Capital Adequacy Ratio

The Committee on Banking Regulations and Supervisory Practices (Basel Committee) had released the guidelines on capital measures and capital standards in July 1988 which were been accepted by Central Banks in various countries including RBI. In India it has been implemented by RBI w.e.f. 1.4.92 Objectives of CAR : The fundamental objective behind the norms is to strengthen the soundness and stability of the banking system. Capital Adequacy Ratio or CAR or CRAR : It is ratio of capital fund to risk weighted assets expressed in percentage terms i.e. Minimum requirements of capital fund in India: * Existing Banks 09 % * New Private Sector Banks 10 % * Banks undertaking Insurance business 10 % * Local Area Banks 15% Tier I Capital should at no point of time be less than 50% of the total capital. This implies that Tier II cannot be more than 50% of the total capital. Capital fund Capital Fund has two tiers - Tier I capital include *paid-up capital *statutory reserves *other disclosed free reserves *capital reserves representing surplus arising out of sale proceeds of assets. Minus *equity investments in subsidiaries, *intangible assets, and *losses in the current period and those brought forward from previous periods to work out the Tier I capital. Tier II capital consists of: *Un-disclosed reserves and cumulative perpetual preference shares: *Revaluation Reserves (at a discount of 55 percent while determining their value for inclusion in Tier II capital) *General Provisions and Loss Reserves upto a maximum of 1.25% of weighted risk assets: *Investment fluctuation reserve not subject to 1.25% restriction *Hybrid debt capital Instruments (say bonds): *Subordinated debt (long term unsecured loans: Risk weighted assets - Fund Based : Risk weighted assets mean fund based assets such as cash, loans, investments and other assets. Degrees of credit risk expressed as percentage weights have been assigned by RBI to each such assets. Non-funded (Off-Balance sheet) Items : The credit risk exposure attached to offbalance sheet items has to be first calculated by multiplying the face amount of each of the off-balance sheet items by the credit conversion factor. This will then have to be again multiplied by the relevant weightage. Reporting requirements : Banks are also required to disclose in their balance sheet the quantum of Tier I and Tier

II capital fund, under disclosure norms. An annual return has to be submitted by each bank indicating capital funds, conversion of off-balance sheet/non-funded exposures, calculation of risk -weighted assets, and calculations of capital to risk assets ratio,

Features Accounts of Individuals - Legal name and any other names used

Documents

(i) Passport (ii) PAN card (iii) Voter's Identity Card (iv) Driving licence (v) Identity card (subject to the bank's satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank (i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the bank) (any one document which provides customer information to the satisfaction of the bank will suffice)

- Correct permanent address

Accounts of Companies - Name of the company - Principal place of business - Mailing address of the company - Telephone / Fax Number Accounts of Partnership Firms - Legal name (i) Registration certificate, if registered (ii) Partnership deed - Address (iii) Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf - Names of all partners and their (iv) Any officially valid document identifying the partners and the persons addresses holding the Power of Attorney and their addresses - Telephone numbers of the firm (v) Telephone bill in the name of firm / partners and partners Accounts of Trusts & Foundations - Names of trustees, settlers, beneficiaries and signatories (i) Certificate of registration, if registered (ii) Power of Attorney granted to transact business on its behalf (iii) Any officially valid document to identify the trustees, settlors, - Names and addresses of the beneficiaries and those holding Power of Attorney, founders / managers / founder, the managers / directors and their addresses directors and the beneficiaries (iv) Resolution of the managing body of the foundation / association - Telephone / fax numbers (v) Telephone bill Accounts of Proprietorship Concerns - Proof of the name, address and activity of the concern * Registration certificate (in the case of a registered concern) * Certificate / licence issued by the Municipal authorities under Shop & (i) Certificate of incorporation and Memorandum & Articles of Association (ii) Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account (iii) Power of Attorney granted to its managers, officers or employees to transact business on its behalf (iv) Copy of PAN allotment letter (v) Copy of the telephone bill

Establishment Act, * Sales and income tax returns * CST / VAT certificate * Certificate / registration document issued by Sales Tax / Service Tax / Professional Tax authorities * Registration / licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority / Department. * IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of bank account. * Licence issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc. Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.

Features of various Deposit Schemes available for Non-Resident Indians (NRIs) Particulars Foreign Currency (NonResident) Account (Banks) Scheme [FCNR (B) Account] (2) Non-Resident (External) Rupee Account Scheme [NRE Account] (3) NRIs (individuals / entities of Bangladesh / Pakistan nationality/ownership require prior approval of RBI)

Non-Resident Ordinary Rupee Account Scheme [NRO Account] (4) Any person resident outside India (other than a person resident in Nepal and Bhutan). Individuals / entities of Bangladesh / Pakistan nationality / ownership as well as erstwhile Overseas Corporate 2 Bodies require prior approval of the Reserve Bank.

(1)

Who can open an NRIs (individuals / entities of account Bangladesh / Pakistan nationality / ownership require prior approval of RBI)

Joint account

In the names of two or more non-resident individuals provided all the account holders are persons of Indian nationality or origin; Resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on former or survivor basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder.

In the names of two or more May be held jointly with residents non-resident individuals provided all the account holders are persons of Indian nationality or origin; Resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on former or survivor basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder. Permitted Permitted Indian Rupees

Nomination

Permitted

Currency in Any permitted currency i.e. a Indian Rupees which account is foreign currency which is freely denominated convertible

Repatriablity

Repatriable

Repatriable

Not repatriable except for the following: i) current income ii) up to USD 1 (one) million per financial year (April-March), for any bonafide purpose, out of the balances in the account, e.g., sale proceeds of assets in India acquired by way of purchase/ inheritance / legacy inclusive of assets acquired out of settlement subject to certain conditions.

Type of Account Term Deposit only Period for fixed deposits Rate of Interest For terms not less than 1 year and not more than 5 years. Deposits of all maturities contracted effective from the close of business in India as on November 23, 2011, interest shall be paid within the ceiling rate of LIBOR/SWAP rates plus 125 basis points for the respective currency/corresponding maturities (as against LIBOR/SWAP rates plus 100 basis points effective from close of business on November 15, 2008). On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency/maturity plus 125 basis points. For floating rate deposits, the interest reset period shall be six months. Operations by Power of Attorney in favour of a resident by the non-resident account holder Operations in the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.

Savings, Current, Recurring, Savings, Current, Recurring, Fixed Deposit Fixed Deposit At the discretion of the bank. As applicable to resident accounts. Subject to cap as stipulated by the Department of Banking Operations and Development, Reserve Bank of India : Banks are free to determine their interest rates on savings deposits under Ordinary Non-Resident (NRO) Accounts. However, interest rates offered by banks on NRO deposits cannot be higher Banks are free to determine than those offered by them on the interest rates of savings comparable domestic rupee and term deposits of maturity deposits. of one year and above. Interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

Operations in the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.

Operations in the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments in rupees, remittance of current income to the account holder outside India or remittance to the account holder himself through normal banking channels. Remittance is subject to the ceiling of USD 1 (one) million per financial year.

Loans a. In India i) to the Account Permitted only up to Rs.100 Permitted up to Rs.100 lakhs Permitted subject to the extant

holder

lakhs

Permitted up to Rs.100 lakhs rules

i) to Third Parties Permitted only up to Rs.100 lakhs b. Abroad i) to the Account Permitted holder (Provided no funds are remitted back to India and are used abroad only) ii) to Third Parties Permitted (Provided no funds are remitted back to India and are used abroad only) Permitted (Provided no funds are remitted back to India and are used abroad only) Permitted (Provided no funds are remitted back to India and are used abroad only)

Permitted, subject to conditions Not Permitted

Not Permitted

c. Foreign Currency Loans in India i) to the Account holder Permitted up to Rs.100 lakhs ii) to Third Parties

Not Permitted

Not Permitted

Not Permitted

Not Permitted

Not Permitted Personal requirement and / or business purpose.*

Purpose of Loan i) Personal purposes or for i) Personal purposes or for a. In India carrying on business activities * carrying on business i) to the Account activities.* holder ii) Direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms / companies iii) Acquisition of flat / house in India for his own residential use. (Please refer to para 9 of Schedule 2 to FEMA 5). ii) Direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms / companies. iii) Acquisition of flat / house in India for his own residential use. (Please refer to para 6(a) of Schedule1 to FEMA 5). Fund based and / or nonfund based facilities for personal purposes or for carrying on business activities *. (Please refer to para 6(b) of Sch. 1 to FEMA 5) Fund based and / or nonfund based facilities for bonafide purposes.

ii) to Third Parties

Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities *. (Please refer to para 9 of Schedule 2 to FEMA 5).

Personal requirement and / or business purpose *

b. Abroad Fund based and / or non-fund To the account based facilities for bonafide holder and Third purposes. Parties

Not permitted.

http://www.docstoc.com/docs/73364352/Recent-Trends-in-Commercial-Banks

The CASA (current and savings account) ratio is the ratio of deposits in the current and savings accounts of a [1] bank to its total deposits. A high CASA ratio indicates that a higher portion of the banks deposits come from current and savings accounts. This means that the bank is getting money at low cost, since no interest is paid on the current accounts and the interest paid on savings account is usually low. Current and Saving Accounts are demand deposits and therefore pay lower interest rates compared to term deposits where the rates are higher. Thus higher CASA ratio means that more of the money deposited in the bank is in the [1] demand deposits i.e. the CASA, thus bank is getting the money at lower cost.