SESSL ON 1

COMMERCIAL BANKING aud RiSK MANAGEMENT

End Te-407. ) wHRL

Paojut ’ 30/. ) wtals loa
Quiz 207. :1 Quiz 3) Raug de
CP+ Caes 10/

Look at a probeuu statuweut aud propose a soleetion

Ly wat a e tte n e a s , at cau be d e e ?

Ruual utrasetuee Developet Fud awd et acgiu

CASE STUDY FORMAT Prob le ad soin

sudus ud Ruidual i c o e valuain, auar Bok Tcueuaroud

ie of He Bautig sysle cu ucia

wedit ottate - 36 laser eOYe Depost- 150 laler coles

e ist is wawagcd by
DE POS1 T L0ANS neglato% sng capital

ilae captal, Ryulatony capejal

capital Adequey Raho Capital wsleisug availabe
(Regd by te rcgulatov) Risk wciglled assels Jo bata

Fcououic dounsde aud

 hionhy Setoy leding

Margual aud nweu farsm

127.

Scuihzation Loa
raA u H
sHaS lave tee loweet dtalt
wa
udig by NB FCs ’ hew do Hey obtaw
wLs
Hile t on Z-dve ’ove to betualu
’welusion o solar pjela u PSL

bsthn ally low wedit otttal

 bautig lueese
kotak Maleinda is He mly oporale to get a
Regul ator doesit
delibeeate ?
Faliee os co-op eeatves b a t î(L, SL
poetd ? ’ Lseeecd depoma,
Hew aee cosccecs

o-opetve laws ’ stati subjet

CAR ioY NBFCs- wot as Seigeut

coueon people - tglr Ety auel

Deposs u bats ae lept by
eaelt
Exit baeces as a

?
WHAT 1S A BANK
tutceediaey, As set
Tyadil'tal det eetceliahn Appxtatls yarsfomer, "specLal

e + oFß- balace steet eouie

Iradihmal t Alon- teeest iuco

No teau dtiehisn od a Mocleeu Baek

>Leevecial 5aclig
Nalasiuhawu Couueille peicalited Bateug
Advautages Jucceased ouupetihn
Deadautagcs R s g NrAs d e to laek of specealicahag

owetey a d Baukepte Code - Matiy cospoYals h a s i e t

ket liabelcy Mislatcli a l Loau Res buctcee cg

ALM ’

As st
TYanstoYmahsns done by Bam
Die Tyautmuatin cowetigiall ned depo rli
to laugc gied loae

) Liquidihy Trae foahon- higlly lliqid as sei wto

liquid iatites
3) leedit Trausfnalin ’towehg kAA iatud alilte
wto Res ky assa wi gves teu ueer wasgun

)Miuie Trasacm cost

Bauis betwet b y sa d slls
saen coti, Nyo hahm osa aud Eutreeut
2) Traefooah Seevice
ies iuiiry. DivesiSeabmaud edit
hastonabsn
s) solwe toahsn Proble oAt c detegatd ioitos fr te so
ciet
kguey probleu, Delugatd wuoitong. Role as
4) Caparatve Adu. A weoutog citomabn povide
b Bakgvg Loas
stugle teeoia poviding all fn sevis t
9) Advee seleesaa Probley
Baut wowtoiwg eutipatu te watt ttat teu ie
6) iquidity useaue beh v ebicieut
wiguid ass iqeid Liabilites- - - - Liqliiy stocta
Feccetns
) egulatuny
Transussim o ueonetay pouey, Cred't allocaion

pecegulatun o icteest alu

SESS ION- 2

PSL ’ Dieectcd u d i t

Push based vs Pee b s d deuaud for fuaucial suivicu

Rlseves
rokl Deposts: /80 4 4 la Y
Dtfeue de to captal luguidy
Totel ccdcl: 136. 5 Lakh

DiNeesipahn aud seuihzahon

woe
have o e loas iuto yeu potfoio, iordes to
c9: yo
tie
o t i ote loars but tiis tates
lwusity you ce lud
hoe loas Hogh seeihzahn
Joe a sell t yoe

cociety's saviugs
EcOLuic gouth
weoeitoy sk tateu
looled aud Reglatec to
Hig ya d orit bauiu
oDeevate cis eeta,
LetlY
Mulual heds eti
Nou- utst eOee' nsuMce,

we lewecsityiug by qetlug eto otter baeecsscs

Basks
as wee
Bauhs play a gulatoy fuuuclion
REVIVING EcONOMY

uteest ratu - oe ding

fupg ouey - lowng

ceapfudlug turough cetfate of dep0sls - wold ecooy

s t ldadit eeoveeed

ueceetal cash neaewe ntio-lis weey goes bat o RBI

Move to neduce tiqtti ttahion
7 Huis attets t e gowth ratu but gevt is ss cocceened wcth it
ueretly d e to eleetves

INDIA ALL BANKS ROSS NPA TO Ga ROSS ADVANCES

up act of i CRR Gn a particlar bauk/mB Fe

o Speialied baute to ueineial Bats

Rsug NPAs dde to Pocihcal ss s
9 caung up of bats i a015 Aset Quality Rweeo so lvecey
aud bautupty code : elped puslh aege- hctet NPA caies to

Lo led to orgauisahsns de -levecing

HAIRCUuT: He IBc woking

Bod bank
BANK 0ALS AND CONSTRBINTS

Tuug o casth flow

Masiuiu teAeholduy
Weat

cceit uteet Liquucluty opeeehnal captal

Rrsk Ralis

Matet opehh an
gocial uga/Ragulatoy
Reduces saeholdu
Doubee- cdged swOYd weath. Rucal lencling
to syskcie
righcouputihn- Proue
Yisks
Low copehhn - High
rala
iHiglhur IRR Pr your projets to be psoftalte
sociery
cest frr vaiablety of profr
uteet Yati risk ha al g e paut on He
teluiological ris k as wcll
tpeatOnel nst ieluces

caputal iu youe last nebt

ysguals evel of copethan

steady fatl e HH1 uden to duposis aud advauces

udicets shady upsoveueut u

KISK
 Coercial
Baks

Pulie tto Bant Piwat Set Bats

Fust Baut of wdia

Deeeeted uedib Psogu- PsL ndig "Rasioist Po iciu

wecasig wwestor coutide- 1949 Bauk
Major
Refoms
Poobiu: Bats weee
oly aud wot coueon peope: eediug/cattrug to te
coprate heus
Nationalizahm ot Baks - 1980s pooY psoau ce of bants

cRR+ SLR’55/.
ucoey lett fo levdig culy 57.
Hugln Fis cal Dejiita Staguat grouth
Hiua 8wt Rat
Bad stuahan by l7t0
Neeasinellau coweittee epot
opeuig up ceowmy
bveal degee ot fiaueial repsson
CRR, SLR. PSL, legee of fuedom ud
ndepedeuce
BANKI NG sECTOR RE FoRMs
POS7-1497
Stateea!y Pe-eeiphon EAuby aed Esit
tect Ral
Coudins
coLsollatiin ad sheuyig Toces cn Pyodi cbthy
Ran'naliu Psl
 loans iu total wporat seeto bomuty
o baut
" le oluing laee
og A e
toward touee copoYate seeloo bar
"Jle slitt
Oeescial pape w e t
eeyae
ewtiug buses ses to uan ce
" Hue loss of copoyate g o yto
stau os pcsal Hitoy 8CNngS feous
e deliewg
bauku lue o
waetet
speetacelau goutt of weoney
-’ le speetata

to adhomal batng wateta

e y ot NB FCs
e
Fuau e, udiablls
hee e e g c e of a wew set oz NBFCs ( Bajay
.
 SESSION-3 (cBRM)

Pg 13-24 : Awatouuy a bauk failue

Reteu m As selk awd Retueu n Equihy

d015 2014

SB1 RoA O 44 663

689 102 92
RoG

64
134
1C1C1 ROA 1334
13-S9
RoE

yes Baut RoA |53

ROE

5-9) 5:78
ROA 5.98
RIL
1115
RoE 1|.41

1967 19-33
dl69
utoys ROA
2 53
ROE

RoAs ae geerally louer for swvices

Fo baks to b i da e s tey do st hoe to raiae capital

Caaa Bat Mnal Repot

Assets - L Lake aos

Regulatd apital P9 d9 8/3 56

Moty uteeat e stotes teew have otter Sulidiale
wty does it coe d lialieiries ?

Depo setb’6-2L cioes Loas

couweslon o
dposla to oa s u wot
oensura du to
Tie i udTur I capital
eqieula.
cah ard Balaces wtto RB1 + Balauces

ceutugeut lialilitie
tt- baaceslet atiwte aud 008 ces is
Je ris k brouut iud e to OBS aetvtis
Lcoig eder
egulaty seuty
epey asd aptal for wwetunla tat yee wiake
 LHS Tate
n Pg24
JAU
ALMs yoage au dftiuet
to wuoe t
tuis Lower wldbeliabilites Latueities
f RAgler
CA,
cASA ugler dwe weld Baute
Lawe expede
is clees Yato, CASA hyle have yee B
Aceot Greut
sit dupoDeawd aud Dposit Twe
sa Dep0 Sedule
3- 30|-
ceeueiiis weatetabte westuena
cie
bat tee os
mist te oß
cae 1ats Rsve- alaion Rew
Revetranslaton cwreey FoRig
te Proft
fr
x5
ja) wet eeve Res Shyea (last Reseve capital
Reseeve
statuatoy keguaiors
Act Batug lC) anseeh
aud capital || lg
tus to
de doue priations
ae Appro
ity afteuting Ps8s luglur
for bieeally enpeaes op
0o 3Pg: vs.
Bauts alud ewes TYaolitimal
Devecifahon
of ativilu> oHer eoe fo s.buk
hewwelicals cicowe wteest wn- Hgter
esaliud
yeuY
iucoe ott aelead teat
 Axs hus CASA 54, BoB hAs 29

Bake epelle lits y ALM due to tuicle Hey o l a paefer to keep a

stigltly liiglur CASA Yatio.
PSBS hawe llighs CASA
coyaed to put seetor bate.
6 you have higlly liquuid
liallites Heie aveage ueateitus wold
be
leueywetteawals ale
higheyNisatclees iu cash uflos
a d outfeows Dfficect to wwauage weisatchee
Naaguy lost teeeu liquidiy uisateles tuogl ulte bavt

CRR, SLR 3o2,303 Mauey at call’lday caeity

SNohce>l< /4
geveend secwulis
’4Lceoee (Pri0rity seetox lediug)
Du Pout talyis ot Cauara Bak aud HOFC Bak

die ROA Profit Mag

wty H ditfeuce ukoE
Asset Tuerser
de to Leveeag
A/E
2etitatin ans oFt batauceleet Activetes
 SESSI ON -5

KEY PLAY GRS IN THE SECuRI7I2A7I ON PROCESS

wtat is Hhe inovaion u tep s s t secelizabn?

s e ewel oh Hiuk
He
s e . Fidiugcwes tos with
He
i p a t on iik
beeoes diticuet. sLeeib zatio aud

wthat cou a e e ceyaies do

ou cacot wwet wto s y as sels

Diffueclialid poduclt
with vayig levees of xsk
oe ellalte
is coweeisn eacle He D D t

e a dfr ueauagi He as set ceato

SPEC1AL PURPoSE VEH1cLE
aucl c f l ws
ou ued to at t e cahe t flous

cleaper ateeuae
ancat
200
le causs anl EBsets oh Re Fin ceis
elctleveagectues good dals
coe bulte ceap

t- Risr
vestuet B a t l S a t e -
Risiu eosi g Pnces "AAABBB
obeigah) C d t Defalt suap
ColLatealied Deet Sb- PeceLe
/ DocLeetsa d Poof
No d o np a y e t Detauia
nsale ’ExcssveSfply-No.ce
Hoel s c
wot
geueealley, they Laline Hain locse is alo
e qeig don
ctaet woiLding wtey ey ane payig eh high
Leh Les so ttey teet to
hereh lesseY’oivas
0tgags fy cu leose uot
oletelt as ttell
 EX
AMP

toldis bauke aecotabe foy

o -balauesheet atwes -
capital equieela
seitization by MF1s. Loans
upaut of He ww seeeihatinguidliue& by RB1
-’ Loaus wiH wateity o < 365 day& cauot b sececeeheead
> DelLe to help bate
’ Maclet weelais ubËct to deaud
taw:‘deaud Tpnce
DUet Assigeut Sall ’tomaloh Assmy
Bticial for bads as tey cau egotiate tte t Price
eew iç enpot wade casy by tue boatigsyl ?
ADVANIAGES oF SLCs

wts ot ceedit een a fee for pvidig tee

sevie (os - / ot e
a e o e t od cedit ievoed)

REASON POR aROwTH OF SLCS

SOcL Rt ES OF RISK wTH SLCs

REDUcINn R!SK E XPos URE

 M T W TF S
Page No.:

Date:

ExAMPLE

AdNautgs od seceeehaho

Retion o suvLcLg ewees

" lowey t i u i g costs

Heguied uprtal
Reteiisn
of coptetive advatage

eLLove asseca ho tue balace t e t ?

twy stould yeu

yo lialiies
you dlout heve to iLceasl

weg
atueies aud ettet n het c t e s t
Detieig

" P a p a y e t Risk

is cs o 2004-09 steoLULd teat tte bLdcplcy

. cdit
qet ccLto bDelee te
Heute" sPE awLawGLeLeelts cau
wae lyung Lous go
bad
captal eqceeeeceLls
May cot edece a baks

ppose ectitces
EHt of ccan of spuial
affeet Hee bcuk
(i doClect cUo)k
’ 2008 is s stowd ttLet bateLteyeeleo
celLclI
’ y t e i e ia k wcs c c e a l t as a ceieLt oh

’ l e csk yoe cceali coLeLes boct o belt ysu

 M

Page No.
Date:

0 Pautecapatun oas etee au eutivcle pauy pececlau a

( Ass r e l s

Loa Sbips

RLass Beliud Loau Sals

@tway to id Hee bank o low er-yeleig asseCs to
wlate soOLt
way to icease watetalty

inauial s et
b Huat eulaucs He cett
staictg
borrby prtvidg
Date

Page
No.: M T W TF S
M
Page No.

Date.

ledt stacclaiols to SLCs

’Baecks lcLicst appy He saue
Sessin-6

Keyu ato y concns o t sLCs

- Bakenaieu e wortiug tok p Msk eposee wwley

’ Bats meit apply He saue ceedit ctaLcoluclo to

SL Cs cs foy loas

Barts ceet c o t SLCs as l o a i wteu assess iig

ke o c e u to a sigle ceuitoeer
Bats wet post a p t l belid Lost sLCs

CREDIT DERI VATIVES

(cdet Suucps

loau pymens
 vaial Ras

BANK DE BII

FLud Rale

BANK CREDIT

CREDIT OPII 0NS : Gtuad agaut L0saLIS u tte valle t a ce dit

asst y helps to ottsetgler boLg cot tat way occee

e to clauges ucedit ahngs

Bauk, Hitt Ophan Deale

ieteeceliiy
(beueticcaey (gualatoy)

CRED1 TOEFAuLT SWA PS

Aued at endus abte to avdle copaatvely lmetct

Ldclines n vale, et vatg uwLeTaee agst
Seios losss
+lu tLis case a l iayseek o t a lealer cwcllg to
weli a pet opbon
ASSET LIAB1L1Ty MANA bn EMENT

yaus to matwity
icld cwwes
y ais - ield

a l 3 yas te yeld is wceasig tth ueeasng

matuites

tit s te upleahn ttus on banus?

Avg watuity fox liabilitie ae genenlly mch lorte
Hran tte atrage m a i r i s tor

G u ttegenal case ceaio, tee iwteeet eaee

u d be lirer tan uteest epesed
eis is wthat waks tte bauk pDitate
t e s t Re wesion
10-19 spead hould ideally be positve, wten His

iuce 2000. all e sSons have beeu pceticlid coectty

iH) is

Jecvceted ylld cevvs caue be easly fexd e a ceek otLen

ttuat is po licy eet colcee Lrr

gcidalce

feccd ra
eittLd cerve qeicy c«cgh by Cullg t e
uwe is wot wtat p d c s , rater, de-wsisy.

Dittee n boud yals Abitage

we g o v e t
bcud yild uwe as uawed at for Hee

past few wceks, wtti Hue fo aud feve yeot yields at aDwd 1257.
aud te io yes beileak bod yild at 7 23 '/.
Reftecls wwcetan ty over the nuentaey po licy c t look a d
liquidety coudibos
7-16'/. Gs a033 = 7-2 3/.

2 3

723 78

/02/8

DLF : 667 54 6 24 t 682 + 5:4 2 + 5-06+ 4 72 + 4 40 + 4 )0t 3. 8 2 + 532y

Meetet sulig Pne: 99 6971

H Hu boud is seeling at Rs ?? 57 eu tue yield u 2.22/

wtu you haue a sel- ots os slost- e paes
sppy wceeaes ’ Pricee fal > yield for stot- teu pape

ceeider a F! ttat iss e IN R100 a s d iailites od c e yeae eatan

with awg uteeut raliu of s/. o fiu aee tte pueclase od
INR !Db Lars o assels wit a huD yeae wwatuety wty

avg i t e u t r a s ot 8'l what woud happeu to NII He

uteet i e e a u by l'?
2

IEn 5L 6L

1Er

3L 2L

1En 5L 5L

NII 32 4L

t e t rati isk ?

Macegucg cletches
 ASset Mauagemet stratuges
oey aseti, uo couol oves liallitus
-’ lohol

PLiciliy Maagmeet Shatgy

c l a g ieg ralis aud
cobol oves liallLies by
o He ten

F l s Maageet satugy
|*
’Woks uth both shaligeu

eteet
Reveee
A
agig
tuaucial Juteeest
lost&
iu hhhit
Meapons to Matt Value
lagig
atet
iteeeet
Yaliu
I n t tRat Resk

teet a d p
pat bo H tte balauce
uaugwg iutelst nales
epess oz tinaueial fues
t a t i u t d icoue aud
Prrice Risk
eaket vale t He
alis tese, Hee
- whu i t e e t

boud asset falls

Reiw a t n t Rsk

tue copsn rali m tte

wen i t e t ais fall
Hals
evested at l o r
boud a

yTM

Bod 1

2
Bod 2

Vb, ( Pv (T4, 16, (o0,o, -/|3- 42 -124 44

-/03 57 -lo7: 33
Vb 2

ciagt lie casl o boud 1 > boud 2

Secsitivi hy to cleage ie iet eest 1all is higle foy lI bons

His s browgtt uc e

t you waut to Hecluee yoer utecst atu risk, you ehoet

west sT bonds bet Heee He Menves t n e t iak warl
be higtr.