Bank Career Hierarchy

PROBATION- Probationary Officer.
SCALE 1-        Assistant Manager.
SCALE 2-        Manager.
SCALE 3-        Senior Manager.
SCALE 4-        Chief Manager.
SCALE 5-        Assistant General Manager.
SCALE 6-        Deputy General Manager.
SCALE 7-        General Manager.
                         Chief Financial Officer.
                         Chief Executive Officer.

PROMOTION PROSPECTS

• Normally, first 2 years is the probation period. 
• After that he/she becomes Assistant Manager-Scale 1. 
• Thereafter promotion takes place every 5 years till Scale 3. However Fast Track promotions are also possible if he/she passes the JAIIB and then CAIIB exams.
• After Scale 3, promotions are based on MERIT.
• After Scale 7 your posting is decided by the Central Government and not your bank. You will be posted to some other bank as CFO and CEO by the Central Government.

JAIIB AND CAIIB EXAMS

 These are exams conducted by Indian Institute of Banking and Finance. The Syllabus, Rules and Eligibility for the exams are given on the link below.

JAIIB- http://www.iibf.org.in/documents/RulesSyllabus/2014/JAIIB.pdf

CAIIB- http://www.iibf.org.in/documents/RulesSyllabus/2014/CAIIB.pdf

FOR OTHER COURSES VISIT: http://www.iibf.org.in/scripts/archives_exam_schedule.asp

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Micro ATM's

• RBI has allowed banks to engage intermediaries, i.e. Business Correspondents (BC) to carry out specified financial transactions through public call office operators.
• The intermediaries would be provided mobile phone and fingerprint readers and would act as a Micro ATM to withdraw/deposit money across the country.
• Aadhar could emerge as a payment card linked to a savings account where government credits would be credited to the accounts directly.
• This enables banks to have immediate access to many more potential customers at the bottom  of the pyramid through Branchless Banking.
  But it requires substantial investment in technology.

Micro ATM's primarily performs following functions:

1. Cash Withdrawal.
2. Cash Deposit.
3. Balance Inquiry.
4. Remittances.

Advantages of Micro ATM's

1. Brings down the cost of cash management for banks.
2. Supports physical cash transactions at the local level.
3. Substantially reduce the risk to the bank. 

Suggested Column: http://www.thehindubusinessline.com/industry-and-economy/handouts/article4569777.ece

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Role of Aadhar in Banking System

• Unique Identification Authority of India (UIDAI) established by the Government of India is implementing the Aadhar scheme.
• Its objective is to implement Multipurpose National Identification Card or Unique Identification Card (UID Card)
• Head, Shri. Vijay S Madan (as on April 2014).
• Budget Rs 3,000 Crore.
• Objective to cover 60 Crore residents by 2014.
• Unique 12 digit number for every resident of India.
• Aadhar is used to prove identity not citizenship.
• Large number of residents, who currently don't have any identity documents and are therefore excluded from beneficiary list can also get an identity.

 Aadhar Enabled Payment System (AePS)

• Indian payment system developed by National Payment Corporation of India (NPCI) based on unique identification number. 
• The system allows an Aadhar holder to carry out financial transactions on a micro ATM provided by banking correspondence.
• Public Sector Banks already started entering MOU with UIDAI to act as Registrars for AADHAR project.
• Major constrains faced by the banks while opening of account is the absence of valid identity and address proof of the prospective customers.
• Aadhar number may be treated as substitute for KYC compliance which enables the banks to open accounts with a greater speed and accuracy.

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Regional Rural Banks (RRB's)

Main purpose of RRB's is to mobilize financial resources from rural/ semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural laborers and rural artisans.

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Forward Contract

A forward Contract is an agreement between two parties to exchange at some fixed future date a given quantity of a commodity for a price defined today. That price is known as Forward price.

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Commodity Markets

Markets where raw or primary products are exchanged. These items are traded on regulated commodities exchanges in which they are bought and sold in standardized contracts.

eg: Food, metals, currency, etc.

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Investment Banking

Investment Banks raise funds for businesses and some governments by registering and issuing debt or equity and selling it on a market.

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Merchant Banking

Merchant Banking is the combination of Banking and Consultancy Services  for a fee. It helps the clients by way of, raising finance, acting as broker for issue of securities and for mergers and acquisition, project management, etc.

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Hedging

It is reducing or controlling risk. This is done by taking a position in the futures market which is opposite to the one in the physical market with the objective of reducing a limited risk associated with price change.

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Body Language

NOTE: Mostly in BANK Interviews the interviewer doesn't offer a hand shake. It's better to give a hand shake only when offered by the interviewer.

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Insurance Regulatory and Development Authority (IRDA)

• IRDA is the controlling and regulatory apex body in the country for insurance sector.
• Head Quarters, Hyderabad.

Functions of IRDA

1. Registration of insurance companies.
2. Licensing of insurance intermediaries such as agents.
3. Monitoring all products including pricing of products, terms and conditions etc.
4. Supervision of functioning of the companies and intermediaries.

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Securities and Exchange Board of India (SEBI)

• Chairman, U.K.Sinha (as on April 2014). (Disclaimer: Subject to change.)
• It is an Apex body to develop and regulate the stock market in India (Capital Market Regulator).
• Objective is to protect the interest of investors so that there is a steady flow of savings into the capital market.

Functions of SEBI:

1. Regulation of stock exchanges and intermediaries to stock exchanges like stock brokers, merchant bankers etc including their registration.
2. Prohibition of fraudulent and unfair trade practices relating to securities market.
3. Prohibition of insider trading.
4. Promoting investor education.
5. Training of intermediaries.
6. Conducting research and publishing information useful to all market participants.

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Rural Infrastructure Development Fund (RIDF)

• Set up by Govt of India in 1995-96 for financing ongoing rural infrastructure projects.
• Fund maintained by NABARD.
• Domestic commercial banks contribute to the Fund to the extent of their shortfall in stipulated priority sector lending to agriculture.
• The main objective of the Fund is to provide loans to state Government's and state owned corporations to enable them to complete ongoing rural infrastructure projects.

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National Bank for Agriculture and Rural Development (NABARD)

• Recommended by committee under the chairmanship of Shri B.Sivaraman, former member of planning commission.
• The Parliament through its ACT of 1981, approved the setting up of NABARD.
• Established in the year 1982.
• NABARD was established primarily for providing institutional credit for agriculture and rural development.
• NABARD is a Refinance Institution.
• Chairman(as on April 2014): Dr. Harsh Kumar Bhanwala.

  

Roles and Functions of NABARD. 

1. Credit Functions

Providing credit and refinancing facility to RRB's and Co-Operative Bank's.

2. Development and Promotional Functions

3. Supervisory Functions

Undertakes inspection of Regional Rural Banks (RRBs) and Cooperative Bank's under the provisions of Banking Regulation Act, 1949.

4. Role in Training

The Bank provides training facilities for the Rural Financial Institutions (RIF) and agencies involved in rural development through BIRD, Bankers Institute of Rural Development.

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How do banks help in the economic development of a country?

• Banks mobilize the small savings of the public and make them available for productive purposes.
• Banks provide convenient means of transfer of funds from one place to another.
• Banks also act as a mediator between exporters and importers by way of letter of credit and bank guarantee.
• Banks give preference to priority sector lending which leads to equitable and productive use of funds.
• Banks provide funds for huge infrastructure projects by way of consortium lending.

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What is the most important element for a Bank to survive?

Trust is the most important element for a bank to survive. People will keep money with the bank only when they believe that it will give back the money on demand in case of savings or current account or on the date of maturity in the case of fixed/term deposit. They believe that their money is in safe custody with the bank and will not loose value on the course.

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Pledge, Hypothecation, Mortgage

	Pledge	Hypothecation	Mortgage
Type of Security	Movable	Movable	Immovable
Possession of Security	Remains with the lender.	Remains with the Borrower.	Remains with the Borrower.
Examples	Gold Loan, Advance against NSC’s(National Savings Certificate), Advance against goods.	Vehicle Loans, Advance against stock.	Housing Loan.

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Banking Regulation Act, 1949

The Banking Companies Act, presently known as Banking Regulation Act was enacted owing to safeguard the interest of depositors, control abuse of power by some bank personnel controlling the banks in particular and to the interest of Indian economy in general.

Reference: https://www.nabard.org/pdf/India_Banking_BankingRegulationAct1949.pdf

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Mutual Funds

Mutual Funds are professionally managed vehicles of collective investment that pool the savings of many investors for investment in securities and the profits are shared equally among its participants in proportion to their holdings.

The fund manager collects money from the members and invests them in diversified portfolio of financial assets with a view to reducing risk and maximizing income for distribution to its members.

The Mutual Funds usually invest their funds in equities, bonds, debentures, call money etc. depending on the objectives and team of scheme.

Selection of Mutual Funds depends on-

1. When did you want returns.
2. How much of risk you can take.

NO RISK
Invest in Government Securities which gives you Guaranteed Returns.

WILLING TO TAKE RISK
Invest in shares, Real Estate etc.

WANT LIQUIDITY
Invest in Gold.

•  Mutual Fund is a tax saving instrument.

Net Asset Value (NAV)

The NAV of a scheme is a number which basically represents the value in rupees per fund units as on a particular date.

NAV= (Realizable value of all assets- Liabilities and outstanding expenses) /Number of Fund Units

• NAV keeps on changing with the changes in the market rates of equity and bond markets.
• Mutual Funds makes more profit when NAV increases.
• When NAV comes down customers purchase more units and sells it when the market recovers and NAV goes up.

Classification of Mutual Funds

A) According to the type of investment

1. Open Ended Schemes

• There is no specific date when the scheme will be closed.
• Allowed to issue and redeem units any time during the life of the scheme.

2. Closed Ended Schemes

•  There is a closing date when finally the scheme will be winded up.
• At the end of the term, the corpus is dis-invested and proceeds distributed to the various unit holders in proportion to their holdings.
• After final distribution the scheme ceases to exist.

 B) According to type of investment

While launching a new scheme every Mutual Fund is supposed to declare in the prospectus the kind of instruments in which it will make investments of the funds collected under that scheme.

1. Equity Funds Scheme or Growth Funds.
2. Debt Fund Scheme or Income Funds.
3. Diversified Fund Scheme or Balanced Funds.
4. Gilt Fund Scheme.
5. Money Market Fund Scheme( Invest in safer short term instruments such as treasury bills, certificate of Deposit, Commercial Paper and Interbank Call Money)
6. Sector Specific Funds (invest in shares of companies operating in specific sector or industry)
7. Index Fund(Funds that specializes in the purchase of securities that represent a specific index)

C) According to Tax incentive Schemes

1.  Tax Savings Funds.
2. Non Tax Savings Funds.

D) According to the Time of Payout

1. Dividend Paying Schemes- Pays dividends from time to time as and when the dividend is declared.
2. Reinvestment Schemes- The share's dividend and capital gains will be reinvested in additional fund shares.

Advantages of Mutual Funds

1. Your investments are managed by professional finance managers who are ina better position to asses the risk profile of the investments.
2. In case of small investors, your investment cannot be spread into equity shares of various good companies due to high price of shares. Mutual funds are in a better position to spread your investments across various sectors, this is called risk diversification.

Difference between Mutual Funds And Portfolio Management Schemes

Mutual Fund Schemes	Portfolio Management Schemes
In Mutual Fund Schemes, the funds of large number of investors are pooled to form a common fund and the gains/losses are shared among the investors equally.	In Portfolio Management Schemes, the funds of a particular investor remains identifiable and gain/losses for that portfolio will be for him only. Each investors funds are invested in a separate portfolio and there is no pooling of funds.

Courtesy: AllBankingSolutions

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Preference Shares

• Preference Share holders do not have voting rights.
• Dividends announced must be first payed to preference share holders.

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Non Performing Asset (NPA)

Non Performing Asset is an advance where interest or installment of principle remains overdue for a period of more than 90 days.

Categories of NPA's:

1) Substandard Assets

An asset which has remained NPA for a period up to 12 months.

Provisioning- 10%.

2) Doubtful Asset

An asset which has remained sub-standard for a period of 12 months becomes a Doubtful Asset.

Provisioning

after 1 year- 20%
after 2 years- 30%
after 3 years- 100%

3) Loss Asset

An asset becomes loss asset where loss has been identified by the bank or internal or external auditors or RBI inspection.

Note: General Provisioning for Standard Asset is .25%.

SARFESI Act- Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act 2002.

Empowers Banks/Financial Institutions to recover their non- performing assets without the intervention of the courts.

Disclaimer- Subject to change.

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Black Money and Money Laundering

Black Money

Money earned through illegal activity and, as such, is not taxed.

Money Laundering

The process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source.

Prevention of Money Laundering Act- 2002 (PMLA)

Prevention of Money Laundering Act, passed in 2002 is to prevent money laundering and to provide for confiscation of property derived from money laundering.

Director, Financial Intelligence Unit, under Ministry of Finance have been conferred with exclusive and concurrent powers under relevant sanctions of the Act.

 

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Shares- Types of Issue

1) Public Issue

It involves sale of securities to the members of the Public.

2) Writes Issue

It is method of raising further capital from existing share holders.

3) Private Placement

It is method of selling securities privately to a selective group of investors.

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Financial Market

Money Market

Money market is the place for trading in money and short term financial assets which gets rolled over within a span of 1 year.

1) Certificate of Deposit (CD)

CD is a marketable receipt of fund deposited in a bank for a specified period at a specified rate of interest. It is a important source of mobilization of funds for a commercial bank. CD can be transferred to any person through endorsement and delivery.

Minimum  Size- 1Lakh and multiples of 1Lakh.

Period- minimum- 14days. maximum- 1 year.

Note: On the other hand Fixed Deposits are not negotiable.

2) Commercial Paper (CP)

CP is a short term debt instrument in the form of a unsecured promissory note issued by highly rated companies to raise short term funds. Issue is privately placed through agency banks or financial institutions.

While Debentures are long term instruments.

Requirements:

• Net worth of companies- 4 Crores.
• Working Capital- 4 Crores.
• Shares listed on one or more stock exchamges.
• Required specified rating by approved credit rating agencies.
• Minimum Period- 15 days, Maximum Period- 1 year.
• Minimum Amount- Rs 5 Lakhs and multiples of Rs 5 Lakhs.

 3) Treasury Bills (T-Bills)

T-Bills are promissory notes issued by Union Government for a period from 91 days to 364 days.

It is issued at a discount. (Say a T-Bill of Rs 10,000 is sold at Rs 9,000 and  on maturity customer receives the full value).

Maturity- 91 days, 182 days, 364 days.

Main investors are Banks to meet their SLR requirements.

Amount- minimum 1 Lakh and multiples of 1 Lakh.

Capital Market

Markets for financial assets that have long or indefinite maturity.

1) Primary Market

• New issues are made of primary market.
• When a company wishes to raise fresh capital by issuing securities it goes to the primary market.

2) Secondary Market.

Market for already issued shares.

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Why did you choose to join a Bank?

• Reasonable salary.
• If you are ready to work hard you can get into a prestigious job within a short span.
• Banking is the backbone of the economy, therefore it is less prone to recession than other industries.
• Job Security- you will not be fired for reasons other than your fault(Suggested not to tell until you can justify it).

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Introduce Yourself

Tell me something about yourself or Introduce yourself?

1. Your Name.
2. Your Place.
3. Your Fathers name and his occupation.
4. Your Mothers name and his occupation.
5. Your Siblings name and occupation.
6. Your Schooling.
7. Your Degree.
8. Your Strengths.
9. Your Hobbies.

 

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How a Debit Card works?

When someone swipes a debit card through a merchant terminal, the terminal reads the magnetic strip on the back of the card and transmits the data to a card processing network such as VISA, Master Card, Maestro, RuPay(by NPCI) etc.

The transmitted data includes the merchant's name and location, and entered Personal identification number, PIN in the encrypted form.

The network performs a fraud analysis and forwards the information to the bank that issued the debit card.

The issuer then validates that the card hasn't been reported as stolen or lost, confirms whether funds are available in the cardholders account and then notifies the merchant, again through the network, whether the transaction has been approved.

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Challenges faced by Banks

• The biggest problem facing the banking industry is the increasing NPA's. When we look into NPA's we can see that the major defaulter's are MNC's and big corporates and other wealth customers who are capable of paying but are not willing to do so.
• Even though we boost of financial inclusion it remains a distant dream. In India their are thousands of villages which still don't have access to basic banking services.
• Bank's sometimes find difficulty in following KYC norms. By this they are knowingly or unknowingly promoting money laundering. The recent fines imposed by RBI is an example.
• After the global economic slowdown banks find it difficult to lend money to priority sector as the chances for loans becoming NPA is greater.
• Insufficient technology and high cost of technology up-gradation is also a challenge.

How NPA's can be minimized?

• Constant monitoring and taking corrective actions at the earliest in case of default account.
• Before granting loans ensure that proper security is available.
• Sharing information of constant defaulters.

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Details in a Demand Draft

1. Payee Name.
2. Payable at.
3. Drawee Branch
4. Amount in words.
5. Amount in figures.

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Details in a Cheque

1. Date.
2. Account Number.
3. Payee Name.
4. Amount in words.
5. Amount in figures.
6. Signature of the Account Holder.

Before accepting the cheque check whether it is:

1.  Stale Cheque, Post Dated Cheque.
2. Account Payee or not(order or bearer).
3. Amount in words and Amount in Figure same.

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Details in a Withdrawal Slip.

• Same as that of a deposit slip except the their is no denomination and counterfoil.
• Also it is necessary that the account holder must sign the withdrawal slip.

1. Date.
2. Bank Branch.
3. Account Number.
4. Payee Name.
5. Amount in words.
6. Amount in figures.
7. Signature of Account Holder.

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Details in a Cash Deposit Slip

1. Date.
2. Bank Branch.
3. Account Number.
4. Payee Name.
5. Amount in words.
6. Amount in figures.
7. Denomination.
8. Signature of Depositor.
9. Phone Number.

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