MA0044 &INSTITUTIONAL BANKING

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ASSIGNMENT

DRIVE	FALL 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. Institutional banking refers to meeting the financial needs of the institutional clients by financial institutions, including commercial banks. Explain the challenges of institutional banking.

Answer:Institutional Banking is a specialized division within a bank that offers a comprehensive suite of products and services for large institutions both locally and abroad. In particular they can provide complex financing and advisory functions for corporate and government clients who may require tailored capital products. In addition they may also advise on surrounding debt, equity capital markets, risk management and transactional banking.

Institutional banking usually incorporates services such as evaluating mergers & acquisitions, investments and divestments, managing treasuries etc. Institutional banking helps clients to create corporate strategies and develop opportunities for growth on a national and global level. Institutional banking provides clients with

Q.2. Explain the role of Development Finance Institutions (DFIs) in infrastructure Development. What is Risk mitigation? Write the simplification of procedures and removing red-tapism.

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, guarantees and underwriting functions, a development bank normally is also expected to upgrade the managerial and the other operational pre-requisites of the assisted projects.

Thus, the basic emphasis of a DFI is on long-term finance for industrial and infrastructure projects and on assistance for activities or sectors of the economy where the risks are higher than what the other traditional financial institutions like banks may be willing to assume. In fact, in the olden days, banks were only meeting the short term working capital needs of trade and business and were generally averse to lending for the long term.

Q.3. Explain the legal structure of Micro Finance in India (MFI). Explain the challenges faced by MFI.

Answer:Microfinance is a source of financial services for entrepreneurs and small businesses lacking access to banking and related services. The two main mechanisms for the delivery of financial services to such clients are:

(1) relationship-based banking for individual entrepreneurs and small businesses; and

(2) group-based models, where several entrepreneurs come together to apply for loans and other services as a group.

In some regions, for example Southern Africa, microfinance is used to describe the supply of financial services to low-income employees, which is closer to the retail finance model prevalent in mainstream banking.

For some, microfinance is a movement whose object

Q.4. Explain the major considerations in trade finance. Explain the methods of payment in international trade. Write the services available for exporters.

Answer:Trade Finance is a specific topic within the financial services industry. It's much different, for example, than commercial lending, mortgage lending or insurance. A product is sold and shipped overseas, therefore, it takes longer to get paid. Extra time and energy is required to make sure that buyers are reliable and creditworthy. Also, foreign buyers - just like domestic buyers - prefer to delay payment until they receive and resell the goods. Due diligence and careful financial management can mean the difference between profit and loss on each transaction.

The following factors and considerations apply to financing in general.

Financing can make the sale: Favorable payment terms make a product more competitive. If the competition offers better terms and has a similar product, a sale can be lost.In other cases, the exporter may need financing to produce the goods or to finance other aspects of a sale, such as promotion and selling costs, engineering

Q.5. Write brief introduction of International Development Association (IDA). Explain the operations of IDA and financial support to India by IDA.

Answer:The International Development Association (IDA) is an international financial institution which offers concessional loans and grants to the world's poorest developing countries. The IDA is a member of the World Bank Group and is headquartered in Washington, D.C., United States. It was established in 1960 to complement the existing International Bank for Reconstruction and Development by lending to developing countries which suffer from the lowest gross national income, from troubled creditworthiness, or from the lowest per capita income. Together, the International Development Association and International Bank for Reconstruction and Development are collectively generally known as the World Bank, as they follow the same executive leadership and operate with the same staff.

Q.6. Explain the role of technology in Institutional Banking. Write the advantages of technology in Institutional Banking.

Answer:The Investment Banking division is a sector that works on bringing together the advisory and financing, equity securities, asset management, treasury and capital markets, and private equity activities of any group to complete the CIBM structure, while also providing a complete list of financial products to the clients they serve. There are increasing number of banking and institutional services that are being considered by several customers as they work closely with different projects such as finance exporting, both onshore and offshore, to provide structured solutions.

The clients are well serviced by dedicated client servicing teams, which combine relationship managers, product specialists, and industry specialists to develop customized financial solutions. These small groups, in turn, form the

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