SMU MBA - BANKING- SPRING 2016 - SOLVED ASSIGNMENTS

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ma0047 smu mba winter 2015 (april/may 2016 exam) IVth sem assignment

Ma0047

Winter 2015

Q1 “Risks in the organisation are usually considered as trade-off between reward and threat.” Critically explain the concept.

“Risks in the organisation are usually considered as trade-off between reward and threat.” Critically explain the concept.

Answer: The risk-return tradeoff could easily be called the iron stomach test. Deciding what amount of risk you can take on is

Q2 Explain the types of corporate debt instruments available in Indian markets and their features.

Different types corporate debt instruments available in Indian market and their features

Answer: Debt market refers to the financial market where investors buy and sell debt securities, mostly in the form of

Q3 Give an idea of foreign exchange market. Who are the participants in foreign exchange markets?

Foreign exchange markets

Participants in forex markets

Answer: Foreign Exchange Market

In view of the contemplated convertibility of the rupee, the foreign exchange market would be intimately linked to the interbank or call money market since the players in the two markets are the same commercial banks. Further, the link between foreign exchange market and term-money market is being

Q4 Working capital forms the most important part of operating capital. Do you agree? Justify your agreement/disagreement.

Is working capital the most important part of operating capital? Justify your agreement/ disagreement.

Answer: Working capital is the availability of cash to a bank to meet its day-to-day requirements. It is the difference between resources in cash or resources readily convertible into cash (current

Q5 What are the objectives of IRR Management programme?

Objectives of IRR management programme

Answer: Interest rate risk, according to the RBI circular, is the risk where changes in market interest rates affect a bank’s financial position. Changes in interest rates affect both the current earnings (earnings perspective) as also the net worth of the bank (economic value perspective). The risk from the earnings’ perspective can be measured as changes in the Net Interest Income (NIL) or Net

Q6 Submit a brief description of Treasury functions and associated risks.

Treasury functions and associated risks

Answer: Treasury function is a high-impact function affecting every part of an organization. Its basic purpose was, as we saw earlier, to manage exchange and interest rate volatility through special skills. It is also responsible for

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ma0046 smu mba winter 2015 (april/may 2016 exam) IVth sem assignment

MA0046

Winter 2015

Q1 How does a merchant banker get registered with SEBI? What are the eligibility criteria?

Eligibility criteria to be registered as merchant bankers with SEBI

Answer: To get registered as a merchant banker, the person concerned has to follow some steps. The merchant bankers are registered under four different categories.

A.      Category I, that is to carry on any activity of the issue management, which will, inter alia,consist of

Q2 How does an Indian Company raise funds from the foreign markets? Differentiate between ADRs and GDRs.

Raising funds from foreign markets

Differentiate between ADRs and GDRs

Answer: Raising Funds from the Foreign Markets

Companies in India have increased in terms of their size and geographical coverage. Many times the companies need to import costly machinery and technology for which payment is required to be

Q3 Illustrate some of the fund based financial services.

Some of the fund based financial services

Answer: Fund based services involve funds of financial institutions.

Under this category some specific services are included. A brief explanation of important services is given below.

(i)                Lease financing: A financial lease is a means of financing capital equipments. It gives impetus to the investment activity and facilitates the flow of savings into real investment. For example, PNB Housing Finance Limited provides a unique service to its customers which is known as Lease Rental Discounting. When a customer avails this scheme, the bank provides a loan against

Q4 Explain the essentials of an Insurance Contract. What is Bancassurance ?

Essentials of an Insurance Contract

Bancassurance

Answer: According to Section 10 of the Indian Contract Act, 1872, ‘All agreements are contracts if they are made by free consent of parties, competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void’. On the basis of this definition, the

Q5 Explain the benefits and limitations of Leasing.

Benefits and limitations of leasing

Answer: Benefits to the lessee

• Simple source of finance

Leasing is an easy source of intermediate and long-term finance. As the ownership of the asset lies with the lessor, the lease does not require any security for the asset. Various types of provisions are

Q6 Illustrate the concept of effective portfolio management to minimise risk and maximise returns.

Effective portfolio management to minimise risk and maximise returns

Answer: Risks and Returns of a Portfolio

The following equations are used to measure the risks and returns of a portfolio. The following is an

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ma0044 smu mba winter 2015 (april/may 2016 exam) IVth sem assignment

MA0044

Winter 2015

Q1 Illustrate the role of Small Industries Development Bank of India (SIDBI)

Role of SIDBI

Answer: SIDBI was set up on 2 April 1990 under an Act of Parliament, as a Wholly Owned Subsidiary (WOS) of IDBI, but was delinked in March 2000. SIDBI is the apex financial institution for the promotion, financing and development of MSME sector and for co-ordination of the functions of the institutions

Q2 Explain the umbrella programme of natural resource management (UPNRM) operated by NABARD and German Development Corporation.

Umbrella programme of natural resource management operated by NABARD and GDC

Answer: NABARD and the German Development Corporation (GDC) have launched the Umbrella Programme on Natural Resources Management (UPNRM). The objective of the programme is to offer tribals continuous livelihood solutions, converting these solutions into public policies of Natural Resources Management (NRM) and also improving the livelihood of other poor people through the usage of natural resource and management. Katarina has a strong network of Self-Help

Q3 Analyse the requirement of funds by large industries. How are these fun requirements are managed?

Requirement of funds by large industries and way to source them.

Answer: Financial Requirements of Large Industries

Large industries require huge finances for setting up of basic infrastructure like factory sheds, office buildings, plant and machineries and vehicles to working capital requirements for raw materials,

Q4 Elaborate the role National Housing bank (NHB) in addressing the requirement of home loan finance in India.

Role National Housing bank (NHB) in addressing the requirement of home loan finance in India

Answer: NHB is the apex DFI in the housing sector in India. NHB has been established to achieve, inter alia, the following objectives:

·         Promotion

Q5 “Export Credit Guarantee Corporation covers risks of exporters and financing banks through various insurance policies and schemes”. Explain.

Different insurance policies and schemes of ECGC for exporters and banks

Answer: Specific insurance policies provided by ECGC to exporters and companies:

·         Shipments Comprehensive Risks Policy (SCR) – This policy is also known as the Standard Policy. This is ideally suited for coverage of risks in respect of export done on short-term credit, that is, credit period below 180 days. The policy is designed to cover both

Q6 Illustrate the role played by :

i) Power Finance Corporation of India(PFC) and

ii) Rural Electrification Corporation of India (REC)

to resolve the power crisis in rural sector.

Role of PFC and REC to resolve the power crisis in rural sector

Answer: i) Power Finance Corporation Limited (PFC)

The PFC was formed with an objective to provide financial assistance to the power and its allied sectors and also to act as a catalyst for bringing about institutional improvements in the functions of the borrowing power sector companies. It helps in the optimum utilisation of the resources available and

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ma0043 smu mba winter 2015 (april/may 2016 exam) IVth sem assignment

MA0043

Winter 2015

Q1 How does a commercial bank assess the working need of their corporate clients? Explain the RBI guidelines to finance working capital.

Assessment of working capital need

RBI guidelines for working capital finance

Answer: Assessment of Working Capital by Banks

Total working capital requirements of a firm are affected by number of internal and external factors in which a firm operates. Before a bank finances the working capital for a firm, the bank studies all factors involved. The internal factors which may impact the working capital requirement of individual firms like the

Q2 What are the different types of Letters of Credit ?

Different types of Letters of Credit

Answer: Types of Letters of Credit

Revocable letter of credit: This may be amended or cancelled without prior warning or notification to the beneficiary. Such letter of credit will not offer any protection and should not be accepted as beneficiary of credit.

Irrevocable letter of credit: This cannot be amended or cancelled without the agreement of all parties involved. This type of

Q3 Describe the different types of post shipment finance offered on export credit scheme?

Different types of post shipment finance offered on export credit scheme

Answer: Types of Post Shipment Finance

1. Export Bills Purchased/ Discounted (DP & DA Bills)

Export bills (Non L/C Bills) is used in terms of sale contract/ order may be discounted or purchased by the banks. It is used in indisputable international trade transactions and the proper limit has to be sanctioned to the exporter for purchase of export bill facility.

2. Export Bills Negotiated (Bill under L/C)

The risk of

Q4 Illustrate the financial evaluation of lease finance.

Financial evaluation of lease finance

Answer: Financial Evaluation of Lease Finance

Some of the basic advantages of acquiring capital assets on lease are as follows:

(i) Cash flow planning: A financial lease allows a lessee to plan its cash flows as the lease rentals are paid out of the cash derived from the utilization of the leased assets itself.

(ii) Saving the financial resources: Lease finance is a good source of finance as the equipment/

Q5 Differentiate between Factoring and Forfeiting

Differentiate between Factoring and Forfeiting

Answer:                        Difference between Factoring and Forfaiting

Factoring	Forfeiting
It is suitable for financing smaller and short-term receivables with credit period less than 1 year.	It is for deferred payments (used to finance capital goods’ exports), where receivables are paid in 5 to 7 years.
It may be with or without recourse.	It is always without recourse.
The exchange risk lies with the party.	The exchange risk lies with Forfaitor
The advance is usually 80 per cent of the factor value.	The advance is 100 per cent.

Q6 Explain corporate debt re-structuring and revival package.

Corporate debt re-structuring

Revival package

Answer: Corporate Debt Restructuring (CDR)

For the revival of the corporate sector facing financial crisis and operational difficulties, genuine support is very much needed. This is also required in the interest of banks and financial institutions

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