Banking for Beginners

In this blog, we shall discuss evolution of Debt Resolution process in India and provisions of three main debt resolution legislations. The blog is meant to present the subject in a nutshell, to any person who is interested in this subject. Debt resolution or settlement   is an arrangement whereby creditors settle their dues from the debtor / borrower for a certain reduced amount, which ensures that they are able to recover at least part of their dues as against the possibility of a total loss. Thus the process tries to protect and balance the interest of both creditors and debtors. Historical perspective Reference to the concept of debt resolution can be found in early Roman law doctrine of Cessio bonorum   (Latin for "surrender of goods"). It meant a voluntary action by a debtor to surrender goods   to the creditors . It did not include a discharge from liability unless the property ceded was sufficient for the purpose, but it secured the debtor from personal arrest. T...

Current turmoil in some US and European Banks has raised questions (in minds of general public) about various risks being faced by Banks, especially in the Indian context, and what measures Banks adopt for mitigation of such risks   Risk in Banking According to Wikipedia, The Oxford English Dictionary (OED) 3 rd edition defines risk as: “(Exposure to) the possibility of loss, injury, or other adverse or unwelcome circumstance; a chance or situation involving such a possibility.” Risks are inherent in business of banking. A bank which does not take fair amount of risk cannot grow. Excessive risk may result in faster growth in the short term but at the same time could lead the Bank to a situation which may not be good for its stakeholders.   As Banks primarily deal with money, perception of risk regarding Bank’s business or stability acquires added significance. Trust is the essential factor in business of banking and therefore it’s very important for Banks to see that...