The debt collection policy (recovery policy) of the bank is built around dignity and respect to customers. The Bank will not follow policies that are unduly coercive in recovery of dues from borrowers. The policy is built on courtesy, fair treatment and persuasion. The bank believes in following fair practices with regard to recovery of dues from borrowers and taking possession of security (properties / assets charged to the bank as primary or collateral security) (known as security repossession) and thereby fostering customer confidence and long-term relationship. The repayment schedule for any loan sanctioned by the Bank will be fixed taking into account the repaying capacity and cash flow pattern of the borrower. The bank will explain to the customer upfront the method of calculation of interest and how the Equated Monthly Installments (EMI) or payments through any other mode of repayment will Continue reading
Bank Management
Innovations in Customer Services in Banking Sector
Satisfied customers are the best guarantee for the stability and growth. Customers will be satisfied only when the banks provide the customized and innovative products and services at responsible cost. This article focuses on the kind of services provided by developed countries and level of innovative services provided by Indian banks. Many innovative services are currently available from Indian banks like E-Banking, ATMs, Anywhere Banking etc., but there is a vast scope of improvement. Globalization, the buzzword, which engulfed all the nations of the world since the beginning of the last decade of the past millennium, did not leave the banking industry untouched. The opening of the world trade has brought out several changes in the global banking map. The continuing evolution of the banking and financial market has created opportunities both for providers and for users of financial products and this evolution have proven beneficial to the economy. However, Continue reading
How Public Key Infrastructure (PKI) Works?
It is necessary to understand some of the basics of encryption, digital certificates, and digital signatures before examining the components of a Public Key Infrastructure (PKI). Encryption Overview “Encryption” is the term used to describe the process of taking legible data, and scrambling it into a form that is non-intelligible to anyone who doesn’t know how to unscramble (or “decrypt”) it again. Encryption processes usually involve a method for encrypting the data and one or more “keys”. The keys are usually a very long number and are used during the encryption or decryption process. In most cases, the method (or “algorithm”) that is used by an application to encrypt data is common knowledge and the key that is used is kept private. There are two main types of encryption – “symmetric encryption” (the same encryption key is used for encryption and decryption), and “asymmetric encryption” (different keys are used for Continue reading
Liquidity Risk Management in Banks
While introducing the concept of Asset-Liability Management (ALM), it has been mentioned that the object of any ALM policy is twofold — ensuring profitability and liquidity. Working towards this end, the bank generally maintains profitability/spreads by borrowing short (lower costs) and lending long (higher yields). Though this process of price matching can be done well within the risk/exposure levels set for rate fluctuations it may, however, place the bank in a potentially illiquid position. Efficient matching of prices to manage the interest rate risk does not suffice to meet the ALM objective. Price matching should be coupled with proper maturity matching. The inter-linkage between the interest rate risk and the liquidity of the firm highlights the need for maturity matching. The underlying implication of this inter-linkage is that rate fluctuations may lead to defaults severely affecting the asset-liability position. Further in a highly volatile situation it may lead to liquidity Continue reading
Different Modes of Granting Loans by Commercial Banks
The basic function of a commercial bank is to make loans and advances out of the money which is received from the public by way of deposits. The loans are particularly granted to businessmen and members of the public against personal security, gold and silver and other movable and immovable assets. Such loans and advances are given to members of the public and to the business community at a higher rate of interest than allowed by banks on various deposit accounts. The rate of interest charged on loans and advances varies depending upon the purpose, period and the mode of repayment. The difference between the rates of interest allowed on deposits and the rate charged on the loans is the main source of a commercial banks income. A loan is granted for a specific time period. Generally, commercial banks grant short-term loans. But term loans, that is, loan for more Continue reading
Recommendations of Narasimham Committee Report (1991)
The Narasimham committee (1991) assumed that the financial resources of the commercial banks from the general public and were by the banks in trust and that the bank funds were to be deployed for maximum benefit of the depositors. This assumption automatically implied that even the government had no business to endanger the solvency, health and efficiency of the nationalized banks under the pretext of using banks funds for social banking, poverty eradication, etc. Accordingly, the Narasimham committee aimed at achieving three major changes in the banking sector in India; Ensuring a degree of operational flexibility. Internal autonomy for the banks in their decision making process. Greater degree of professionalism in banking operations. Towards this end, recommendations of Narasimham committee covered such subjects as directed investments, directed credit programmes, structural of rate of interest, structural reorganization of the Indian banking system, and organization, methods and procedures of banks in India. Continue reading