MA0044 - INSTITUTIONAL BANKING

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ASSIGNMENT

DRIVE	SUMMER 2015
PROGRAM	MBADS (SEM 4/SEM 6)MBAFLEX/ MBA (SEM 4) PGDBMN (SEM 2)
SUBJECT CODE & NAME	MA0044 - INSTITUTIONAL BANKING
BK ID	B1818
CREDITS	4
MARKS	60

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.

Q. 1. Explain the changing face of DFIs in India with special reference to NABARD.

Answer:The world is increasingly facing global challenges such as climate change, financial crises, food and oil price swings, security threats, etc. They increasingly affect the prospects of developing countries, yet the current thinking on development assistance is often rooted in national development plans. Research is needed to understand how aid and non-aid measures can help to address global challenges which are increasingly affecting developing countries.

The research will cover the following conceptual and empirical areas:

·         review the nature of global challenges and pathways through which they affect development;

Q. 2. “According to the report of All India Census of SSIs, 35 % of the SSIs were closed due to severe financial crisis” In the light of above illustrate the challenges faced by financial institutions to finance small scale sector. Can you cite some of the measures taken by the government to address the challenges faced in financing MSMEs ?

Answer:Challenges in financing small scale sector

(1) Finance:Finance is one of the most important problem confronting small scale industries Finance is the life blood of an organisation and no organisation can function proper у in the absence of adequate funds. The scarcity of capital and inadequate availability of credit facilities are the major causes of this problem.

Q. 3. What do you understand by securitization of housing finance ? How would you explain bankruptcy-remoteness and insolvency regulations of SPV (Special purpose vehicle) ?

Answer:Securitization of housing finance

Securitization reduces the risk of the underlying assets.  Consider a random selection of mortgages.  Firms in the mortgage business know from experience that a certain percentage of mortgages will experience payment difficulties such as late payments or even defaults.  The problem is that firms can’t identify in advance exactly which mortgages will become problematic.   Thus, the riskiness of a given mortgage is difficult to ascertain.  Securitization eliminates that uncertainty and allows the risk to be priced through higher interest rates.  By pooling together a random selection of mortgages, firms can reduce the overall risk they face since the risk of the pool will approximate the average payment difficulties known from experience.  By charging a

Q. 4. Describe the role of Export Credit Guarantee Corporation of India in promoting export credit. Cite some of the policies and schemes to address the imminent risks in export trade.

Answer:Role of ECGC to promote export credit

The ECGC Limited (ECGC) was established on 30 July 1957 with an objective to provide insurance cover in respect of risks in export trade. These risk may include loss of money on account of foreign buyer becoming bankrupt or sudden import or exchange restrictions resulting in stopping of payments etc. The Export Credit Guarantee

Q. 5  “Apart from DFIs and commercial banks there are various other institutions carved to look into the sectoral needs, especially financial needs”. Can you name some of those while specifying their roles ?

Answer:A DFI is defined as "an institution promoted or assisted by Government mainly to provide development finance to one or more sectors or sub-sectors of the economy.” The institution distinguishes itself by a judicious balance between commercial norms of operation, as adopted by any private financial institution, and developmental obligations. DFIs adopt the "project approach" - emphasizing the viability of the project to be financed – against the "collateral approach". Apart from provision of long-term loans, equity capital,

Q. 6  “The World Bank is supporting the Government of India in its effort to achieve the National goal”. Enumerate.

Answer:The World Bank is an international financial institution that provides loans to developing countries for capital programs. It comprises two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The World Bank is a component of the World Bank Group, and a member of the United Nations Development Group.  The World Bank's official goal is the reduction of poverty. According to its Articles of Agreement, all its decisions must be guided by a

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