Banking for Beginners

Banking for Beginners: PNB Fraud - what happened and what went wrong : It has been almost three weeks since Punjab National Bank (PNB) went public with the Nirav Modi / Geetanjali Gems (Mehul Choksi) issue. R...

It has been almost three weeks since Punjab National Bank (PNB) went public with the Nirav Modi / Geetanjali Gems (Mehul Choksi) issue. Reams have been written about various facets of the entire episode and may continue in days to come. There has been an intense debate in media and public domain, and the whole episode has been variously classified as fraud, open loot of public money, misdemeanor and Niravgate etc , but there are many core process issues which are still not clear.   For the uninitiated, let’s try to decipher what has happened and what is yet unanswered.   On February 14, 2018 PNB informed Bombay stock exchange that it had detected fraudulent transactions worth around Rs 11,380 crore (USD 1.77 billion) put through its Mid Corporate branch at Brady House, Mumbai. It further said that the Bank has already lodged a complaint with Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) implicating celebrity Jewelers and Diamantaires Nirav ...

As we wrap up 2016, and reflect on issues affecting Indian Banking industry during the year (apart from Demonetization), Profitability of Banks crops up as one of the most outstanding issues. The subject got into focus in the face of write-offs of doubtful or bad loans, requiring a provision to be made out of profits. For the uninitiated it presented a strange scenario whereby Banks continued to register ‘operational profits’, but the bottom line showed ‘net losses’ mainly on account of additional provisioning for doubtful debts. In this context, for a layman, it is relevant to understand nuances in fixation of loan pricing, as provisioning for doubtful debts and its impact on profitability shall continue to shadow Banks in 2017 as well. Let us first understand Bank’s profitability model. Bank’s profits are mainly driven by the difference in interest it earns on loans as against interest it pays out on deposits, with the margin getting squeezed by administrative expenses. Bu...

There has been great curiosity about the Start Up India campaign at various fora - what is it all about, who are eligible, what are the benefits etc etc. For the benefit of all who wish to understand and also take advantage, I have tried to put together various facets of the scheme. The idea of a Startup India   campaign was first mooted by Prime Minister Narendra Modi in his Independence Day address to the Nation from the ramparts of historic Red Fort on 15 th August, 2015. The objective- to promote entrepreneurship which in turn shall lead to job creation , through development of a favorable eco-system with less bureaucratic intervention, ease of doing business , financial incentives and easy availability of bank finance for start-up ventures. The scheme combined with a 19 point action plan was formally launched on 16 th January 2016 by PM Narendra Modi at Vigyan Bhavan, New Delhi in the presence of Government ministers, senior bureaucrats and leading luminaries fr...

In March 2016, a survey was conducted in United States by RBC Wealth Management-U.S. and City National Bank. The poser was that whether financial literacy is an important-enough skill that it should be taught alongside reading, writing and arithmetic ?  It was found that 87 percent of Americans believe that financial literacy should be taught in schools. Of those in favor of incorporating financial literacy into the classroom, 15 percent said instruction should begin as early as elementary. The rest (72 percent) said it should be taught in middle and high school. In the last 3 - 4 years, concerted attempts have been made the world over, to include financial literacy at the High School level. In India, CBSE issued guidelines in October 2015, to all its affiliated schools to expose students to financial literacy and develop their capabilities through a project called School Bank Champs.. The project envisages interaction with bank authorities, exposure to openin...