Know Your Customer (KYC) It is important, in these days of drugs smuggling, terrorism, financial fraud, money laundering and arms dealing that banks know whom their customers are. Banks must be comfortable with the bona fides and the integrity of their customers. The need increases as external people like general selling agents introduce a number of customers. Apart from this, in order to develop a long- term relationship, it is an imperative that the banker knows as much as possible about his customer. What does KYC mean? It means that a banker should know his customers. He should know about their business and as far as possible the nature of their earnings and their moral standing. This is why it is recommended that persons known to the bank recommend prospective customers. Even though the introducers cannot be sued or otherwise held responsible, the introducers have a moral responsibility. A banker 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.
Universal Banking – Concept, Meaning, Advantages and Limitations
Universal Banking includes not only services related to savings and loans but also investments. However in practice the term ‘universal banks’ refers to those banks that offer a wide range of financial services, beyond commercial banking and investment banking, insurance etc. Universal banking is a combination of commercial banking, investment banking and various other activities including insurance. According to Cheang (2004), the universal bank can be defined as “the banking system in which the bank offer the whole variety of financial products and services.” He also states that it combines both investment banking and commercial banking, for example, lending and taking a deposit, selling insurance, issuing underwriting, investing and trading in securities. To me therefore, the universal bank refers to the banking system which operates completely financial services like a supermarket. It is a multipurpose and multi-functional financial supermarket providing both ‘Banking and Financial Services’ through a single window. As Continue reading
Indian Financial Network (INFINET) and It’s Impact on Indian Banking System
It had been widely felt earlier that one of the biggest bottlenecks in the banking system in the country was the lack of a system that ensures fast, safe and secure intra-bank and inter-bank communication. In fact, this deficiency had been hampering to a large extent the development of a modern, integrated payment system in the nineties. Most of the cases of complaint against banks, in those days related to the time taken for transfer of funds across banks and between cities and to the delays in the collection of outstation cheques. Clearly, the non-availability of a reliable communication backbone had been one of the main contributors to this state of affairs. The functioning of the terrestrial line networks was hardly optimal in terms of efficiency, although of late, there has been some change in this area for the better. But, the wide geographical spread of branches of banks and Continue reading
Process Costing – Definition, Steps and Charactristics
In accounting, process costing is a method of assigning production costs to units of output. In process costing systems, production costs are not traced to individual units of output. Costs are assigned first to production departments and then to units of output as they move through the departments. The process costing method is typically used for processes that produce large quantities of homogeneous products. The process costing method is in contrast to other costing methods, such as product costing, job costing, or operation costing systems. Using the process costing method is optimal under certain conditions. If the output products are homogeneous, that is, the units of output are relatively indistinguishable from one another, it may be beneficial to use process costing. If the output products are of low value, meaning each individual unit of output is not worth much, it may be beneficial to use process costing. And if it Continue reading
What is Seed Capital?
Seed capital means the initial capital used to start a business. Seed capital often comes from the company founders’ personal assets or from friends and family. The amount of money is usually relatively small because the business is still in the idea or conceptual stage. Such a venture is generally at a pre-revenue stage and seed capital is needed for research & development, to cover initial operating expenses until a product or service can start generating revenue, and to attract the attention of venture capitalists. Seed capital is needed to get most businesses off the ground. It is considered a high-risk investment, but one that can reap major rewards if the company becomes a growth enterprise. This type of funding is often obtained in exchange for an equity stake in the enterprise, although with less formal contractual overhead than standard equity financing. Banks and venture capital investors view seed capital Continue reading
Bank – Meaning, Characteristics and Functions
A bank is financial institution, which deals with money and credit. Bank accepts deposits from the public and mobilizes the fund to productive sectors. Bank also provides remittance facility to transfer money from one place to another. Generally, bank accepts deposits from business institutions and individuals, which is mobilized into productive sectors mainly business and consumer lending. So bank is also called a dealer of money. At present context, a bank may engaged in different types of functions such as remittance, exchange currency, joint venture, underwriting, bank guarantee, discounting bills etc. The modern bank refers to an institution having the following characteristics: Bank deals with money: it accepts deposits and advances loans. Bank also deals with credit: it has the ability to create credit by expanding its liabilities. Bank is commercial institution: it aims at earning profit. Banks are the principal source of credit for millions of individuals and families and Continue reading