasury revenues were 290 crores (US $ 39 million) in the first quarter of 2022, compared to 3,763 crores (US $ 506 million) in the first quarter of 2021. Financial income for the first quarter of 2021 included a profit of 3,036 crores (US $ 408 million) from the sale of shares in a subsidiary.

• Reserves (excluding tax reserves) were 2,852 crores (US $ 384 million) in the first quarter of 2022, compared to 7,594 crores (US $ 1 billion) in the first quarter of 2021. Bad debts to make it more conservative. Due to the policy change, the provision for non-performing loans has increased.

1,127 crores (US $ 152 million) to align loan outstanding reserves with revised policy

• Based on the current valuation of the portfolio, the Bank has rewritten the Covid-19 allowance equivalent to 1,050 crores (US $ 141 million) made during the previous period.

• On June 30, 2021, the World Bank held a provision of 6,425 crores (US $ 864 million) related to Covid-19.

• Profit before tax increased 90% year-on-year from 3,183 crores (US $ 428 million) in the first quarter of 2021 to 6043 crores (US $ 813 million) in the first quarter of 2022.

• On a non-consolidated basis, profit after tax increased 78% year-on-year.

4616 crores (US $ 621 million) in the first quarter of 2022 compared to 2,599 crores (US $ 350 million) in the first quarter of 2021

Growth of digital and payment platforms

In December 2020, we extended iMobile, a state-of-the-art mobile banking app, to iMobile Pay, which provides payment and banking services to customers at all banks. Activation of iMobile Pay by non-ICICI Bank account holders has exceeded Rs 250,000 within the first six months. Transactions by non-ICICI Bank account holders increased eight-fold and seven-fold in June 2021 compared to March 2021, respectively. The value of transactions with the "Pay to Contact" feature available to users Easily transfer money to any payment app or digital wallet via UPI has more than tripled in June 2021 compared to March 2021. ..

In the first quarter of 2022, Amazon Pay credit cards became the fastest co-branded credit card in the country, surpassing the milestone of issuing 2 million cards. We recently launched a co-branded credit card with Hindustan Petroleum Corporation Limited (HPCL) called "ICICI Bank HPCL Super Saver Credit Card". This card offers you best-in-class perks and perks with daily spending on fuel and other categories.

Business banking and SME franchises continue to grow against the backdrop of digital products and platforms like InstaBIZ. InstaBIZ offers a variety of services including immediate overdraft, Goods and Services Tax (GST) payments, foreign exchange trading bookings, revenue-based business loans reported in GST filings, automated bank verification, and domestic and international remittances. .. Our supply chain platform enables companies to seamlessly manage supply chain financing and payment, dealer and vendor collection and coordination requirements in a convenient and paperless way. Financial transactions on InstaBIZ and supply chain platforms have grown steadily in the last few quarters.

In the area of ​​Unified Payment Interface (UPI), the bank's strategy is to participate directly through the bank's own platform and partner with third-party players in both peer-to-peer and payment-to-merchant segments. The value of merchants of banks that acquire transactions through UPI more than doubled year-on-year, up 32% quarter-on-quarter in the first quarter of 2022.

The value of mobile banking transactions increased 117% year-on-year to 349,072 chlores (US $ 47 billion) in the first quarter of 2022. Digital channels such as the Internet, mobile banking and point-of-sale accounted for more than 90% of savings account transactions in the first quarter of 2022. We are the market leader in electronic toll collection through FASTag. In the first quarter of 2022, we gained a 36% market share in electronic toll collection via FASTag, an increase of 146% year-on-year.

IFCI and SFCs

The Indian Industrial Finance Corporation (IFCI) turned into sincerely the primary monetary group set up with the aid of using the authorities after independence. The primary cause of setting up IFCI turned into to offer long-time period investment to the country's production and business sectors. Learn greater approximately IFCI.

Indian Industrial Finance Corporation (IFCI)

Founded in 1948, the Indian Industrial Finance Corporation turned into transformed to a public enterprise on July 1, 1993 and is now called the Indian Industrial Finance Corporation. The primary cause of setting up this improvement financial institution turned into to guide the economic sector. To meet their medium- to long-time period monetary needs.

IDBI, Scheduled Banks, Insurance Sector and Cooperative Banks are a number of IFCI's key stakeholders. IFCI's legal capital is 250 crores, which the crucial authorities can growth as needed.

Functions of IFCI

1. First, IFCI's primary characteristic is to offer medium- to long-time period lending and prepayment for business and production concerns. Before granting a mortgage, examine numerous elements. They have a take observe the significance of enterprise in our country wide economy, the general fee of the project, and in the end the pleasant of the product and the control of the enterprise. If the above elements provide first-rate results, IFCI will provide the mortgage.
2. Industrial Finance Corporation of India also can enrol in company bonds issued with the aid of using those organizations at the market.
3. IFCI additionally gives ensures for loans made with the aid of using such business organizations.
4. When a enterprise troubles stocks or bonds, Indian Industrial Finance Corporation might also additionally pick out to underwrite such securities.
5. We additionally assure deferred fee in case you borrow from a overseas financial institution in a overseas currency.
6. The Merchant Banking & Allied Services Division has a unique division. They cope with troubles including recapitalization, mergers, mergers and mortgage syndications.
7. As a procedure to sell industrialization, Industrial Finance Corporation of India is likewise selling 3 subsidiaries, IFCI Financial Services Ltd, IFCI Insurance Services Ltd and I-Fin. It manages the features and rules of those 3 organizations.

SFC

The National Finance Corporation (SFC) is an integral part of the country's institutional financial structure. Where the SEC promotes small and medium-sized industries in the state. In addition, SFC helps ensure balanced regional development, higher investment, more job creation and broader ownership of different industries.

SFC – State Finance Corporation

Currently, there are 18 national financial companies in India (17 of which were established under the SFC Act of 1951). Established under the Companies Act of 1949, Tamil Nadu Industrial Investment Corporation Limited also operates as a state-owned financial company.

Organization and management

A 10-member board of directors manages the State Finance Corporation. The state government generally consults with the RBI to appoint a managing director and appoint the names of the other three directors.

All insurers, fixed-term banks, investment trusts, co-operative banks, and other financial institutions elect three directors.

Therefore, state and quasi-government agencies appoint a majority of directors.

Functions of the National Financial Corporation

The various important features of State Finance Corporation are:

(I) SFC provides loans primarily for the acquisition of fixed assets such as land, buildings, plants and machinery.

(Ii) SFC will support financial support for the industrial sector where paid-in capital and reserves do not exceed Rs. 3 rupees (or up to 30 rupees if notified by the central government).

(Iii) SFC will underwrite new shares, shares, corporate bonds, etc. of the industrial unit.

(Iv) SFC permits the repayment of upcoming banks, industrial concerns, and guaranteed loans rose in the capital markets by state co-operative banks within 20 years.

Problems of the National Financial Corporation

There is no independent organization

All SFCs rely on rules and regulations created by the state government.

The problem with the SFC is that all decisions of these agencies depend on the state's political environment.

For this reason, it is not possible to get a loan to the right person at the right time.

Corruption

Like other government agencies in our country, we can also see the evil of corruption in state-owned financial companies.

The purpose of SFC executives, who are saving wealth and money, is to make money in both good and bad ways.

The problem is that these institutions do not have the proper transparency of banks.

Effects of World Bank and WTO policies

About. All SFCs in India are bound by an agreement between the World Bank and the WTO.

For this reason, the decisions of these institutions are influenced by the policies of the World Bank and the WTO.

The World Bank can easily put pressure on him to embrace his policies. It can also have a negative impact on small industries in India.

LIC & GIC

Meaning of insurance-

• An arrangement in which a company or state promises to provide a guarantee of compensation for a particular loss, damage, illness, or death in exchange for a particular premium payment.

• Insurance is a legal agreement between an insurance company (insurance company) and an individual (insured person). In this, the insurer promises to improve the insured's loss in the event of an insured's contingency.

Insurance principles

1. The nature of the contract:

The nature of the contract is the basic principle of insurance contracts. An insurance policy occurs when one party offers or proposes a contract and the other party accepts the proposal. The contract must be simple in order to be a valid contract. The person who signs the contract must enter it with free consent.

2. Maximum integrity principle:

Under this insurance policy, both parties must trust each other. As a client, it is the insured's duty to disclose all facts to the insurer. Fraud and misrepresentation of facts can lead to contract cancellations.

3. Principle of insured interests:

Under this insurance principle, the insured must be interested in the subject of insurance. Without insurance, the contract will be invalid. If there is no insured interest, the insurer will not issue an insurance policy.

Insured interests must be present at the time of insurance purchase

For example, creditors have insured interests in the lives of debtors. A person is considered to have unlimited interest in the life of his spouse.

4. Principle of compensation:

Compensation means security or compensation for loss or damage. The principle of compensation is an insurance principle that indicates that the insured may not be insured by the insurer for an amount that exceeds the insured's financial loss. In the type of insurance, the insured is the amount of compensation equivalent to the actual loss, not the amount exceeding the loss.

5. Subrogation Principal:

The principle of subrogation allows the insured to claim the amount from a third party responsible for the loss. This allows insurers to pursue legal methods to recover their losses.

For example, if you are injured in a car accident, the insurance company will compensate the loss due to the reckless driving of the third party and appeal to the third party to recover the amount paid as a claim.

6. Double insurance:

Double insurance means insurance of the same subject with two different companies or the same company under two different insurance policies. Insurance is available for compensation contracts such as fire insurance, marine insurance, and property insurance.

7. Proximity Cause Principle:

Proximity cause literally means "closest cause" or "direct cause". This principle applies when the loss is the result of more than one cause. Proximity causes are considered the most dominant and most effective cause of loss. This principle applies when there is a series of causes of damage or loss.

Life insurance Company

Life Insurance Corporation of India is an Indian state insurance group and investment company owned by the Government of India.

Headquarters: Mumbai

Owner: Government of India (100%) Founder: Government of India Established: September 1, 1956

Total assets: 31.12 rupee INR (US $ 450 billion, 2019)

Subsidiaries: LIC Housing Finance, IDBI Bank, Yes Bank LIC Card Services and others.

The important purposes of LIC are:

1. Mobilize people's maximum savings by making the insured's savings more attractive.

2. Expand the scope of life insurance to cover all insured persons under the insurance.

3. Act as a trustee of the insured in personal and collective capacity.

4. Promote all LIC employees and agents in the sense of participation and job satisfaction by performing their duties devotedly to the achievement of LIC's objectives.

5. To ensure the economic use of resources collected from policyholders.

6. To carry out the business with maximum economic efficiency and fully aware that the money belongs to the policyholder.

7. Spread life insurance broadly, especially in rural areas and socially and economically to the lower classes, insure all insured persons in the country and provide adequate financial compensation for death at a reasonable cost. I am aiming for it.

8. Maximize people's savings mobilization by making insurance-linked savings attractive enough.

9. In investing funds, keep in mind the primary obligations to policyholders who trust the funds without losing sight of the interests of the entire community. Funds deployed in the best interests of the entire community, not just investors, taking into account national priorities and attractive return obligations.

10. Do enterprise with most financial performance and with complete recognition that cash belongs to policyholders.

11. Act as a trustee of the insured from an man or woman and collective standpoint.

12. Meet the various lifestyles coverage desires of the network that can stand up in a converting social and financial environment.

13. We will maximize the involvement of all who paintings for the corporation which will sell the pursuits of the insured with the aid of using offering well mannered and green offerings.

14. Promote participation, satisfaction, and task pride amongst all marketers and personnel of the corporation with the aid of using acting their obligations devotedly to the success of the corporation's goals.

Functions of Life Insurance Corporation of India:

1. In the reinsurance enterprise associated with the lifestyles coverage enterprise, preserve the capital redemption enterprise, pension particular enterprise or reinsurance enterprise.

2. Invest Kosha's finances in a way that Kosha deems suitable and take all measures that can be essential or suitable to defend or recognise the funding. This consists of taking on and dealing with the belongings furnished as collateral for an funding till the suitable possibility arises to cast off them.

3. Acquiring, protecting and casting off belongings for enterprise purposes.

4. If it's miles suitable to accomplish that for the advantage of the general public corporation, switch all or a part of the lifestyles coverage enterprise out of doors India to any other person.

5. Movables or collateral for movables, or in any other case prepayment or lending of money.

6. Borrow or increase finances beneathneath such strategies and such collateral, because the Kosha deems suitable.

7. If the control enterprise is transferred to the Company beneathneath this regulation and the subsidiary of the vested coverage corporation is engaged in different enterprise, it will be engaged in different enterprise with the aid of using itself or via the subsidiary.

8. To perform different companies that Kosha can with ease perform in reference to its enterprise and that may be calculated immediately or in a roundabout way to make Kosha's enterprise profitable. When

9. Do something that can be incidental or facilitating the right workout of any of the corporation's powers.

GIC

GIC of India (GIC Re) is a state-owned corporation in India. It becomes the simplest reinsurer within side the Indian coverage marketplace.

By past due 2016, the coverage marketplace become open to overseas reinsurance businesses, along with businesses in Germany, Switzerland and France.

Purpose of General Insurance Corporation (GIC) in India:

1. To run a widespread coverage enterprise aside from lifestyles, together with injuries and fires.

2. Now, to guide and obtain the subsidiary to perform the coverage enterprise.

3. Support the implementation of funding techniques of subsidiaries in an green and effective way.

4. Companies that customers count on to apply the brand new era to offer IT answers that clear up enterprise demanding situations inside time and budget.

5. A corporation that takes satisfaction in worker empowerment.

6. A corporation that may design, deploy, and manipulate tasks from enterprise demanding situations to operational manufacturing systems.

7. Working with clients and era partners

Provide a solution.

8. A corporation that makes a speciality of the non-stop improvement of latest answers or new markets, offerings, or product offerings, or the man or woman boom and improvement of personnel and their ideas.

Functions of General Insurance Corporation (GIC) in India:

1. If you suspect its miles desirable, preserve a part of the overall coverage.

2. Assist, guide and recommend acquirers concerning the established order of requirements of behaviour and sound practices within side the widespread coverage enterprise.

3. We offer green offerings to non-lifestyles coverage policyholders.

4. Advise the acquirer on dealing with costs, along with fee of prices and different costs.

5. Advise the obtaining corporation concerning the funding of the fund.

6. Issue a directive to the obtaining corporation in reference to the implementation of the non-lifestyles coverage enterprise.

7. In order to offer offerings greater efficiently, we can display the path the various obtaining businesses and sell competition.

The main differences between life insurance and non-life insurance

The difference between life insurance and non-life insurance can be clearly drawn for the following reasons.

1. Insurance policies that cover an individual's life risk are known as life insurance. In contrast, insurance that is not covered by life insurance and includes various types of insurance such as fire, ships, and automobiles is non-life insurance.
2. Life insurance is nothing more than a means of investment. On the contrary, non-life insurance is a compensation contract.
3. Life insurance is a long-term contract and runs for many years. Conversely, non-life insurance is a short-term contract and must be renewed annually.
4. Life insurance pays a guaranteed amount at the time of the event or the maturity of the period. In the case of non-life insurance, in the event of an uncertain event, the actual loss amount will be refunded or the liability incurred will be repaid.
5. With life insurance, premiums are paid throughout the period. In contrast, non-life insurance is a one-time payment of premiums.
6. Life insurance requires insured interests to exist only at the time of contract, while non-life insurance requires insured interests to exist both at the time of contract and at the time of loss.
7. Life insurance can be provided at any amount based on the premium the policyholder is willing to pay. Unlike non-life insurance, the amount paid is limited to the amount of loss incurred, regardless of the amount of insurance.
8. The savings component is usually included in life insurance, but not in non-life insurance.

Key takeaways:

1. To acquire quicker inorganic increase of banks, IDBI Bank, a completely owned subsidiary of IDBI Bank, has merged with IDBI Bank pursuant to the provisions of Section 44A.
2. IDBI Bank is an enterprise controlled via way of means of the Board of Directors.
3. : IDBI presents loans and prepayments for commercial issues.
4. Provides refinancing centers to authorities-authorised IFCIs, SFCs and different economic establishments.
5. Industrial planning, promoting and improvement aimed toward bridging the gaps within side the business shape through devising, making ready and highlighting new projects.
6. The Bank's Board of Directors is pleased to publish a report on its business and operations for the fiscal year ended March 31, 2019.
7. Given the ongoing stress of banks' corporate loan portfolios, total bank provisioning has increased.
8. Significant modifications and commitments (if any) that have an effect on IDBI Bank's monetary function on the cease of the financial 12 months and among the dates of the board record.
9. Details concerning the adequacy of inner monetary control almost about monetary statements.
10. Your financial institution has applied an IFC-FR framework to assess present inner monetary control systems, verifying compliance with control documentation, certification and reporting tactics throughout all industries / departments, and the whole lot approximately monetary reporting.
11. IFCI and SFC were allowed to apply for and underwrite company stock and bonds, but limited to lending activities and avoided underwriting and investing in businesses.
12. ICICI's main purpose was to meet the industry's needs for permanent and long-term funding in the private sector.
13. Fund in the form of long-term or medium-term loans or equity participation.
14. Kosha established the Merchant Banking Division in 1973 to selectively advise customers, raise funds in an appropriate manner, and reorganize existing company funds.
15. Core operating income (profit excluding financial income and income before income taxes) increased 23% year-on-year to ¥ 8,605 (US $ 1.2 billion) in the quarter ended June 30, 2021 (Q1 2022).
16. Commission revenue increased 53% year-on-year from 2,104 crores (US $ 283 million) in the first quarter of 2021 to 3,219 crores (US $ 433 million) in the first quarter of 2022.
17. In December 2020, we extended iMobile, a state-of-the-art mobile banking app, to iMobile Pay, which provides payment and banking services to customers at all banks.
18. Founded in 1948, the Indian Industrial Finance Corporation turned into transformed to a public enterprise on July 1, 1993 and is now called the Indian Industrial Finance Corporation
19. The National Finance Corporation (SFC) is an integral part of the country's institutional financial structure.
20. A 10-member board of directors manages the State Finance Corporation.
21. SFC permits the repayment of upcoming banks, industrial concerns, and guaranteed loans rose in the capital markets by state co-operative banks within 20 years.
22. The purpose of SFC executives, who are saving wealth and money, is to make money in both good and bad ways.
23. •
24. Life Insurance Corporation of India is an Indian state insurance group and investment company owned by the Government of India.
25. Expand the scope of life insurance to cover all insured persons under the insurance.
26. In the reinsurance enterprise associated with the lifestyles coverage enterprise, preserve the capital redemption enterprise, pension particular enterprise or reinsurance enterprise.
27. GIC of India (GIC Re) is a state-owned corporation in India. It becomes the simplest reinsurer within side the Indian coverage marketplace.
28. . Support the implementation of funding techniques of subsidiaries in an green and effective way.
29. . Assist, guide and recommend acquirers concerning the established order of requirements of behaviour and sound practices within side the widespread coverage enterprise.

2.3 The banking Institutions: Commercial banks - the public and the private sectors - structure and comparative performance

Commercial banks-the public and the private sectors

What is a commercial bank?

A commercial bank is a type of financial institution that does everything from depositing and withdrawing money to the general public and providing loans for investment. These banks are commercial institutions and operate solely for commercial purposes.

The two main characteristics of commercial banks are lending and borrowing. Banks receive deposits and give money to various projects to earn interest (profit). The interest rate that a bank provides to depositors is called the borrowing interest rate, and the interest rate that a bank lends money to is called the lending interest rate.

Commercial bank functions:

The functions of commercial banks fall into two major divisions.

(A) Main functions

Accept Deposits: Banks receive deposits in the form of savings, current and fixed deposits. Surplus balances collected from companies and individuals are lent out as a temporary requirement for commercial transactions.

Providing Loans and Prepaid: Another important function of this bank is to provide entrepreneurs and businessmen with loans and prepayments and collect interest. For all banks, it is a major source of profit. In this process, the bank holds a small number of deposits as reserves and provides (lends) the remaining amount to the borrower at banks such as demand loans, overdrafts, cash credits and short-term loans.

Credit Cash: When a customer is offered a credit or loan, no liquid cash is offered. First, a bank account is opened for the customer and then the money is transferred to that account. This process allows banks to make money

(B) Secondary function

Bill of exchange discount: This is a written agreement approving the amount to be paid for goods purchased at a particular point in the future. You can also settle the amount before the estimated time by using the discount method of the commercial bank.

Overdraft Facility: A prepayment given to a customer by overdrawing the overdraft to a certain limit.

Buying and Selling Securities: Banks provide the ability to sell and buy securities.

Locker Equipment: Banks provide locker equipment to their customers to keep valuables and documents safe. The bank charges a minimum annual fee for this service.

Use various means such as promissory notes, checks, and bills of exchange.

Types of commercial banks:

There are three different types of commercial banks.

Private Bank –: A type of commercial bank in which an individual or company owns a majority of the equity capital. All private banks are recorded as limited liability companies. Banks such as Housing Development Finance Corporation (HDFC) Bank, India Industrial Credit Investment Corporation (ICICI) Bank, Yes Bank, etc.

Public Banks –: A type of nationalized bank in which the government holds important shares. For example, Bank of Baroda, State Bank of India (SBI), Dena Bank, Corporation Bank, Punjab National Bank.

Foreign Banks –: These banks are established abroad and have branches in other countries. For example, banks such as American Express Bank, Hongkong and Shanghai Banking Corporation (HSBC), Standard & Chartered Bank, and Citibank.

Commercial Bank Example

Here are some examples of commercial banks in India:

1. State Bank of India (SBI)
2. Housing Development Finance Corporation (HDFC) Bank
3. Indian Industrial Credit Investment Corporation (ICICI) Bank
4. Dena Bank

Public and Private sectors

What is a public sector bank?

A public sector bank is a financial institution in which the state government holds more than 50% of the shares. Banks usually appear on the stock exchange.

They are the financial backbone of the country and contribute to the financial security of the country.

Despite the slightly higher interest rates, putting money in a fixed account at a government bank will ensure the security of your funds.

It is unlikely that such an institution will default on the customer's finances. If banks experience financial constraints, governments tend to cover them.

What is a private bank?

Banks in this category are dominated by individual shareholders, not the government. These banks have individuals or private institutions and hold more than 50% of the shares.

Some private banks may default on the customer's finances. This mainly happens with fixed deposits. Others may suddenly shut down their entire operation and lose their way with their customers.

In such cases, the customer may lose savings.

These institutions typically employ aggressive customer strategies aimed at ultimate customer satisfaction. They primarily aim to provide quality service in the shortest possible time.

Employees constantly sell high-end products and services to a wider geographic and larger target audience.

The main differences between public and private banks

1. Public sector banks have existed for a long time now. They have a great public image that creates credibility. In return, these institutions receive customer loyalty, which contributes to a broader customer base. Conversely, private banks now exist for a shorter period of time. Therefore, they have a lower customer base.
2. When it comes to interest rate policy, public sector banks are transparent. However, interest rates on customer savings are quite high. For private banks, different operating systems can incur more hidden charges. It explains why most people choose government banks. However, banks in this category usually reduce customer interest in savings.
3. Public sector banks usually have employment security for their employees. When individuals start working for such institutions, they do not have to worry about being dismissed from work due to a particular problem. Private banks usually have a certain performance valuation, which adds to the constant concern about employment security. If individuals do not meet certain performance levels, they can easily be scaled down.
4. Government banks usually take time to implement new technologies that facilitate the work of both employees and customers. However, the private sector is always up to date with the latest technology trends that make it easier to operate. When visiting a public bank, you may have to go through various departments to get the information you need. However, most private banks have all the help they need at one desk. Going forward, you'll be satisfied and save time.

Key takeaways:

1. A commercial bank is a type of financial institution that does everything from depositing and withdrawing money to the general public and providing loans for investment.
2. The two main characteristics of commercial banks are lending and borrowing.
3. Banks receive deposits in the form of savings, current and fixed deposits.
4. Another important function of this bank is to provide entrepreneurs and businessmen with loans and prepayments and collect interest.
5. When a customer is offered a credit or loan, no liquid cash is offered.
6. A prepayment given to a customer by overdrawing the overdraft to a certain limit.
7. A type of commercial bank in which an individual or company owns a majority of the equity capital.
8. A public sector bank is a financial institution in which the state government holds more than 50% of the shares.
9. Banks in this category are dominated by individual shareholders, not the government.
10. Public sector banks have existed for a long time now.
11. When it comes to interest rate policy, public sector banks are transparent.
12. Government banks usually take time to implement new technologies that facilitate the work of both employees and customers.

2.4 The problems of competition; interest rates, spreads, and NPAs.

The problems of competition

As any statistics scientist knows, there may be a significant global of predictive modelling opposition at the Internet. Some of those contests are financially motivated, at the same time as others are advocated completely via way of means of curiosity. The fundamental shape of opposition given nearly any economic incentive is a check wherein each participant (or group of participants) trains and develops a version on a education dataset and the label is hidden from competition. Sending submissions as a forecast for a dataset. The "excellent" version is then provided a piece in their respective economic rewards primarily based totally on a pre-decided accuracy metric. Most critiques approximately those predictive modelling competitions are that opposition primarily based totally on economic incentives creates a call for proficient folks that locate answers to hard troubles. I first shared this opinion and disagreed that they have been heading within side the proper direction, however I have become privy to troubles unique to those tasks that hindered development in a totally resolvable manner rice field. After all, whilst a corporation offers $ 10,000 to the excellent acting version in opposition, they may be simply crowd sourcing the excellent feasible way to their trouble, proper? This article discusses the troubles inherent in statistics technological know-how opposition and violations of open supply ethics, recommendations for restructuring those competitions, and why this solves the troubles inherent within side the modern shape.

Specific trouble:

1. Most competition aren't gambling to win

These contests provide remarkable rewards as an incentive; however from my revel in I found out that maximum competition do now no longer take part because of their prizes. First, if this remark is true, its miles a form of antithesis towards the cause of the preliminary provision of economic rewards within side the first place. If many competition do now no longer do not forget the prize as an incentive, the fee of the prize can be appreciably decreased due to the fact it's miles associated with the high-satisfactory of the version created for the provider. Please allow me explain.

Some of you analyzing this will have formerly approached the top of statistics technological know-how opposition, at the same time as others can be within side the center of the %. Recall how any of those positions modified the technique to the trouble. From my revel in of competing and seeing others competing, the understanding of being within side the center of the % and missing thoughts for similarly development frequently ignores economic incentives and in maximum cases , It modifications to something just like the following. At least I found out something. Meanwhile, folks that see their call on the pinnacle of the leader board are already considering what to do with their winnings proportion. What occurs as a end result? These humans paintings relentlessly to relax and save you their tough paintings from slipping thru their fingers. This is remarkable. As a end result of economic incentives, we're dozens of smart humans competing tirelessly to give you answers to hard troubles. Proper. But what if there has been a manner to incentivize all participants, loads of statistics scientists, and the usage of the identical quantity of money?

2. Anti-Open Source — everyone spends time fixing the identical (or similar) troubles

For the ones unfamiliar, the usage of an open supply framework makes all of the supply code of a venture to be had to all people who has the capacity to listen in on thoughts or make similarly improvements. It is a decision. In my opinion, the flow to open supply is one in all the most important movements in records in elevated generation development, specifically as it pertains to regions with such plenty of well-that means and malicious use cases. , Enter deep getting to know and synthetic intelligence. The provisions of those contests, including disqualification for sharing code among teams, create an anti-open supply environment. Based at the modern praise shape of conventional statistics technological know-how contests, there may be no incentive for all of us to proportion their thoughts. In truth, it is plenty greater useful to keep accurate thoughts in-residence to save you others from the usage of them due to the fact they may hit you. As a end result of this anti-open supply nature, if there may be a well known trouble to be solved, including pre processing statistics or experimenting to locate the right neural community shape, the easy truth that everybody has to resolve the identical trouble. Based at the facts, endless instances are wasted on themselves. For example, I am currently participating in an Alzheimer's disease research contest with the Stall Catchers Project, whose dataset is a collection of videos of blood flow in the brain. Due to the nature of this dataset, all participants in the contest must write a script that pre processes the video into a frame image and then crops it around the vessel in question. It took about 3 hours to create a function that would allow Numpy slices of video to work properly and universally at every frame of every video.

Data Pre processing Example for the Driven Data Competition — Thanks to Driven Data and the Human Computation Institute for providing the data and permission to use it.

Let's calculate some numbers here. You can see that there are 623 participants in this contest. Let's assume that the observations at n = 1 are close to the mean, due to the lack of details. We all need to pre process the data in the same (or very similar) way, so if we take on this role and share our work with others, we add up to the pre processing that may have been redirected. Spent  1,869 hours in. Class. If so, these hours may have been spent instead building networks, researching illnesses, optimizing networks, and so on. And keep in mind that this was only the first step in the competition.

3. Pay to win

All this is summarized in the simple fact that even the best data scientists in the world cannot optimize their networks in a short enough time for sufficiently complex problems without computing resources such as high-end GPUs and TPUs. In addition, as the computing power increases, the optimization time is reduced somewhat and can be used to further pursue the ideas within it. My claim is that not all of these competitions are determined by access to computing resources. In fact, it is clear to me that knowledge of the problem and an effective approach to solving it are far more important assets than computing resources. I'm just stating the fact that if there are speed barriers that aren't met, you can rule out the possibility of a talented data scientist running out of resources to access a particular prize pool.

A potential counter-argument to my claim is that some competition mentions often implemented computing limitations, such as illegal use of TPUs, GPU execution time limits, or other processing speed limits. We may claim that it is actually fair. From an economic point of view, if an organization is "paying" (or rewarding as a prize) to a group of people to find the best solution to a difficult problem, why not pool this group's computing resources? Will it be restricted? Is it already free to use? So these restrictions seem like a beginner to me if the ultimate goal is to reach the best possible solution. What's more, if you choose not to use the speed at hand, you'll lose credibility to engineers who have pushed the boundaries and built amazing technology, the state-of-the-art processor accessible today.

Interest rate , Spreads

With the liberalization of India's financial sector, commercial banks have been transformed into universal banks that can offer a large number of both fund-based and non-fund-based financial services under a single roof. Commercial banks are also given full autonomy to fix interest rates on deposits and loans. However, some policy directives are issued from time to time by the Reserve Bank of India (RBI), the central bank of the country, by adjusting the quantity base (CRR and SLR, etc.) or the price base (REPO and reverse REPO, MSF, etc.). Will be done. Bank-Rate) Benchmark rate. According to the Banking Regulations Act, banks are bound by the RBI Directive on interest rates on loans and down payments and are obliged to implement upward or downward interest rate adjustments for all existing advance payments from the date of the directive / revision. I have. Interest rates come into effect. Also, there is no freedom to invest in the lending resources of Indian commercial banks, and direct lending must account for at least 40%.

Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Balance Sheet Exposure (CEOBE), whichever is higher. Of this, 18% of ANBC or CEOBE, whichever is higher, should be assigned to the agricultural segment. Of the 18% target for agriculture, the higher of 8% of ANBC or CEOBE will be assigned to smallholders and marginal farmers. For bank lending to domestic micro-enterprise, there is also a sub-target of 7.50% of ANBC or CEOBE, whichever is higher .

NPA

Non-performing loans, also known as non-performing loans, are loans made by banks or financial companies that are not repaid or paid interest on time.

Loans are a bank asset because interest payments and principal repayments generate cash flow. Banks make a profit by paying interest.

Banks usually treat assets as bad assets if they haven't been maintained for some time. If payment is delayed for a short period of time, the loan will be classified as overdue. Loans are classified as non-performing when payments are really late (usually 90 days).

High levels of bad assets compared to similar lenders can be a sign of a problem, as well as a sudden increase. However, this should be considered in the context of the type of loan being made. Some banks lend to higher-risk customers than others, which tends to increase the percentage of non-performing loans, but this is compensated for by imposing higher interest rates on borrowers and widening spreads. .. Mortgage lenders will almost certainly have less bad assets than credit card specialists, but credit card specialists will have higher spreads and even if they eventually have to amortize their bad debts, they will be better off with the same assets. It has the potential to make a big profit. ..

The RBI also sets out the following reserve requirements:

(I) Each commercial bank must maintain a reserve requirement ratio (CRR) with the RBI. The minimum CRR that a commercial bank must maintain forcibly is currently 4% of its net demand and time liabilities (NDTL). This asset has zero risk weight and no bank interest.

(Ii) Each commercial bank must maintain its statutory liquidity ratio (SLR) by investing in regulated government securities, etc. (SLR assets). This is more than 19.5% of NDTL. October 14, 2017 [2] (gradual decomposition over a period from 25%). This asset is assumed to be free of default / credit risk, bears small market risk and usually produces a risk-free rate of return.

In line with the Basel Accords, the RBI also stipulates that each commercial bank must comply with its capital requirements (CAR). This requires banks to hold at least a certain percentage of their risk-weighted asset and off-balance sheet exposures. .. Off-balance-sheet debt is very important to any bank as it leads to interest-free or fee-based income (commission income), which helps to increase the bank's overall return on assets (ROA).

The Revenue Recognition and Asset Classification (IRAC) criteria set by RBI  require, among other things, to classify a bank's assets according to their quality. Assets can be either performance or non-performance. Performance assets are standard assets that generate pre-fixed inflows / revenues at scheduled intervals. Toxic assets (NPAs), on the other hand, are assets whose principal, interest, or both payments are overdue by 90 days or more from their respective due dates. NPA is an impaired asset on the books of a commercial bank that no longer generates income.

Defective assets can be categorized into three categories in descending order of quality as shown below.

(A) Substandard assets

(B) Suspicious assets

(C) Lost assets.

Reserves for these various ranges of NPA must be created by debiting the bank's profit and loss account.

For market-related investments by commercial banks, these need to be marked to market. This exposes banks to interest rate and / or foreign exchange risk apart from traditional credit risk.

Calculated under the basic structure of an Indian bank's balance sheet, the minimum spread between the interest rate on a commercial loan and the interest rate on a deposit required for the continued service of depositor claims for a particular level of bad assets. I will estimate. The cut off risk associated with a commercial bank's assets in the absence of defaults is calculated as a function of its net worth.

B. Basic structure of Indian commercial bank balance sheet:

Consider the basic structure of the balance sheet of an Indian commercial bank that has made a priority sector loan of 100 rupees. We assume that:

(A) Bank CAR / NW is 10% (exposure of risk-weighted assets and off-balance sheet debt).

(B) The risk weight of all loan assets is 100%.

(C) The CRR is 4% of the deposit and the risk weight is zero (deposits with RBI have no risk).

(D) No income from CRR (RBI does not pay interest on CRR).

(E) SLR is 20% of deposits and has a small risk weight from market risk (ignored for ease of calculation).

(F) The average yield of SLR securities is 6% per annum.

(G) Direct (priority sector) loans are worth 100 units, which account for 40% of total credit and yield, averaging 8% per annum.

(H) The exposure of off-balance sheet debt is 10% of the total size of the balance sheet and the conversion factor is 50%.

(I) Part of the credit portfolio (including preferred sector loans) is the NPA, and the collection from the NPA is 50% of the NPA.

(J) Commission income for off-balance sheet items is 1% p.a.

(K) "Rs" is an abbreviation for "Indian Rupee" and is a unit of Indian currency.

Then, basic structure for the balance sheet of the commercial bank would look as under:

Off-balance sheet items aggregate Rs. 64 units and the consequential exposure (Conversion Factor = 50%) is Rs. 32 units i.e. 10% of the total balance sheet size.

Directed (Priority Sector) Lending (40% of Total loan) = Rs 100 units (assumed)

Commercial Loan (60% of Total Loan) = Rs 150 units

Total Loan Rs (100 + 150) units  = Rs 250 units Off Balance Sheet Exposure @ 10% of B.S. size                            = Rs 32 units Net worth              = 10% of Rs. (250+32) units              ~ Rs. 28 units Deposits              = Rs. (250 – 28)/0.76# units              ~ Rs. 292 units CRR              = 4% of Deposits                            ~ Rs.  12 units

SLR Investments       = 20% of Deposits ~ Rs.  58 units

Commission Income = 1% of Rs. 64 units = Rs. 0.64 unit

NPA = A Fraction of Rs. 250 units

Recovery from NPA = 50% of NPA

# [(CRR + SLR) = 24% of NDTL = 0.24 Deposit; Fraction of Deposit available for funding Loan Assets = 76% Deposit = 0.76 Deposit; So, Deposits required to fund Loans worth Rs 222 (250 less Net Worth of 28) units = Rs (222/0.76) units]

A.   Return on Net-Worth (RONW) and EPS

EPS = (Earning for equity shares) / (No. Of equity shares)

= Return on Net worth (RONW) × Net worth per share

= RONW × Book Value per share.

The aim of the commercial bank would be to maximize its EPS or RONW under the available circumstances. Let us consider below the situations for 3 different values of NPAs, viz. (i) NPA = 0; (ii) NPA = 6% of Total Loan Assets and (iii) NPA = 10% of Total Loan Assets.

(i)                       NPA = 0

The net return available to the equity investors for a year can be written down as:

N = [150(1+α) +100(1+0.08) +58(1+0.06) + 12 + 0.64 – 292 (1+d)] –28,

Where    α =     yield    per     annum     for     the    commercial    loan,   and

d = weighted average rate of interest per annum for the bank’s deposits.

A positive value for N implies a net positive return (pre-tax) for equity investors, while a negative value for N indicates a corresponding erosion of their net worth during the related year.

N = [150 + 100 + 8 + 58 + 3.48 + 12 + 0.64 – 292] – 28 + 150α – 292d

= [332.12 – 320] + 150α – 292d

= 12.12 + 150 (d + δ) – 292d, where δ is the interest rate spread for

The commercial loan [δ = (α – d) > 0];

= 12.12 – 142d + 150δ, where δ > 0.

Thus, RONW > 0 (some positive return for equity investors) requires that 12.12 – 142d + 150δ > 0.

Since δ > 0, 142d < 12.12 would guarantee that RONW > 0 for all

Values of δ.

Or, d < (12.12/142) < 8.54% would guarantee a positive RONW for

All values of δ.

Or, RONW > 0 for all values of δ as long as d < 8.54% (quite an

Acceptable value).

As a matter of fact, a reasonable δ of 2% and a deposit rate of 6% (current REPO rate) would lead to a Return on Net Worth (RONW = N/28) of nearly 23.6%.

A healthy return of 20% on net worth can be achieved with a rather conservative value for Interest Rate Spread of 1.33%.

In other words, a reasonable return on net worth (now-a-days commercial banks are mostly listed entities, and share-holders require a risk based rate of return) can be achieved without any undue restriction on the value of d or δ. So, there is no undue constraint on Interest Rate Spread or NIM as could impact adversely on unhindered Monetary Transmission.

(ii)   NPA = 6% of Total Loan Assets

The net return available to the equity investors can be written down

As:

N = [141(1+ α) + 4.5 + 94(1+ 0.08) + 3 + 58(1+ 0.06) + 12 + 0.64 –

292 (1+ d)] – 28

= [141 + 4.5 + 94 + 7.52 + 3 + 58 + 3.48 + 12 + 0.64 – 292 – 28] +

141α – 292d

= 4.14 – 151d + 141δ.

Thus, RONW > 0 requires that 4.14 – 151d + 141δ > 0.

Since δ > 0, 151d < 4.14 would guarantee that RONW > 0 for all values of δ.

Or, d < (4.14/151) < 2.74% would ensure a positive RONW for all

Values of δ.

This means that RONW > 0 for all values of δ as long as d < 2.74%

(hard to fulfil for an Indian bank at all times).

It appears that, for NPA = 6% of total loan assets, a positive Return on Net Worth (RONW = N/28) can be achieved for a deposit rate of 6% (current REPO rate) only if the spread (δ) exceeds a threshold value of nearly 3.5%. As a matter of fact, a reasonable δ of 2% and a deposit rate of 6% would lead to a negative Return on Net Worth of nearly (–) 7.5%.

Even a moderate Return on Net-Worth (RONW) of 10% would

Require a very high spread (δ) of nearly 5.5%.

Further, for a given value of RONW, an increase of 1% in the value of d would warrant an increase of 1.07% for δ and, therefore, a hike of 2.07% for α. In other words, any increase of the deposit rate has a multiplier effect on the increase of commercial loan rate (α) or even the spread (δ).

(iii)   NPA = 10% of Total Loan Assets

The net return available to the equity investors can be written down

As:

N = [135(1+ α) + 7.5 + 90 (1+ 0.08) + 5 + 58 (1+ 0.06) + 12 + 0.64 –

292 (1+ d)] – 28

= [135 + 7.5 + 90 + 7.2 +5 + 58 + 3.48 + 12 + 0.64 – 292 – 28] +

135α – 292d

= – 1.18 – 157d + 135δ

Thus, RONW > 0 requires that – 1.18 – 157d + 135δ > 0.

Since both the first 2 terms have negative sign, no value of d can guarantee a positive value of RONW for all values of δ.

RONW > 0 if 135 δ > 1.18 + 157d, i.e. δ > (1.18/135) + (157/135) d

Or, δ > 0.01 + 1.16 d.

Then, the basic structure of the balance sheet of a commercial bank is as follows.

If the deposit interest rate is 6% (current REPO interest rate), RONW> 0 requires a spread (δ)> 7.85%, a commercial loan interest rate of 13.85%, which is more than double the deposit interest rate. Such high lending rates / spreads are clearly impractical in highly competitive scenarios, and the commercial banks involved will suspend or limit new commercial lending sanctions. In fact, the RBI has already classified many commercial banks into the PCA (Rapid Corrective Action) category.

Considering their high NPA ratio. In other words, if a bank has to make a reasonable return on net worth at a high NPA ratio, the lending rate must be unacceptably high. This is not a viable scenario and banks need to be careful not to fall into such a financial bog. Therefore, managing net losses from commercial banks' NPAs is paramount.

The article in  also states that increasing pressure on interest rate spreads requires banks to minimize total NPA as a percentage of loans and investment assets, as brokerage costs need to be curtailed and reduced. Emphasizes that. As global competition intensifies, Indian banks must develop the ability to survive and prosper with thinner interest rate spreads and lower brokerage costs. However, as already mentioned, the majority of bad assets can be an obstacle to this goal as a percentage of the total balance sheet loans and investments of commercial banks (smaller spreads).

It is important to note that improved NPA recovery can significantly reduce lending rates and interest rate spreads. Therefore, the specific procedure for organizing a commercial bank's balance sheet is the need for time to be able to effectively handle interest rate rigidity, thereby leading to efficient financial transmission. Open the way.

Key takeaways:

1. As any statistics scientist knows, there may be a significant global of predictive modelling opposition at the Internet.
2. For the ones unfamiliar, the usage of an open supply framework makes all of the supply code of a venture to be had to all people who has the capacity to listen in on thoughts or make similarly improvements.
3. All this is summarized in the simple fact that even the best data scientists in the world cannot optimize their networks in a short enough time for sufficiently complex problems without computing resources such as high-end GPUs and TPUs.
4. With the liberalization of India's financial sector, commercial banks have been transformed into universal banks that can offer a large number of both fund-based and non-fund-based financial services under a single roof.
5. Non-performing loans, also known as non-performing loans, are loans made by banks or financial companies that are not repaid or paid interest on time.
6. Each commercial bank must maintain a reserve requirement ratio (CRR) with the RBI.
7. The Revenue Recognition and Asset Classification (IRAC) criteria set by RBI  require, among other things, to classify a bank's assets according to their quality.
8. If a bank has to make a reasonable return on net worth at a high NPA ratio, the lending rate must be unacceptably high.
9. It is important to note that improved NPA recovery can significantly reduce lending rates and interest rate spreads.

2.5 Bank capital - adequacy norms and capital market support

Bank capital acts as a critical cushion in opposition to sudden losses. In the occasion of a bankruptcy, the capital of the financial institution proprietor is at hazard, growing a robust incentive to manipulate the financial institution carefully1. Therefore, financial institution capital performs an critical function within side the protection and soundness of character banks and banks. System.

Bank capital is regularly described in a hierarchy or class that consists of shareholders' fairness, retained earnings, reserves, hybrid fairness products, and subordinated debt. The capital adequacy ratio is generally measured as a percent of financial institution belongings or hazard-weighted financial institution belongings.

Bank capital, additionally referred to as a financial institution's internet worth, is the distinction among a financial institution's belongings and its liabilities, which often serves as a reserve for sudden losses and additionally protects lenders whilst the financial institution is liquidated. Bank belongings are cash, authorities bonds, and interest-incomes banks-furnished loans (mortgages, letters of credit score, etc.). Bank liabilities are loans / liabilities received via way of means of the financial institution.

Types of financial institution capital

Banks want to preserve a sure quantity of liquid belongings in reaction to hazard-weighted belongings.

.. The Basel Accords are banking policies that make sure that banks have enough capital to address their operations and obligations.

There are 3 types:

1 – Tier 1 Capital

It includes the financial institution's center capital (ie shareholders' fairness) and disclosed reserves (retained earnings) minus goodwill.

,If you have. It indicates the economic situation of the financial institution. It includes all of the reserves and finances of the financial institution. It serves because the number one guide in case of loss absorption. It is indexed withinside the financial institution's economic statements.

Under Basel III, Tier 1 capital ought to preserve no less than 7% of hazard-weighted belongings. In addition, banks must additionally keep a further buffer of 2.5% of unstable belongings. Risk-weighted belongings constitute the financial institution's publicity to credit score hazard from loans provided via way of means of the financial institution.

Tier 1 Capital / Risk Weighted Assets = 7% (Minimum Requirements)

Example:

Bank X has a Tier 1 capital of $ one hundred billion. Its hazard-weighted belongings are $ one hundred billion. (Ie) Tier 1 capital ratio

Is 10%, which exceeds the Basel III requirement of 7%.

2 – Tier 2 Capital

Consists of finances now no longer disclosed withinside the economic statements

Of the financial institution. Includes revaluation reserve

, Hybrid fairness products, subordinated bonds, popular reserves, allowance for dubious money owed, and decreased funding in non-disclosure reserves, non-consolidated subsidiaries and different economic institutions.

Tier 2 capital

It is extra capital due to the fact it's far much less dependable than Tier 1 capital. It is tough to degree this capital due to the fact the belongings of this capital aren't clean to liquidate. Banks divide those belongings into higher and decrease tiers primarily based totally at the liquidity of the character belongings.

Under Basel III, they ought to preserve a minimal capital adequacy ratio of 8%.

Example:

Bank X has $ 15 billion in Tier 2 capital. The Tier 2 capital adequacy ratio is 1.5%, which exceeds the necessities of Basel III.

The general capital ratio is 11.5% (that is, Tier 1 + Tier 2 = 10% + 1.5% = 11.5%). Which one exceeds the Basel III requirement of 10.5%? (With extra buffer)

3 – Tier three Capital

Tier three capital is tertiary capital. It is there to guard marketplace hazard, commodity hazard and overseas foreign money hazard. This consists of greater subordinated debt, undisclosed reserves, and allowance for dubious money owed in comparison to Tier 2 capital.

Tier 1 capital ought to be extra than mixed Tier 2 and Tier three capital.

How does a financial institution's capital growth increase  or decrease?

Banks increase finances from a lot of reassets to offer loans to clients who price interest. This is greater than the price the consumer rents. The distinction is profit.

Shareholder Financing – Publicly issued banks increase investment, and the identical is used for banking operations. Shareholder returns are within side the shape of dividends

And the upward push in inventory prices.

Obtaining a mortgage from a economic institution

Government investment banks

Time deposits, financial savings deposits;

Adequacy norms:

With a view to adoption via way of means of the Basel Banking Committee Supervisory framework (BCBS) on capital adequacy that takes into consideration the factors of credit score hazard in diverse kinds of belongings at the stability sheet, as nicely as off-stability sheet organizations and additionally to reinforce the capital base of banks, the Reserve Bank of India determined in April 1992 to introduce a machine of hazard asset ratios for banks (which includes overseas banks) in India as capital adequacy measure.

• Essentially, beneath the preceding machine, the stability belongings, unfunded objects and different off-stability sheet exposures are assigned prescribed hazard weights and banks should preserve a minimal capital intact budget equal to the percentage prescribed within side the aggregate of hazard-weighted belongings and different exposures in a continuously.

Reserve Bank issued tips to banks in June 2004 on renovation of the capital requirement for marketplace dangers alongside the traces of the "Amendment to the Capital Accord for include marketplace dangers ”issued via way of means of the BCBS in 1996.

• The BCBS posted the "International Convergence of Capital Measurement and Capital Standards: A Review framework "on June 26, 2004. The revised framework changed into up to date in November 2005 and the model of the framework changed into posted in June 2006.

Incorporating the capital ingredients and the 1996modification to the Capital Agreement to include the Market risk. The Revised Framework seeks to reach extensively greater hazard-touchy methods to capital necessities. The revised framework gives a variety of alternatives for decide capital necessities for credit score hazard and operational hazard to permit banks and supervisors to pick methods which can be maximum suitable for your operations and economic markets.

• The revised framework includes three reinforcement pillars, viz. Minimal capital necessities, supervisory evaluation of capital and marketplace adequacy discipline. In Pillar 1, the Framework gives three distinctive alternatives for calculating capital necessities for credit score hazard and 3 different alternatives for calculating capital requirement for operational hazard. These credit score alternatives and operational dangers are primarily based totally on growing hazard sensitivity and permit banks to pick an method that is maximum suitable for the bank's improvement stage operations.

The alternatives to be had to calculate the capital for credit score hazard are Standardized Approach, Foundation Internal Rating Based method and superior inner qualification primarily based totally getting closer. The alternatives to be had to calculate the capital for operational hazard are the simple indicator focus, standardized method and superior measurement getting closer.

• Taking into consideration the goal of the Reserve Bank to have coherence and concord with worldwide standards, it's been determined that each one industrial banks in India (aside from nearby location banks and nearby rural banks) undertake the Standard Approach (SA) for credit score hazard and Basic Indicator Approach (BIA) for operational hazard.

Banks will maintain to use the Standardized Duration Approach (SDA) for calculating the capital requirement for market place dangers.

Capital market support

First, let's take a look at how banks support the capital markets. If one bank has a comparative advantage in assessing credit quality, granting and renewing bank loans should provide a positive signal to external investors, especially when borrowers do so (Fama). 1985, Diamond 1991). There is no established reputation. James (1987) analyzes the impact of loan announcements on a company's equity returns and compares it to the impact of other financing. He found that bank loan agreements provide investors with positive information about the outlook for borrowers in that they show higher excess returns before and after the event date than alternative lending. Lummer and McConnell (1989) distinguish between the effect of announcing a new bank credit contract and the renewal or cancellation of an existing contract, and the information that banks send to the capital markets is more than the monitoring that takes place in the course of ongoing relationships. I found it to happen. From the borrower screening at the start of the loan.

At a deeper level, Best and Zhang (1993) investigated the information content of bank loan agreements, arguing that bank monitoring and screening is especially valuable when public signals are noisy and corporate outlook deteriorates. I am. They observe that when analysts have a large forecast error in their past corporate earnings, the excess return on the announcement date is important, while when the forecast error is small, the opposite is true. They also say that for companies that have received positive earnings forecast revisions, the excess earnings of the loan announcement is not important, but for companies that have received negative or noisy forecast revisions, the loan announcements are considerable. Observe to generate excess revenue. Slovin et al. (1992) shows that the information value that banks generate through screening and monitoring depends on the size of the company. For larger borrowers with more public information, excess returns on the announcement date will be reduced. Billet etc. (1995) We presume that the announcement of a loan from a quality lender is probably better for better monitoring and is more beneficial to investors than the announcement of a loan from a poorer lender. Finally, Dahiya et al. (2003) shows that the termination of banking by selling loans signals the market with a firm outlook2.

Evidence also shows that bank lending reduces the cost of information associated with access to the equity and securities markets. Companies with established lending relationships do not experience very serious low prices at the time of publication (James and Weir 1990), and existing lending relationships are reflected in lower issuance yield spreads on bond issuance. Reduce the cost of companies seeking access to capital markets (Datta et al. 1999). Drucker and Puri (2005) provide evidence that simultaneous lending relationships are associated with both lower underwriting fees and discounted yield spreads, especially for non-investment-qualified companies. Yasuda (2005) confirms that banking relationships are of particular value to junk bonds and first-time issuers, and Drucker and Puri (2007) show that commercial bank entry reduces underwriting fees and total spreads in equity offerings. We are reporting an estimate that indicates that.

Finally, the available evidence suggests that allowing banks to hold shares in a company could improve efficiency by expanding banking activity into the capital markets. Li and Masulius (2004) found that by holding shares in the company, underwriters could reduce the low price of an IPO at the time of underwriting. They also show that the total spread of the IPO will decrease in the shareholding of the company's underwriters.

In the 2004 treatise

Lee Jong-Kun and I investigated how capital markets support banks (another link) and predicted and tested strong efficiency effects (Bossone and Lee 2004). The production of banking services has studied production efficiency in banking under the so-called "system-scale economy" hypothesis, which is characterized by increasing returns at the scale of the financial system in which it takes place. As we have found, banks operating on systems with larger (deeper, more efficient) capital markets signal more risk absorption and reputation than banks operating on smaller capital markets. The cost of transmission is relatively low 3. Our evidence is that access to larger capital markets reduces banking costs by providing banks with more efficient means of risk management and reputation signaling, thereby providing the finance that banks need for higher production. Showed that you can save capital. Especially:

Larger capital markets help banks improve borrower screening4, monitor investments more efficiently, and show risk attitudes through non- (and perhaps complementary) information on accumulated financial capital. Banks operating on systems with large capital markets have a lower capital-to-asset ratio than banks operating on smaller systems, providing the same reputation signaling effect as comparable protection against financial distress. Achieve.

Larger capital markets allow banks to manage their financial capital with relatively few non-financial resources. Banks may need to mobilize additional (non-financial) resources to manage and protect their financial capital in order to increase production and adjust their financial capital position accordingly.

In large capital markets with higher quality information and greater investor signal extraction capabilities, signals are more efficient and banks need to show a certain level of reputation or risk security. Financial capital can be saved.

Structural and policy implications

The evidence found is consistent with the conclusion that banks and capital markets are interrelated and mutually beneficial. Obviously, the externalities of information that arise from capital markets enhance the competitiveness of only the banks that are best suited to benefit from the efficient use of information, but inevitably for unequipped banks. I will impose a penalty. Similarly, banks investing in more information extraction and risk management capabilities are in high demand for cross-cutting risk sharing services and will expand into growing capital market operations compared to loan and deposit market consolidation. It is possible (Allen and Santomero2001). Dynamically, the development of capital markets will shift banks from activities that could be defeated by competition with non-bank services to activities that leverage complementarily with capital markets (Bossone et).

The presence of strong two-way bank capital market interconnects leads to important policy considerations.

Interconnection enhances the bank's special role as a credit assessor. This role is based on exclusive information that banks extract from borrowers (through lending relationships) in order to maintain the quality of their balance sheets. Therefore, banks should be motivated to strengthen their direct relationship with the borrower and deepen their internal knowledge of the borrower's business. Also, when securitizing a loan, the bank should be required to retain ownership of a significant (uninsured) share of the securitized loan. This forces banks to strengthen their incentives to maximize their information extraction and risk management capabilities and maintain their responsibility for sound credit quality analysis. Allowing the full disposal of a loan in progress weakens the bank's liability, which undermines the bank's signal power and distorts investment decisions.

On their part, investors need to be scrutinized for loans securitized, repackaged and marketed by banks and fully aware of the risks of loan packages. The original "credit message" should not be lost along the market chain. Information about the transparency of loan-structured products and the credit valuation capabilities of banks is critical to investors' ability to read bank signals without distortion. Investors need to perform a thorough credit analysis of structured products and, in some cases, extend it to their original assets to ensure they understand the product structure and its underlying assets. They need to supplement their external credit ratings with their own analysis and have a clear understanding of how rating agencies assign ratings to their products.

Favourable co-evolution of banks and capital markets requires the development of supportive financial infrastructure, including legal, institutional, information, markets, trading rules and technologies. With such developments, investors will have access to a wider range of risk sharing tools, will be attractive and will provide more information on alternative investment options. Reducing information costs and popularizing market valuation services make it easier to finance new companies and ideas. Incentives encourage investors to incorporate a relatively large amount of intangible assets and choose activities that are characterized by higher knowledge strength (Bossone et al. 2003).

By strengthening the role of banks in encouraging and supporting companies to access capital markets, we will be able to provide more information about companies that fall below the radar screens of non-bank investors. It improves the company's external funding requirements and increases growth opportunities. Banks should be allowed to extend their reach beyond traditional business boundaries as long as a sound supervisory and regulatory system is in place. This will allow them to diversify their sources of income and offset rent losses due to competition from non-bank financial intermediaries.

However, systems that are too small to justify the development of efficient domestic capital markets will allow banks and businesses to take advantage of larger system-scale economies and thus gain access to larger financial systems is essential. It allows foreign intermediaries to enter the domestic market, imports financial (and financial infrastructure) services from abroad, links regional economies to regional or international capital market infrastructure, or regional capital market infrastructure. This can be achieved through a variety of channels, including sharing with partners. (Bossone et al. 2001).

Key takeaways:

1. Bank capital acts as a critical cushion in opposition to sudden losses.
2. Bank capital is regularly described in a hierarchy or class that consists of shareholders' fairness, retained earnings, reserves, hybrid fairness products, and subordinated debt.
3. Banks want to preserve a sure quantity of liquid belongings in reaction to hazard-weighted belongings
4. Under Basel III, Tier 1 capital ought to preserve no less than 7% of hazard-weighted belongings
5. It is extra capital due to the fact it's far much less dependable than Tier 1 capital.
6. Tier three capital is tertiary capital. It is there to guard marketplace hazard,

Commodity hazard and overseas foreign money hazard.

7.     With a view to adoption via way of means of the Basel Banking Committee Supervisory framework (BCBS) on capital adequacy that takes into consideration the factors of credit score hazard in diverse kinds of belongings at the stability sheet, as nicely as off-stability sheet organizations and additionally to reinforce the capital base of banks, the Reserve Bank of India determined in April 1992 to introduce a machine of hazard asset ratios for banks (which includes overseas banks) in India as capital adequacy measure.

8.     Incorporating the capital ingredients and the 1996modification to the Capital Agreement to include the Market risk.

9.     First, let's take a look at how banks support the capital markets.

10. At a deeper level, Best and Zhang (1993) investigated the information content of bank loan agreements, arguing that bank monitoring and screening is especially valuable when public signals are noisy and corporate outlook deteriorates.

11. Evidence also shows that bank lending reduces the cost of information associated with access to the equity and securities markets.

12. Larger capital markets help banks improve borrower screening4, monitor

13. investments more efficiently, and show risk attitudes through non- (and perhaps complementary) information on accumulated financial capital

14. The evidence found is consistent with the conclusion that banks and capital markets are interrelated and mutually beneficial.

15. Interconnection enhances the bank's special role as a credit assessor.

16. By strengthening the role of banks in encouraging and supporting companies to access capital markets, we will be able to provide more information about companies that fall below the radar screens of non-bank investors.

Reference:

1. Pathak: Indian Financial Systems Pearson Education
2. NibasaiyaSapna – Indian Financial System – S. Chan