A lease is a contractual arrangement whereby one party (i.e., the owner of an asset) grants the other party the right to use the asset in return for a periodic payment. A lease is essentially the renting of an asset for some specified period. The owner of the assets is called the lessor while the other party that uses the assets is known as the lessee. A lessee can be an individual. a firm or a company interested in the use of the assets without owning it, while the lessor may be the seller, supplier, a finance company or the manufacturer who can finance the purchase of the assets. Under the lease contract, the ownership of the assets remains with the lessor whereas the use of the assets is available to the lessee. In return, the lessee has to pay a fixed periodic amount to the lessor. This periodic payment Continue reading
Business Finance
Business Finance is that business activity which is concerned with the acquisition and conservation of capital funds in meeting financial needs and overall objectives of business enterprises.
The Electronic Clearing Service (ECS) in India
We have discussed about Indian Financial Network (INFINET), a high-tech communication facility established by RBI for the Indian Banking Sector. There can be no better measure of success of the INFINET than the facility for quick funds transfer. The Reserve Bank of India has, over the last few years, developed many new products for the benefit of banks which are all aimed at ultimately improving customer service and systemic efficiency. One of this – the Electronic Clearing Service (ECS) – is aimed at effecting electronically, repetitive credits or debits for a large population of customers spread across a large number of branches of many banks. ECS (Credit Clearing) This is a new method of payment whereby the institutions having to make a large number of payments (such as interest / dividend) can directly deposit the amount into the bank accounts of the share-holders/ depositors/ investors without having to issue paper Continue reading
Functional and Dysfunctional Aspects of Budget System
Like other management control methods, budgets have the potential to help management reach their goal. How useful budgets are, in practice depends on how they are conceived and implemented. It is also important that the, process is clear and acceptable to the people whose activities it controls. Potentially Functional Aspects of Budgets Some of the potentially functional aspects of budgets as follows : Motivation. Budgets can have a positive impact on motivation and morale. Most individuals in an organization desire to achieve things and recognition by groups to which they belong. Budgets can activate these motivational factors by creating common goals and the feeling that everyone is working towards them. Coordination. Budgets make it possible to coordinate the work of the organization. A comprehensive budget is a blueprint of an organization’s plans for the future and the top management can, therefore, use it to together the activities of every unit. Continue reading
Recent Trends in Indian Banking Sector
Today, we are having a fairly well developed banking system with different classes of banks — public sector banks, foreign banks, private sector banks — both old and new generation, regional rural banks and co-operative banks with the Reserve Bank of India as the fountain Head of the system. In the banking field, there has been an unprecedented growth and diversification of banking industry has been so stupendous that it has no parallel in the annals of banking anywhere in the world. During the last 41 years since 1969, tremendous changes have taken place in the banking industry. The banks have shed their traditional functions and have been innovating, improving and coming out with new types of the services to cater to the emerging needs of their customers. Massive branch expansion in the rural and underdeveloped areas, mobilisation of savings and diversification of credit facilities to the either to neglected Continue reading
Co-operative Banks in India
The Co-operative bank has a history of almost 100 years. The Co-operative banks are an important constituent of the Indian Financial System, judging by the role assigned to them, the expectations they are supposed to fulfill, their number, and the number of offices they operate. The co-operative movement originated in the West, but the importance that such banks have assumed in India is rarely paralleled anywhere else in the world. Their role in rural financing continues to be important even today, and their business in the urban areas also has increased phenomenally in recent years mainly due to the sharp increase in the number of co-operative banks. While the co-operative banks in rural areas mainly finance agricultural based activities including farming, cattle, milk, hatchery, personal finance etc. along with some small scale industries and self-employment driven activities, the co-operative banks in urban areas mainly finance various categories of people for Continue reading
Advantages of Swaps
Swaps permits institutions to exchange one flow of payments with another, in addition to hedging income gaps existing in the organizations. Swaps are contractual agreements between two parties who agree to exchange a stream of cash flows for a specified period, known as the “tenor.” These cash flows depend on agreed-upon parameters and the price fluctuations in a specified underlying asset, commodity, or market index. Swap markets emerged to address the increased currency and interest-rate volatility after the collapse of the Bretton Woods fixed exchange rate system. They are known to lessen risk; reduce borrowing costs; and assist in avoiding unnecessary costs arising from changes in the balance sheet. The following advantages can be derived by a systematic use of swap: 1. Borrowing at Lower Cost: Swap facilitates borrowings at lower cost. It works on the principle of the theory of comparative cost as propounded by Ricardo. One borrower exchanges Continue reading