...source of funding for businesses. For example, these loans can be structured either as short- or long-term, fixed or floating rate, demand or with a fixed maturity, and secured or unsecured. While each potential borrower's business is unique, reasons to borrow generally include the purchase of assets including new fixed assets or entire businesses, repayment of obligations, raising of temporary or permanent capital, and the meeting of unexpected needs. Loan repayment generally comes from one of four sources: operations, turnover or liquidation of assets, refinancing, or capital infusion. This note describes traditional bank lending products, the role of the lending officer, credit evaluation, and the structuring of credit facilities and loan agreements. Specialized loan and credit products are described in Appendix A. Traditional Commercial Bank Lending Products While increased competition has forced banks to develop innovative credit facilities and financing techniques, traditional products, which include short-term, long-term, and revolving loans, continue to be the mainstay of commercial banking. Short-Term Loans Short-term loans, those with maturities of one year or less, comprise more than half of all commercial bank loans made. Seasonal lines of credit and special purpose loans are the most common short-term credit facilities. Their primary use is to finance working capital needs resulting from temporary build-ups of inventory and receivables. Reflecting their use...
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...IDBI BANK LTD. Fair Practices Code for Lending 1 Introduction This document is the Bank’s Fair Practices Code for Lending, which is a voluntary code for dealing with customers in the course of the Bank’s lending business. Unless otherwise stated at relevant places in this code, the code is applicable to both Corporate Lending and Retail Lending. For the purpose of this Code, the term ‘credit’ will include all funded and non-funded credit facilities. RBI’s guidelines / directives, that may be issued from time-to-time, will override the Code where applicable. 2 Short title and commencement 2.1. This Code is called IDBI Bank Ltd. Fair Practice Code for Lending. 2.2. This Code is made pursuant to the Directives of Reserve Bank of India, vide Circular No:DBOD.Leg.No.BC.204/09.07.007/2002-03 dated May 5, 2003. 2.3. This Code is applicable to all members of staff of IDBI Bank Ltd. 2.4. The Board of Directors of the Bank may modify the Code from time to time. 3 Applications for Loan and its Processing 3.1. Application for loan in the loan application form/Loan related important document (LRID) shall be comprehensive to include information about rate of interest (fixed/floating) and manner of charging (monthly/quarterly/halfyearly/yearly), process fees and other charges, penal interest rates, pre-payment option and any other matter which materially affects of the interest of the borrower. The LRID would be retained with the applicant for his future reference and would also act as...
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...competitive and challenging lending environment, an up-to-date policy, appropriate to a credit union’s lending function and business plan, may be more important than ever. This Bulletin summarizes features and benefits of an effective policy, details warning signs and potential consequences of an outdated policy, and offers practical advice about reviewing and updating a loan policy. ELEMENTS OF AN EFFECTIVE LOAN POLICY Written loan policies vary considerably in content, length, and specificity, as well as in style and quality. No two credit unions share the same tolerance for risk, offer the same loan products, and face the same economic conditions. An effective loan policy should reflect the size and complexity of a credit union and its lending operations and should be tailored to its particular needs and characteristics. Revisions should occur as circumstances change, and the policy should be flexible enough to accommodate new lending activity without a major renovation. During examinations, examiners will make a determination about the adequacy of a credit union’s loan policy. Examiners are guided in their review by rules, Department guidelines, and common sense: Is the policy up-to-date and are important areas adequately addressed? Commission Rule 91.701 details the areas that must be addressed in written loan policies. Regardless of a credit union’s size or location, a loan policy should address: * General areas of lending * Lending authority of loan officers...
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...By BankBazaar.com Feedback/Comments on RBI’s Consultation paper- Peer to Peer Lending in India The Reserve Bank of India (RBI) has initiated steps to regulate peer-to-peer (P2P) lending business. RBI has proposed registering P2P lending platforms as non-banking financial companies (NBFCs). In order to come up with the regulation RBI has sought suggestions over the consultation paper. We have analysed the proposed regulatory framework and submit our comments /suggestions. We request the RBI to give us an opportunity to present our views at appropriate forum or panel if they deem fit to substantiate our views. Clause No. Comments/suggestions Clause 5.1- Proposal P2P platforms are online market place and acts merely as a to bring P2P lending platform/intermediary between lender and borrower to facilitate platforms under the transaction through its technological integration. These definition of NBFCs platforms neither accept deposits on their balance sheets nor do under section 45I (f) they engage in proprietary lending. There activity should not be (iii) of the RBI Act termed as ‘financial’ per se. P2P platforms are non-banking and non-financial companies and therefore the proposal or need to bring them under the definition of NBFCs under section 45 I (f) (iii) may kindly be reviewed. Clause 5.2- RBI to Online platform is only a market place facilitating the sale of issue registration financial products and do not...
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...EUR 3 billion, offering the full range of retail and corporate financial products and services to its clients. Among the key responsibilities of the Corporate Banking Division is business lending where the main process is the credit one - from discussing financing needs and negotiating terms with corporate customers, through processing of loan applications, including credit proposal preparation and financial and business analysis, review by Risk Management and obtaining a decision by the competent approval authority, to drafting and execution of loan documentation and implementation of credit facilities terms. One of the most critical operational problems identified in the credit process was the slow implementation of loan approvals. On one hand, delays affected customers' overall satisfaction with the service, impacted negatively their investment projects, liquidity position, financing cost and sometimes even their credit history and rating, e.g. whenever an existing loan facility was not renewed on time, the borrower was reported delinquent, despite the fact that they had submitted the loan application and relevant documentation on time and that the respective Credit Committee approval was already in place. On the other hand, delays in the process artificially deteriorated the bank's lending portfolio profitability, volume, and credit quality, e.g. higher delinquency rates were reported while revenues were fluctuating due to reversals of already accrued penalties as signing...
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...Shawn Mutchler Clara Gerl Comp I 01 September 2013 Unethical Mortgage Lending and the Collapse of the American Economy Living in an era of economic uncertainty is an abysmal proposition that many of us thought improbable. However, we find ourselves in the midst of the worst financial quagmire since the Great Depression of the 1920’s. Across the United States, businesses are down-sizing and even closing the doors of peripheral branches. In realizing that there is no way to return to a period of economic prosperity America once enjoyed, it is important to look at the causes of its demise. While there are myriad causes for America’s financial collapse, it is important to focus on the role of ethics, or the lack thereof, in America’s current financial dilemma. Unethical practices, particularly in mortgage lending have helped to directly contribute to the collapse of the American economy. When discussing unethical behavior and the financial collapse of America, few topics receive more attention than the mortgage lending industry, and in that industry, most of the focus falls on subprime lending. Before looking at subprime lending, however, it is central that we look at the evolution of mortgage lending. Because the approach to mortgages has changed, we must take a glance at the past methodology of mortgage lending. As recently as the past twenty years, borrowers seeking mortgage loans would go to their local banker to apply for a mortgage. This banker was oftentimes known on...
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...REGULATORY GUIDE 196 Short selling April 2011 About this guide This guide contains an overview of the short selling provisions of the Corporations Act 2001 (Corporations Act) and the Corporations Regulations 2001 (Corporations Regulations) as they relate to securities, managed investment products and certain other financial products. In particular, it addresses the naked short selling prohibition and the reporting and disclosure obligations. This guide is particularly relevant to institutional investors and brokers who are involved in short selling activity. REGULATORY GUIDE 196: Short selling About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by: explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act) explaining how ASIC interprets the law describing the principles underlying ASIC’s approach giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief...
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...We have heard a lot from bankers, but perhaps the most revealing comment at Wednesday's business, innovation and skills select committee was made by Vince Cable on the subject of bank lending, and what would happen if the Project Merlin targets are missed. The business secretary, as expected, issued vague threats about higher taxes. But then he added: "It is hard to imagine that we could penalise individual banks." Why? The Merlin agreement set a collective target for gross business lending by the big five banks (£190bn in total and £76bn to small and medium-sized companies) but it was always possible that some would pull their weight and some would not. So surely there ought to be a way to apply a whip to the laggards. But there is not. Nor, it appears, has the government nailed down the detail of the only sanction that was trumpeted by the chancellor at the time of February's agreement – a link between executive bonuses and lending targets. Cable is only now writing to banks' remuneration committees to ask how they intend to apply the principle. Merlin, as we suspected, was a badly drafted fudge. But, if the targets are missed, get ready for a repeat. The government will threaten higher taxes. The banks will protest that demand for lending is weak (and Bob Diamond got his retaliation in early when he said small businesses have £16bn on deposit at Barclays). Companies themselves will complain that the price of credit is too high. In the end, an equally unsatisfactory Merlin...
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...Companies that are highly-leveraged or do not have the credit rating or track record to qualify for bank financing now find asset-based lending a pleasant choice instead of the financing option of last resort. The main difference between the asset-based lending and traditional types of banking is that asset-based financing is secured by an asset like trade account receivable, inventory or property and equipment not credit rather than credit ratings (Robert A. Modansky, Jerome P. Massiminom).The benefit of placing the borrower’s assets as collateral is that the borrower will receive a higher amount of maximum credit with a lower interest rate. Revolving lines of credit requires the borrower to grant a security interest in its receivables and inventory to lenders as collateral to secure the loan, which creates a borrowing base for the loan. It’s worth noting that not all receivables and inventory are eligible to constitute the borrowing base. For instance, receivables that are more than 90 days old and related party receivables would be ineligible (Robert A. Modansky, Jerome P. Massiminom).Also, dilution of receivables should be taken into consideration as the lender uses it to establish the advance rate which refers to the maximum percentage of the current borrowing base available to the borrower as a loan. In most cases, the asset-based lending will give the lender the control of the customer’s cash receipts and may require set up of a lockbox...
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...Class: Here are some excerpts from the model solution to UpBeat that discuss four possible alternative solutions to the issues raised in this case. Discussion 1 For each of the transfer provisions included in the agreement, determine whether the provision would preclude sales accounting. Alternative 1 — Fail sale accounting criteria because of Transfer Provision 1. ASC 860-10-40-5(b) requires that the bank have the right to pledge or exchange the accounts receivable it received and that no condition both “constrains [the bank] from taking advantage of its right to pledge or exchange [the receivables and] provides more than a trivial benefit” to UpBeat Inc. Transfer Provision 1 (outlined in the case document) indicates that the bank is constrained because it has to obtain permission from UpBeat if it decides to sell or pledge the receivables. This constraint would preclude achievement of the sale criteria under ASC 860-10-40-5(b). Alternative 2 — Fail sale accounting criteria because of Transfer Provision 2. ASC 860-10-40-5(b) requires that the bank have the right to pledge or exchange the accounts receivable it receives and that no condition both constrains the bank “from taking advantage of its right to pledge or exchange [the receivables and] provides more than a trivial benefit” to UpBeat. Because similar accounts receivable are not readily available in the marketplace, the transferee is constrained. The transferee cannot sell the accounts receivable because...
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...extend financial assistance Section 2(16) of the companies act, 2013 defines charges so as to mean an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage. The following are the essential features of the charge which are as under: 1. There should be two parties to the transaction, the creator of the charge and the charge holder. 2. The subject-matter of charge, which may be current or future assets and other properties of the borrower. 3. The intention of the borrower to offer one or more of its specific assets or properties as security for repayment of the borrowed money together with payment of interest at the agreed rate should be manifested by an agreement entered into by him in favour of the lender, written or otherwise. A charge may be fixed or floating depending upon its nature. Need for creating a charge on company’s assets: Almost all the large and small companies depend upon share capital and borrowed capital for financing their projects. Borrowed capital may consist of funds raised by issuing debentures, which may be secured or unsecured, or by obtaining financial assistance from financial institution or banks. The financial institutions/banks do not lend their moneys unless they are sure that their funds are safe and they would be repaid as per agreed repayment schedule along with payment of interest. In order to secure their loans they resort to creating right in the assets...
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...Introduction Cruickshank, Garth & Romano (CGR) is a new real estate appraisal and consulting firm formed by Chris Cruickshank, Wayne Garth, and Richard Romano. The firm provides not only residential, industrial and commercial evaluations, but also consulting services and feasibility analyses in the National Capital Region (NCR). Richard and his two partners have worked for one of the four major NCR firms and are well known in the local real estate community. And recently, Richard has just completed a preliminary evaluation of a property for Watson & Musico, which is one of NCR’s major developers and property owners. However, John Mortimer from Watson & Musico is unsatisfied with the Richard’s evaluation price, he asks Richard to raise the value, otherwise they have no business. This situation is difficult for Richard, because he wants to satisfy John’s needs, but at the same time, he can’t ignore the ethical issue to do that. Stakeholders Richard Romano is a principal of CGR, and he is an Accredited Appraiser Canadian Institute (AACI) candidate. Richard has eight years of experience and is recognized as one of Canada’s leading real estate experts. He wants to complete the appraisal according to his best estimate of the current market value of the property, but he can’t afford losing business with Watson & Musico (WM) for not satisfying their needs. Success in project with WM will be a major boost to CGR, it is also Richard’s responsibility to keep his client’s interest ...
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...Financing and the Exchange Rate Mechanisms During the height of World War Two representatives from 44 countries met in New Hampshire to design a new monetary system to replace the collapsed Gold Standard system. The agreement reached established two multinational institutions the International Monetary Fund (IMF) and the World Bank. The IMF job would be to maintain order in the international monetary system, the World Bank job would be to promote general economic development. The agreement called for a system of fixed exchange rates that would be enforced by the IMF. The IMF was the main custodian; it would try to avoid a repetition of the past through a combination of discipline and flexibility. Discipline the need to maintain a fixed exchange rate, slow down competitive devaluation, and bring stability to the world trade environment. The IMF enforces a fixed exchange rate and imposes monetary discipline on countries, thereby curtailing price inflation. The IMF stood ready to lend foreign currencies to members to get them over short periods of payment deficits. A pool of gold and currencies were contributed by IMF members to provide the resources for lending. Countries were allowed to borrow from the IMF without adhering to a specific agreement. Countries the borrowed heavily would have to agree to increasingly stringent IMF supervision of its macroeconomic policies, agree to monetary and fiscal conditions which included IMF mandated targets on domestic money...
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...problem of sovereign risk and the behaviour of the international interbank market (IIBM), although exchange rate risk can also pose difficulties. Definition of international banking Banking transactions crossing national boundaries International lending: • all claims of domestic banks offices on foreign residents • claims of foreign bank offices on local residents • claims of domestic bank offices on domestic residents in foreign currency Deposits similarly classified (by residence of bank or depositor, or currency) Eurocurrency deposits – placed with banks outside the country whose currency the deposits are denominated in (not necessarily in euros!) Features of international banking Key aspects: currency risk and complexity of credit risk besides typical banking risks Competition for market share among banks (typically spreads very narrow) Cyclical nature, with periodic crises Competition for bank loans from the international bond market (close substitutes for loans) Importance of international interbank market (IIBM) as source of liquidity and funding for banks, and risks arising Role of risk management activities (swaps, options, futures) Historical evolution: Origin in Renaissance (lending to kings) Active international lending and bond market in the 19th century (also trade financing) Decline in 20s and 30s as governments restricted international trade and financing Growth of trade and multinationals (MNEs) postwar Development of euromarkets in the 1960s (owing to...
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...fulfillment to the requirements in technical Writing to: * Ms. Farah Edda Theresa R. Mituda CHAPTER 1 INTRODUCTION AND ITS BACKGROUND Introduction Lending business is a type of business wherein individual, partnership, corporations or institution provide money temporarily on condition that the amount borrowed be returned, usually with an interest fee. Terms and Condition depends between the agreements of two parties. It usually focused on the mode of payment whether lump sum or installment, the nominal interest rate and the period of time when money must be return. The exact origins of the lending business are not known. Scholars and historians believe that the lending business has existed since prehistoric times of which very little is documented and known. There are references to the concept of loans in the bible which indicates that it has been prevalent much before the times of Christ. While in ancient times, it wasn’t perhaps a fully fledged business but the concept and practice of loans did exist. The lending business had its beginnings in the earliest days of land ownership. Prior to the concept of owning land and thereon wealth, the idea of loan cannot have existed. Once the sense of ownership had been firmly founded in society, loans became a reality. The earliest documented references of a properly formed lending business are from the ancient and medieval Green and Roman empires. Wealthy businessmen, traders and landlords would...
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