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Summer 2013
Master of Business Administration- MBA Semester 3
MA0036 – Financial system and Commercial Banking – 4
Credits
(Book ID: B1770)
Assignment- 60 marks
Note: Answer all questions. Kindly note
that answers for 10 marks questions should be approximately of 400 words. Each
question is followed by evaluation scheme.
Q1. The
key functions of financial system are to provide a link between savers and
investors. What are the key functions of financial market?
(
explanation of functions of financial markets - 10 marks) 10 marks
Answer
: Functions of financial markets :
A financial market is a market in which
financial assets are traded. In addition to enabling exchange of previously
issued financial assets, financial markets facilitate borrowing and lending by
facilitating the sale by newly issued financial assets. Examples of financial
markets include the New York Stock Exchange
(resale of previously issued stock shares), the U.S.
Intermediary
Functions:
The intermediary functions of a financial
markets include the following:
Q2. Explain
the meaning and the purpose of financial instruments.
(meaning
- 5 marks; functions of financial instruments - 5 marks) 10 marks
Answer
: Meaning of financial instrument :
A financial instrument is a trade able
asset of any kind; either cash, evidence of an ownership interest in an entity,
or a contractual right to receive or deliver cash or another financial
instrument.
According to IAS 32 and 39, it is defined
as "any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity".
Types
of financial instruments :
Stocks and bonds are the most traditional
types of financial instruments, although there are sophisticated ways to invest
in these securities. When an investor purchases stock, he or she is obtaining
an equity stake in that corporate entity that entitles him or her to share in
profits and vote on some key events. Buying equity also exposes an investor to
risk in that there is little recourse if a stock loses value.
Q3. Discuss
the role played by brokers and primary dealers in the process of
intermediation?
(brokers
role-5 marks; primary dealers role - 5marks) 10 marks
Answer
: Broker's role in the process of intermediation :
1. A brokers typically work for the
policyholder in the insurance process and act
independently in relation to insurers. Brokers assist clients in the
choice of their insurance by presenting them with alternatives in terms of insurers
and products. Acting as “agent” for the
buyer, brokers usually work with multiple companies to place coverage for
their clients. Brokers obtain quotes
from various insurers and guide clients in determining the adequate policy from
a range of products.
Primary
dealer's role in the process of intermediation :
A primary dealer is a firm that buys
government securities directly from a government, with the intention of
reselling them to others, thus acting as a market maker of government
securities. The government may regulate the behavior and numbers of its primary
dealers and impose conditions of entry. Some governments sell their securities
only to primary dealers; some sell them to others as well
Q4. The
Bank for International Settlement (BIS) was established in 1930 with its
headquarters in Basel , Switzerland Basel
(Basel origin- 2marks; Basel
Answer
: Basel
The Bank for International Settlements was
established in 1930. It is the world's oldest international financial
institution and remains the principal centre for international central bank
cooperation.
The BIS was established in the context of
the Young Plan (1930), which dealt with the issue of the reparation payments
imposed on Germany by the
Treaty of Versailles following the First World War
The Basel
“Concordat”, produced by the Basel Committee on Banking Supervision, is a
seminal work on international banking regulation (1983). Since 1975, the Basel
Committee had been developing its “Principles for the supervision of banks’
foreign establishments” – originally known under the designation “Basel
Concordat” – in an effort to close any regulatory gaps that existed.
Q5.
The RBI, apart from the role of regulator and supervisor of payment systems,
also plays the role of a settlement bank apart from being a catalyst, an
operator and a user. Discuss the role played by RBI in technological up
gradation?
(explain
RBI- 4 marks; explain the role played by RBI in technological upgradation-6
marks) 10 marks
Answer
: RBI :
The Reserve Bank of India (RBI) is India 's central banking institution, which
formulates the monetary policy with regard to the Indian rupee. It was
established on 1 April 1935 during the British Raj in accordance with the
provisions of the Reserve Bank of India Act, 1934. The share capital was
divided into shares of ₹100 each fully paid, which was entirely owned by
private shareholders in the beginning. Following
India 's independence in
1947, the RBI was nationalized in the year 1949.
Role
of RBI in technological up gradation :
As
at the end of March 2008, there were 91 RRBs with a total of 14,816 branches.
These included 46 amalgamated and 45 stand alone banks. These RRBs
employed 68,069 staff.
In paragraph 148 of the Reserve Bank’s
Mid-term Review of Annual Policy for 2007-08, it was stated that in order to
prepare RRBs to adopt appropriate technology and migrate to Core Banking
Solutions (CBS) for better customer services, it is proposed to constitute a
Working Group with representatives from Reserve Bank, NABARD, sponsor banks and
RRBs for preparing a road-map for migration to core banking solutions by RRBs.
Q6. Explain
the challenges and issues regarding the perspective in banking industry.
(challenges-5
marks; issues-5 marks) 10 marks
Answer
: Challenges regarding the perspective in banking industry :
1) Self-interest sometimes morphs into
greed and selfishness, which is unchecked self-interest at the expense of
someone else. This greed becomes a kind of accumulation fever. “If you
accumulate for the sake of accumulation, accumulation becomes the end, and if
accumulation is the end, there’s no place to stop,” he said. The focus shifts
from the long-term to the short-term, with a big emphasis on profit
maximization.
2) Some people suffer from stunted moral
development: “I think this happens in three areas: the failure to be taught,
the failure to look beyond one’s own perspective, and the lack of proper
mentoring,” Duska said.
Dear students get fully solved assignments
Send your semester & Specialization name to our
mail id
->
help.mbaassignments@gmail.com
or
call us at -> 08263069601
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