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ASSIGNMENT
Course Code : MS-422
Course Title : Bank Financial
Management
1. Discuss the importance
of financial analysis in a Bank and the techniques that are used for doing such
analysis.
Answer : Importance
of financial analysis in a Bank
Financial statements for banks
present a different analytical problem than statements for manufacturing and
service companies. As a result, analysis of a bank's financial statements
requires a distinct approach that recognizes a bank's unique risks.
Banks take deposits from savers
and pay interest on some of these accounts. They pass these funds on to
borrowers and receive interest on the loans. Their profits are derived from the
spread between the rate they pay for funds and the rate they receive from
borrowers. This ability to pool deposits from many sources that can be lent to
many
Q.2. What are the different sources from
which banks borrow funds? Discuss in detail the Scheme of Rediscounting Bills
of Exchange introduced by RBI.
Answer : Banks are just like other businesses. Their product just
happens to be money. Other businesses sell widgets or services; banks sell
money -- in the form of loans, certificates of deposit (CDs) and other
financial products. They make money on the interest they charge on loans
because that interest is higher than the interest they pay on depositors'
accounts.
The interest rate a bank charges its borrowers
Q.3. Explain the characteristics of different
Money Market instruments and the reasons why these instruments are preferred by
Banks.
Answer : Money market
instruments channel money from investors to borrowers who need money. For an
investment to qualify as a money market instrument, lenders must be able to get
their money back in a year or less. Choosing among short-term securities issued
by banks, companies or governments, investors make their purchases through
brokers, at auction or from other institutions. The different types of money
market instruments share basic characteristics, but they also have important
differences.
Characteristics of Money
Market Instruments
Variety
Q.4. “The Department of Banking Operations
and Development, Reserve Bank of India, has outlined the Building Blocks of
Credit Risk Management in its Guidance Note on credit risk management”. Discuss
each of these blocks in detail. Write a brief note on its implementation in a bank
of your choice.
Answer : WHAT IS CREDIT RISK?
“Probability of loss from a credit transaction “is the plain vanilla
definition of credit risk. According to the Basel Committee, “Credit Risk is
most simply defined as the potential that a borrower or counter-party will fail
to meet its obligations in accordance with agreed terms”.
The Reserve Bank of India (RBI) has defined credit risk as “the
probability of losses associated with diminution in the credit quality of
borrowers or counter-parties”. Though credit risk is closely related with the
business of lending (that is BANKS) its Infect applicable to all activities of
where credit is involved (for example, manufactures /traders
Q.5. Select any case study on mergers of
financial institution and discuss it in details.
Answer : Mergers &
Acquisitions: Financial Institutions
In today’s regulatory environment, many institutions are evaluating
strategic alternatives which include varying approaches to increase shareholder
value. Difficult decisions must be made as to whether remaining independent and
implementing an acquisition strategy to expand current operations is best for
shareholders -- or selling to another financial institution represents the
better value proposition.
Dear
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