THEORY – LAW AND PRACTICE BBA 2.1 BANKING – THEORY – LAW AND PRACTICE Evolution of Banks – Functions of Commercial Banks – Balance Sheet of Commercial Banks – Credit Creation, Organization and structure of Banks – Unit Banking and Mixed Banking – Public Sector and Private Sector Banks – Nationalization of Commercial Banks – Objects – Progress. Central Bank – Evolution – Functions – Credit Control Measures Money market – Indian money market – Components – Characteristics
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15, 18, 20, 21, 22, 23, 24, 26, 27 Chapter Eleven Credit Risk: Individual Loan Risk Chapter Outline Introduction Credit Quality Problems Types of Loans • Commercial and Industrial Loans • Real Estate Loans • Individual (Consumer) Loans • Other Loans Calculating the Return on a Loan • The Contractually Promised Return on a Loan • The Expected Return on a Loan Retail versus Wholesale Credit Decisions • Retail • Wholesale
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account for the bank loan for all 3 years. Assume the loan was made at the beginning of the year and repaid at the end of year. Assume all interest payments are made on an annual basis. The $10,000 per year payment is to reduce the loan’s principal. Loan Issuance: DR Cash $180,000 CR Notes Payable $180,000 Year One Loan Repayment: DR Notes Payable $10,000 CR Cash $10,000 Year Two Loan Repayment: DR Notes Payable $10,000 CR Cash $10,000 Year Three Loan Repayment: DR Notes Payable $160
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is created by banks, in the form of bank deposits – the numbers that appear in your account. Banks create new money whenever they make loans. 97% of the money in the economy today is created by banks, whilst just 3% is created by the government. The money that banks create isn’t the paper money that bears the logo of the government-owned Bank of England. It’s the electronic deposit money that flashes up on the screen when you check your balance at an ATM. Right now, this money (bank deposits) makes
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granting the request for the $750,000 line of credit. There are many supporting strong points but it also has some problems to work out. This is a company that has many good characteristics and looks promising but needs the extra money to pay off loans, inventory, and supplies. I recommend this company to receive the line of credit. Looking at the individual ratios seen in exhibit 1 and comparing it to the industry average shown in exhibit 2 gives a sense of where this company stands. Current ratio
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granting the request for the $750,000 line of credit. There are many supporting strong points but it also has some problems to work out. This is a company that has many good characteristics and looks promising but needs the extra money to pay off loans, inventory, and supplies. I recommend this company to receive the line of credit. Looking at the individual ratios seen in exhibit 1 and comparing it to the industry average shown in exhibit 2 gives a sense of where this company stands. Current ratio
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theory – managing credit risk Anticipated income/ Conversion of funds- managing interest rate risk Gap Management – managing profit Role of the Fed: The Fed buys/sells Treasury securities This raises/lowers bank reserves. This raises/lowers excess reserves. This causes banks to increase/decrease loans. This will raise/lower measured money, M1 total reserves = RR + ER, RR = Required Reserves = rrD•D where rrD is the required reserve ratio (0 to 1), D is the level of (demand) deposits MB = C + TR, C =
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definition of loan, definition of SME, general principles of lending, loan monitoring and control, access to credit as well as repayment performance: theory and practice. 2.1 Definition of loan A loan is a type of debt like all debt instruments, a loan entrails the redistribution of financial assets over time, between the lender and the borrower. The borrower initially receives an amount of money from the lender which they pay back, using but not always in regular installment. Types of loans There are
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Copyright SDA Bocconi revised 2004.10 EMQ 901 1 1) For a loan of 9.2 estimate the future refund value (principal, interest, total) with simple interest: a) yearly rate 5%, for 6 years and 4 months b) yearly rate 8%, for 7 years, 2 months and 15 days 2) With a starting investment of 3.65 how long does it take to have a final total value of 4.779 with a 5.2% yearly rate, simple interest ? 3) 10 years ago you deposited 15.6 in a bank account paying 5% (yearly compounding). Six years ago you withdraw
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knowledge to the concern student. At the end of the program the concern student suggests to prepare a report depends on the assigned topic by his/her supervisor. I took the opportunity to complete my internship in a well known private bank, which is “Southeast Bank Limited.” This program helps me to enlarge my analytical skills and scholastic aptitudes. During my internship period I got the opportunity to work in credit and I have interested to prepare my internship report on the credit department
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