MA0043 - Corporate Banking

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Summer 2013

Master of Business Administration- MBA Semester 4

MA0043 - Corporate Banking – 4 Credits

(Book ID: B1312)

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. Corporate Banking represents the wide range of banking and financial services provided to domestic and international operations of large local corporates and local operations of multinationals corporations. Write a detailed note on evolution of corporate banking.

( introduction- 3 marks; explanation of evolution of corporate Banking -7 marks) 10 marks

Answer : Corporate Banking :

Corporate banking is a term for a group of services that banks provide to companies that open accounts with them. There are a variety of services that comprise this type of banking, including loan, advising and securitization services. Much of corporate banking resembles individual banking, but there are also aspects that are specific to the needs of corporate customers.

Q2. The supply bills are not bills of exchange and do not enjoy the status of being a negotiable instrument. What are supply bills? What is the procedure to be followed by a bank in making advances against such bills?

( explanation of supply bills -4 marks; procedure-6 marks) 10 marks

Answer :  Supply bills :

Bills drawn on government or semi-government departments or bodies or Public sector undertakings, for the supply of goods and other materials or for the performance of certain contracts as per the accepted tenders are referred to as ‘Supply Bills’. A party or contactor whose tender is accepted by the concerned authority of the government may draw the bill on supply of goods or performance of contract, which may be partial or whole as permitted under the terms of the tender

Q3. Assume yourself as a banker and discuss the measures to be taken by the bank to monitor working capital limits sanctioned?

(explanation of working capital-4 marks; measures to be taken by the bank to monitor working capital limits sanctioned -6 marks) 10 marks

Answer :  Working capital :

Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities.

 Q4. As a trader in order to be competitive and successful, how can you address some risks that are peculiar to foreign trade like commercial risks and political risks?

( introduction of ECGC- 3 marks; explanation of ECGC- 7 marks) 10 marks

Answer:  ECGC:

Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit.

Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce & Industry, Department of Commerce, Government of India.

Q5. The arrangement in which short term domestic receivables on sale of goods or services are sold to an agency (known as the factor) is called Factoring. Write a detailed note on factoring and its benefits.

(explain the Factoring- 6marks +benefits of Factoring – 4 marks) 10 marks

Answer : Factoring :

Factoring is a financial transaction in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. In "advance" factoring, the business owner sells his receivables in the form of invoice to the factor, who makes an advance of 70-85% of the purchase price of the receivable amount. The factor collects the full amount from the customer in due course and pays the balance amount due to the business owner after deducting his commission and other charges.

Q6. What role does RBI play in ensuring that the guidelines are adhered to by banks as per RBI Act 1934 and Banking Regulation Act 1949?

(explanation of role of RBI -RBI Act 1934 -5 marks and Banking Regulation Act 1949 - 5 marks) 10 marks

Answer : Role of RBI :

Central Bank 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.