ACCOUNTING TERMS:BALANCE SHEET,ASSET,LIABILITIES,CAPITAL,CREDIT,DEBIT

1. 1. 
      
2. BALANCE SHEET: A balance sheet is a statement of the total assets and liabilities of an organization at a particular date – usually the last date of the accounting period.
 

1. A statement of fixed assets, current assets and the liabilities (something referred to as “Net Assets)
2. A statement showing how the net assets have been financed
The Company Act requires the balance sheet to be included in the published financial accounts of all limited companies. In reality, all other organizations that need to prepare accounting information for external users (e.g. charities, clubs and partnerships) will also product a balance sheet since it is an important statement of the financial affairs of the organization.

ASSET: An asset is any right or thing that is owned by a business. Assets include land, buildings, equipment and anything else that can be given a value in money terms for the purpose of financial reporting.

LIABILITIES: To acquire its assets, a business may have to obtain money from various sources in addition to its owners (shareholders) or from retained profits. The various amounts of money owned by a business are called liabilities.
To provide additional information to the user, assets and liabilities are usually classified in the balance sheet as:
Current: those due to be repaid or converted into cash within 12 months of the balance sheet date
Long-term: those due to be repaid or converted into cash more than 12 months after the balance sheet date
Fixed Assets: A fixed assets is an asset which is intended to be of the permanent nature and which is used by the business to provide the capability to conduct the trade.

CAPITAL: As well as borrowing from banks and other sources, all companies receive finance from their owners. This money is generally available for the life of the business and is normally only repaid when the company is “wound up”. To distinguish between the liabilities owed to the third parties and to the business owners, the latter is referred to as “capital” or “equity capital” of the company.

CREDIT: An accounting entry that either decreases assets or increases liabilities and equity on the company's balance sheet. On the company's income statement,  a credit will increase the company's accounts payable (a liability).
The amount of money available to be borrowed by an individual or a company is referred to as credit because it must be paid back to the lender at some point in the future. For example, when you make a purchase at your local mall with your VISA card it is considered a form of credit because you are buying goods with the understanding that you'll need to pay for them later.

DEBIT: An accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet or in your bank account. A debit on an accounting entry will have opposite effects on the balance depending on whether it is done to assets or liabilities, with a debit to assets indicating an increase and vice versa for liabilities.
In fundamental accounting, debits are balanced by credits, which operate in the exact opposite direction. When a debit is made to one account of a financial statement, a corresponding credit must occur on an opposing account. This is the fundamental law of bookkeeping accounting.

MARGINAL STANDING FACILITY

MSF rate is the rate at which banks borrow funds overnight from the Reserve Bank of India (RBI) against approved government securities.
This came into effect in may 2011. Under the Marginal Standing Facility (MSF), currently banks avail funds from the RBI on overnight basis against their excess statutory liquidity ratio (SLR) holdings.

Under the facility, the eligible entities can avail overnight, up to one per cent of their respective Net Demand and Time Liabilities (NDTL) outstanding at the end of the second preceding fortnight.

Rate of Interest: The rate of interest on amount availed under this facility will be 100 basis points above the LAF repo rate, or as decided by the Reserve Bank from time to time.
Timing: The Facility will be available on all working days in Mumbai, excluding Saturdays between 3.30 P.M. and 4.30 P.M.

Minimum request size: Requests will be received for a minimum amount of Rs. One crore and in multiples of Rs. One crore thereafter.

Current MSF rate: In the mid-quarter review of the monetary policy , the Reserve Bank of India (RBI) increased the Marginal Standing Facility (MSF) rate by 25 basis points to 9.00% and increased the Repo rate by 25 basis points to 8.00% with immediate effect.

Requirement: It is required because Commercial banks borrow money from RBI at MSF rate when there is an acute cash shortage or acute asset-liability mismatch.

Some Interesting Science Facts

1. There are 62,000 miles of blood vessles in the human body – laid end to end they would circle the earth 2.5 times.

2. At over 2000 kms long, the Great Barrier Reef is the largest living structure on Earth.

3. The risk of being stuck by a falling meteorite for a human is one occurrence every 9,300 years.

4.  A thimbleful of a neutron star would weigh over 100 million tons.

5. A typical hurricane produces produces the energy equivalent of 8,000 one megaton bombs.

6. Blood sucking hookwormsinhabit 700 million people worldwide.

7. The highest speed ever achieved on a bicycle is 166.94 mph, by Fred Rompelberg.

8. We can produce laser light a million times brighter than sunshine.

9. 65% of those with autism are left handed

10. The combined length of the roots of a Finnish pine tree is over 30 miles.

11. the ocean contains enough salt to cover all the constituents to a depth of nearly 500 feet

12. the interstellar gas cloud Sagittarius B contain billion and billion liters of alcohol.

13. Polar bear can run at 25 miles an hour and jump over 6 feet in the air.

14. 60-65 million years ago dolphins and humans shared a common ancestor

15. Polar bears are nearly undetectable by infrared cameras, due to their transparent fur.

16. The average person accidently eats bugs each year of their life

17. A single ryeplant can spread up to 400 miles of roots underground.

18. The temperature on the surface of Mercury exceeds 430 degrees C during the day, and at night, plummets to minus 180 degrees.

19. The evaporation from a large oak or beech tree is from ten to twenty-five gallons in twenty four hours.

20. Butterflies taste with their hind feet, and their taste sensation works on touch – this allows them to determine whether a leaf is edible or not.


source:bankersadda

BANKING OMBUDSMAN

BANKING OMBUDSMAN

The Banking Ombudsman Scheme enables  fast and inexpensive forum to bank customers for resolution of complaints relating to certain services provided by banks. The Banking Ombudsman Scheme is introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services. As on date, fifteen Banking Ombudsmen have been appointed with their offices located mostly in state capitals. The addresses and contact details of the Banking Ombudsman offices has been provided by the banks.

All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.

PROCEDURE

One can file a complaint with the Banking Ombudsman simply by writing on a plain paper. One can also file it online or by sending an email to the Banking Ombudsman. There is a form along with details of the scheme in our website.However, it is not necessary to use this format.

The complaint should have the name and address of the complainant, the name and address of the branch or office of the bank against which the complaint is made, facts giving rise to the complaint supported by documents.

The Banking Ombudsman may award compensation not exceeding Rs 1 lakh to the complainant only in the case of complaints relating to credit card operations for mental agony and harassment. The Banking Ombudsman will take into account the loss of the complainants time, expenses incurred by the complainant, harassment and mental anguish suffered by the complainant while passing such award.

It was re-introduced in the year 2006 to receive and deal with the public complaints against the banks of deficiencies in specified types of services.

Under this scheme, the customer can give his complaint to the Branch Manager and it should be responded by the Branch Manager within 30 days, if not the customer can file the complaint with the Banking Ombudsman.

AMENDMENTS:

In the year May 2007, the RBI has amended the Banking Ombudsman Scheme to enable the customers to appeal against the Banking Ombudsman’s decision. Before the scheme was amended, the bank customers could appeal only against the awards given by the Banking Ombudsman. The appellate authority for the Banking Ombudsman scheme is the Deputy Governor of RBI.

The RBI has amended the scheme again on 3rd February 2009, to include deficiencies arising out of Internet Banking. According to this new amended scheme, a customer would also be able to lodge a complaint against the bank for its non-adherence to the provisions of the fair practices code for lenders or the Code of Bank’s Commitment to Customer issued by the Banking Codes and Standard Board of India (BCSBI).

On 4TH January 2013, RBI has set up a working group to evaluate and make improvements in this scheme.

CROSSING OF CHEQUES

Crossing of Cheques:

Any cheque that is crossed with two parallel lines, either across the whole cheque or through the top left hand corner of the cheque.

This symbol means that the cheque can only be deposited directly into a bank account and cannot be immediately cashed by a bank or any other credit institution.

By using crossed cheques, cheque writers are able to simply but effectively protect the cheques they write.

It is also usual to write the words "& Co", in between these two lines. However, it is not necessary to write these words. A crossing is a direction to the paying banker not to pay the money to the holder at the counter.

Types of Crossing:

1. General Crossing:

In a general crossing, simply two parallel transverse lines, with or without the words 'not negotiable' in between, may be drawn. Such a cheque is crossed generally.

The effect of general crossing is that the payment of the cheque will not be made at the counter, it can be collected only through a banker.

2. Special Crossing:

In a special crossing, the name of a banker with or without the words 'not negotiable' is written on the cheque. Such a cheque is crossed specially to that banker.

The effect to special crossing is that the paying banker will be the amount of the cheque only through the bank named in the cheque.

3. Restrictive crossing:

This type of crossing has been recognized by usage and custom of the trade.In a restrictive crossing the words 'Account Payee' or Account Payee Only' are added to the general or special crossing.

The effect of restrictive crossing is that the payment of the cheque will be made by the bank to the collecting banker only for the account payee named. If the collecting banker collects the amount for any other person, he will be liable for wrongful conversion of funds.

4. Not negotiable Crossing:

A person taking is cheque crossed generally or specially, bearing in either case the words 'not negotiable' shall not be able to give a better title to the holder than that of the transferor.

The effect of a not negotiable crossing is that the cheque can be transferred but the transferee will not acquire a better title to the cheque. Thus a cheque is deprived of its essential feature of negotiability.

 

source:bankersadda

White Label ATMs

1.What is White label ATM?White Label ATM or White Label Automated Teller Machines or WLAs will be owned and operated by Non Bank entities.From such White Label ATM customer from any bank will be able to withdraw money, but will need to pay a fee for the services.
They will provide the banking services to the customers of banks in India, based on the cards (debit/credit/prepaid) issued by banks.

Note: The extant guidelines on five free transactions in a month as applicable to bank customers for using other bank ATMs would be inclusive of the transactions effected at the WLAs.

2. What is the purpose for introduction of White Label ATMs in India?The objective of permitting non-banks to operate white label ATMs was to enhance the spread of ATMs in semi-urban and rural areas, where bank-owned ATM penetration has not been growing.

3.Who will benefit from White Label ATMs?The white label automated teller machines are likely to benefit customers as well as banks.With the expansion of ATM network, customers will be able to withdraw funds at more locations which will be convenient and located near to their home or place of work.
Banks too support introduction of white label ATMs as such machines are likely to reduce pre-transaction cost for them and will be free from the problems relating to maintaining and running such a payment channel

4.Which is the first non-bank entity to launch first White Label ATM in India?Tata Communications Payment Solutions Ltd. (TCPSL), a subsidiary of Tata Communications, rolled out the first-ever white label Automated Teller Machines (ATMs) network under the brand Indicash.

The first Indicash ATM was inaugurated at Chandrapada, a rural village in Thane district, Maharashtra.

5.What Problems are likely to be faced by Bankers and Customers?Bankers are already sounding caution about the pitfalls of white label ATMs:1. The first and foremost concern for customers will be the inconvenience they may feel in case of failed transactions on WLAs.In such cases the dispute resolution mechanism will involve three entities — the WLA operator, the sponsorbank of the operator, and the customer's bank.
The WLA operators being non bank entities and running purely on profit basis may take longer time or avoid payments on account of failed transactions.
2. The second concern for customers will be the high cost they are likely to pay for use of such ATMs.

6. Four non-bank entities to set up white label ATMs:The Reserve Bank of India (RBI) has permitted four non-bank entities to set up white label ATMs in India.The RBI has issued Certificate of authorisation to 1. Tata Communications Payment Solutions Ltd.2. Prizm Payment Services Pvt. Ltd.3. Muthoot Finance Ltd., and 4. Vakrangee Ltd. for setting up and operating white label ATMs.


Specific Criteria and guidelines for a non-bank entity:
1. The eligibility criteria for WLA Operators (WLAO) would be as under:
i. The Memorandum of Association (MOA) of the applicant entity must cover the proposed activity of operating WLAs.
ii. Non-bank entities must have net worth of at least Rs 100 crore as per the last audited balance sheet.
iii. The net worth of at least Rs 100 crore has to be maintained at all times.

2. The authorised non-bank entity (henceforth referred to as WLA Operator or WLAO) would have the freedom to choose the location of the WLA.

3. The authorisation for setting up a WLA operation under the proposed guidelines would be initially valid for a period of one year.The scheme and number of WLAs sought to be installed would need to be indicated at the time of application.

The details of the schemes are as under:

Scheme Ai. Year -1 minimum of 1000 WLAsii. Year -2 minimum of twice the number of WLAs installed in Year 1 andiii. Year -3 minimum of three times the number of WLAs installed in Year 2The ratio of 3:1 would be applicable, i.e. for every 3 WLAs installed in Tier III to VI centres, 1 WLA can be installed in Tier I to II centres. Out of the 3 WLAs installed in Tier III to VI centres, a minimum of 10 % should be installed in Tier V & VI centres.

Scheme B: A minimum of 5000 WLAs every year for three years.
The ratio of 2:1 would be applicable, i.e. for every 2 WLAs installed in Tier III to VI centres, 1 WLA can be installed in Tier I to II centres. Out of the WLAs installed in Tier III to VI centres, a minimum of 10 % should be installed in Tier V & VI centres.

Scheme C: A minimum of 25,000 WLAs in the first year and at least another 25,000 in the next two years.
The ratio of 1:1 would be applied under this scheme. Out of the WLAs installed in Tier III to VI centres, a minimum of 10 % should be installed in Tier V & VI centres

4. Only cards issued by banks in India (domestic cards) would be permitted to be used at the WLAs in the initial stage.

5. Acceptance of deposits at the WLAs, by the WLAO would not be permitted.

6. The WLA Operator would not be entitled to any fee from the card issuer-bank other than the "Interchange" fee payable to "acquirer" bank under the bank owned ATM scenario.

7. While the WLA operator is entitled to receive a fee from the banks for the use of ATM resources by the banks customers, WLAs are not permitted to charge bank customer directly for the use of WLAs. 

FINANCIAL REGULATORS IN INDIA

FINANCIAL REGULATORS IN INDIA
The financial system In India is regulated by independent regulators in the field of Banking, Insurance, Capital Market, Commodities Market and Pension Funds. However, Government of India plays an significant role in controlling the financial system in India and influences the roles of such regulators at least to some extent.
The following are the five major financial regulatory bodies in India:

1. Financial Sector Development Council(FSDC):
Financial Stability and Development Council  is the apex-level body constituted by Government of India. The idea to create such a super regulatory body was fird=st mooted by Raghuram Rajan Committee in 1998. The recent global economic meltdown has put pressure on governments and institutions across globe to regulate the economic assests. This council is seen as an India’s initiative to be better conditioned to prevent such incidents in future.
PRESENT CHAIRMAN:  The Union Finance Minister of India (P.Chidambaram)

2. Reserve Bank of India:  Reserve Bank of India is the apex monetary institution in India.  It is also called as the Central Bank of India. It was established on 1st April 1935, in accordance with the provisions of the Reserve Bank of India Act,1934 and was given statuary powers in 1949, fully owned by the Government of India. The Head Office of RBI was initially in Calcutta and later moved to Mumbai in 1937. The Central Office is where the Governor sits and where all the policies are formulated.
PRESENT  GOVERNOR-Raghuram Rajan
PRESENT DEPUTY GOVERNOR-
a) H.R. Khan
b) Dr. K.C. Chakrabarty
c) Urijit Patel
RBI celebrated 75 years in 2010.
Note:  Anand Sinha, who was one of the Deputy governor of RBI has retired now.

3. Securities and Exchange Board of India:SEBI was first established in the year 1988 as the non-statutory body for regulating the securities market. It became an autonomous body in 1992 and more powers were given through an ordinance. Since then it regulates the market through its independent powers. SEBI celebrated 25 years on 24th May 2013.
PRESENT CHAIRMAN- Upendra Kumar (U.K. Sinha)
HEAD OFFICE-MUMBAI

4. Insurance Regulatory and Development Authority:The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India and is based in Hyderabad (Andhra Pradesh). It was formed by an Act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA as stated in the act is “to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.”
PRESENT CHAIRMAN-T.S. Vijayan

5. Forward Market Commission in India: FMC headquartered at Mumbai, is a regulatory authority which is overseen by the Ministry of Consumer Affairs, Food and Public Distribution, Govt of India. It is a statutory body set up in 1953 under the Forward Contracts (Regulation) Act, 1952. This commission allows commodity trading in 22 exchanges in India, out of which three are national.
PRESENT CHAIRMAN- Ramesh Abhishek

6. Pension Fund Regulatory and Development Authority: PFRDA was established by Government of India on 23rd August, 2003. The Government has, through an executive order dated 10th October 2003, mandated PFRDA to act as a regulator for the pension sector. The mandate of PFRDA is development and regulation of pension sector in India.
PRESENT CHAIRMAN- Anup Wadhawan

CHEQUE TRUNCATION SYSTEM

Cheque Truncation System is the process of stopping the flow of the physical cheque issued by a drawer to the drawee branch. The physical instrument will be truncated at some point en-route to the drawee branch and an electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc. Thus with the implementation of cheque truncation, the need to move the physical instruments across branches would not be required, except in exceptional circumstances. This would effectively reduce the time required for payment of cheques, the associated cost of transit and delay in processing, etc., thus speeding up the process of collection or realization of the cheques.

The images captured at the presenting bank level would be transmitted to the Clearing House and then to the drawee branches with digital signatures of the presenting bank. Thus each image would carry the digital signature. In order to ensure only images of requisite quality reach the drawee branches, there will be a quality check process at the level of the Capture Systems and the Clearing House Interface. In addition, drawers could consider using holograms, bar coding or such other features, which would add to the uniqueness of the images.

RBI is proposing to implement the project on a PILOT basis in the National Capital Region (NCR), New Delhi. Based on the experienced gathered, it would consider extending the coverage to other centres.

The criteria for banks participating in the Cheque truncation system are:

i. Membership of the clearing house in the NCR.

ii. Membership of the Indian Financial Network (INFINET) 

 In respect of banks who are not members of the INFINET, the following alternatives are available

(a) They may become the sub-members of the direct members or

(b) Such banks may use the infrastructure of the other banks having INFINET membership

All the local cheques can be presented in the CTS.

Thus the benefits could be summarized as:

a) Faster clearing cycle

b) Better reconciliation/verification process

c) Better Customer Service ñ Enhanced Customer Window

d)  No Geographical Dependence

e) Operational Efficiency

f) Minimises Transaction Costs.

g) Reduces operational risk by securing the transmission route.

source:bankersadda

Bill of Exchange

BILL OF EXCHANGE: A non-interest-bearing written order used primarily in international trade that binds one party to pay a fixed sum of money to another party at a predetermined future date. A bill of exchange is also called a draft.
Bills of exchange are similar to checks and promissory notes. They can be drawn by individuals or banks and are generally transferable by endorsements.
The difference between a promissory note and a bill of exchange is that this product is transferable and can bind one party to pay a third party that was not involved in its creation.
If these bills are issued by a bank, they can be referred to as bank drafts. If they are issued by individuals, they can be referred to as trade drafts.

Following are the various parties related to a Bill of Exchange:

a. The Drawer: The person who draws the bill and puts his signature on it is known as the drawer of the bill. He is also called the “maker” of the bill.

b. The Drawee: The person on whom the bill is drawn is called as the drawee of the bill.

c. The Acceptor: The person who accepts the bill is known as the acceptor of the bill. Usually, the drawee accepts the bill. But sometimes, a third party may also accept a bill on behalf of the drawee. The acceptor puts down his signature across the bill showing his acceptance.

d. The Payee: The person to whom the amount of bill is to be paid is known as payee of the bill. The drawer may make the bill payable to himself or to any other person he likes.

e. The Endorsee: The holder of the bill may endorse the bill in favour of someone else known as endorsee. The person who endorses the bill is called endorser.

f. The Holder: The person who holds the bill and is entitled to realise the amount of the bill from the drawee is known as holder of the bill.


Essentials of a bill of exchange:In order that an instrument may be called a bill of exchange it should satisfy the following conditions:1. The order to pay a bill must be unconditional one.
2. The order to pay must be made in writing on the bill.
3. The bill must be signed by the drawer of the bill. Without signature of the drawer the bill will not be genuine one.
4. The order to pay under a bill must be addressed to a certain person which, of course, includes individuals, firm, company, corporation etc.
5. The amount to be paid under a bill must be certain one.
6. The money under a bill must be paid in legal tender currency.
7. The amount should be payable to or to the order of a specified person or to the bearer of the instrument.
8. The amount should be payable either on demand or at a fixed determinable future time.
9. The bill must be duly stamped.
10. The other formalities like dating, stating the names of the parties concerned etc. must be observed.
11. A bill of exchange like a promissory note may be written in any language. It may be written in any form of words provided the requirements of the section are complied with.



source:bankersadda

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date is termed as Promissory Note.

A promissory note typically contains all the terms pertaining to the indebtedness by the issuer or maker to the note's payee, such as the amount, interest rate, maturity date, date and place of issuance, and issuer's signature. The 1930 international convention that governs promissory notes and bills of exchange also stipulates that the term “promissory note” should be inserted in the body of the instrument and should contain an unconditional promise to pay.

Promissory notes that are unconditional and saleable become negotiable instruments that are extensively used in business transactions in numerous countries.A promissory note is usually held by the payee. Once the debt has been discharged, it must be cancelled by the payee and returned to the issuer.

The person who makes the Promissory Note and promise to pay is called the maker and the person to whom the payment is done is called the Payee. It is duly stamped.

Features of Promissory Note:

1. The promissory note must be in writing- Mere verbal promises or oral undertaking does not constitute a promissory note. The intention of the maker of the note should be signified by writing in clear words on the instrument itself that he undertakes to pay a particular sum of money to the payee or order or to the bearer

2. It must contain an express promise or clear undertaking to pay- The promise to pay must be expressed. It cannot be implied or inferred. A mere acknowledgement of intendedness is not enough.

3. The promise to pay must be definite and unconditional- The promise to pay contained in the note must be unconditional. If the promise to pay is coupled with a condition, it is not a promissory note.

4. The maker of the pro-note must be certain- The instrument should show on the fact of it as to who exactly is liable to pay. The name of the maker should be written clearly and ascertainable on seeing the document.

5. It should be signed by the maker- Unless the maker signs the instrument, it is incomplete and of no legal effect. Therefore, the person who promises to pay must sign the instrument even though it might have been written by the promiser himself.

6. The amount must be certain- The amount undertaken to be paid must be definite or certain or not vague. That is, it must not be capable of contingent additions or subtractions.

7. The promise should be to pay money- The promissory note should contain a promise to pay money and money only, i.e., legal tender money. The promise cannot be extended to payments in the form of goods, shares, bonds, foreign exchange, etc.

8. The payee must be certain- The money must be payable to a definite person or according to his order. The payee must be ascertained by name or by designation. But it cannot be made payable either to bearer or to the maker himself.

9. It should bear the required stamping- The promissory note should, necessarily, bear sufficient stamp as required by the Indian Stamp Act, 1889.

10. It should be dated- The date of a promissory note is not material unless the amount is made payable at particular time after date. Even then, the absence of date does not invalidate the pro-note and the date of execution can be independently proved. However to calculate the interest or fixing the date of maturity or lm\imitation period the date is essential. It may be ante-dated or post-dated. If post-dated, it cannot be sued upon till ostensible date.

11. Demand- The promissory note may be payable on demand or after a certain definite period of time.

12. The rate of interest- It is unusual to mention in it the rated of interest per annum. When the instrument itself specifies the rate of interest payable on the amount mentioned it, interest must be paid at the rate from the date of the instrument.

source:bankersadda

Vote on Account

Vote-on-account: Vote-on-account deals only with the expenditure side of the government's budget. The government gives an estimate of funds it requires to meet the expenditure that it incurs during the first three to four months of an election financial year until a new government is in place.
The present government will have to obtain the sanction of the Parliament for an amount sufficient to incur expenditure on various items for a part of the year. This approval by the Parliament to withdraw money from the Consolidated Fund of India is known as Vote-on-Account.

Points to be noted:
1. Vote-on-account deals only with the expenditure side of the government's budget but an interim Budget is a complete set of accounts, including both expenditure and receipts.
2. The Budget is a statement of the financial position of an administration for a definite period of time based on estimates of expenditures during the period and proposals for financing them. A full budget thus spells out both the manner in which the money is to be spent and how it is to be raised.
3. In an election year (like the present one), the ruling government generally opts for a vote-on-account instead of a full budget.
While technically, it is not mandatory for the government to present a vote-on-account, but it would be inappropriate to impose policies that may or may not be acceptable to the incoming government taking over in the same year.
4. Technically, it is not necessary for a government to present a vote-on-account in an election year. But a full Budget just before the elections makes a mockery of the whole exercise.
5. Also, it is ideally the new government's choice to decide how it'll raise and spend money.

How long a vote-on-account can be in force?
Normally, the vote-on-account is taken for two months only.But during election year or when it is anticipated that the main Demands and Appropriation Bill will take longer time than two months, the vote-on-account may be for a period extending two months. 
Typically this period does not exceed six months, as that is the maximum gap possible between two sittings of the Parliament.

source:bankersadda

Basic Difference Between Bill of Exchange & Promissory notes

(1) Parties.There are three parties to a bill of exchange, namely, the drawer, the drawee and the payee; while in a promissory note there are only two parties – maker and payee.

(2) Nature of payment.In a bill of exchange, there is an unconditional order to pay, while in a promissory note there is an unconditional promise to pay.

(3) Acceptance.A bill of exchange requires an acceptance of the drawee before it is presented for payment, while a promissory note does not require any acceptance since it is signed by the persons who is liable to pay.

(4) Liability.The liability of the maker of a promissory note is primary and absolute, while the liability of a drawer of bill of exchange is secondary and conditional. It is only when the drawee fails to pay that the drawer would be liable as a surety.

(5) Notice of dishonor.In case of dishonor of bill of exchange either due to non-payment or non-acceptance, notice must be given to all persons liable to pay. But in the case of a promissory note, notice of dishonor to the maker is not necessary.

(6) Maker’s position.The drawer of a bill of exchange stands in immediate relationship with the acceptor and not the payee. While in the case of a promissory note, the maker stands in immediate relationship with the payee.

(7) Nature of acceptance.A promissory note can never be conditional, while a bill of exchange can be accepted conditionally.

(8) Copies.A bill of exchange can be drawn in sets, but a promissory note cannot be drawn in sets.

(9) Payable to bearer.A promissory note cannot be made payable to a bearer, while a bill of exchange can be so drawn provided it is not payable to bearer on demand.

(10) Payable to maker.In a promissory note, the maker cannot pay to himself. While in the case of a bill of exchange, the drawer and the payee may be one person.

(11) Protest.Foreign bills must be protested for dishonor when such protest is required by the law of the place where they are drawn. But no such protest is required in the case of a promissory note.

UNIT BANKING

The Unit Banking System is that system of banking under which an individual bank carries on banking business either through a single office or through a few offices operating with a limited area. In this system, independent, isolated units perform banking business. The size of operation of Unit Banking are much smaller when compared to branch banking. Unit banking system originated in the USA.

MERITS OF UNIT BANKING
1. Local Development: Unit banking is localized banking. The unit bank has the specialised knowledge of the local problems and serves the requirements of the local people in a better manner than branch banking. The funds of the locality are utilised for the local development and are not transferred to other areas.

2. Promotes Regional Balance: Under unit banking system, there is no transfer of resources from rural and backward areas to the big industrial commercial centres. This tends to reduce regional in balance.

3. Easy Management: The management and supervision of a unit bank is much easier and more effective than that under branch banking system. There are fewer chances of fraud and irregularities in the financial management of the unit banks.

4. Initiative in Banking Business: Unit banks have full knowledge of and greater involvement in the local problems. They are in a position to take initiative to tackle these problems through financial help.

5. No Monopolistic Tendencies: Unit banks are generally of small size. Thus, there is no possibility of generating monopolistic tendencies under unit banking system.

6. No Inefficient Branches: Under unit banking system, weak and inefficient branches are automatically eliminated. No protection is provided to such banks.

7. No dis-economies of Large Scale Operations: Unit banking is free from the dis-economies and problems of large-scale operations which are generally experienced by the branch banks.

8. No delay in taking decisions: In unit banking system, every bank is an independent unit. Hence, there will be no delay in decisions taking.

9. Personal Contact with the customers: Unit Banking System being a small scale independent unit can maintain good personal contacts with the customers for efficient management of the bank. It is said that in case of unit banking system the manager can maintain good personal contact with the customers and businessmen.

10. Low overhead cost:  In case of Unit Banking, the overhead cost will be low than in case of branch banking system.

11. More operational freedom: The managers of the Unit Banking system are given more discretionary powers so that they can study the problems of local customers and provide better services to them on merit.


DISADVANTAGES OF UNIT BANKINGThe following are the disadvantages of unit banking system:

1. No. Distribution of Risks: Under unit banking, the bank operations are highly localised. Therefore, there is little possibility of distribution and diversification of risks in various areas and industries.

2. Inability to Face Crisis: Limited resources of the unit banks also restrict their ability to face financial crisis. These banks are not in a position to stand a sudden rush of withdrawals.

3. No Banking Development in Backward Areas: Unit banks, because of their limits resources, cannot afford to open uneconomic banking business is smaller towns and rural area. As such, these areas remain unbanked.

4. Lack of Specialization: Unit banks, because of their small size, are not able to introduce, and get advantages of, division of labour and specialization. Such banks cannot afford to employ highly trained and specialized staff.

5. Costly Remittance of Funds: A unit bank has no branches at other place. As a result, it has to depend upon the correspondent banks for transfer of funds which is very expensive.

6. Disparity in Interest Rates: Since easy and cheap movement of does not exist under the unit banking system, interest rates vary considerably at different places.

7. Local Pressures: Since unit banks are highly localised in their business, local pressures and interferences generally disrupt their normal functioning.

8. Undesirable Competition: Unit banks are independently run by different managements. This results in undesirable competition among different unit banks.

source:bankersadda

BRANCH BANKING SYSTEM

BRANCH BANKING SYSTEM: Branch banking center or financial center refers to a single bank which operates through various branches in a city or in different locations or out of the cities. This kind of banking system is common in India, e.g. State Bank of India. It offers a wide array of face to face service to its customers.

Historically, branches were housed in imposing buildings, often in a neoclassical architecture style. Today, branches may also take the form of smaller offices within a larger complex, such as a shopping mall. Services provided by a branch include cash withdrawals and deposits from a demand account with a bank teller, financial advice through a specialist, safe deposit box rentals, insurance sales, etc.
 
ADVANTAGES OF BRANCH BANKING:Rapid growth and wide popularity of branch banking system in the 20th century are due to various advantages as discussed below.

1. Economies of Large Scale Operations: Under the branch banking system, the bank with a number of branches possesses huge financial resources and enjoys the benefits of large-scale operations,(a) Highly trained and experienced staff is appointed which increases the efficiency of management,(b) Division of labour is introduced in the banking operations which ensures greater economy in the working of the bank. Right persons are appointed at the right place and specialisation increases,(c) Funds are made available liberally and at cheaper rates,(d) Foreign exchange business is done economically,(e) Large financial resources and wider geographical coverage increases public confidence in the banking system.

2. Spreading of Risk: Another advantage of the branch banking system is the lesser risk and greater capacity to meet risks,(a) Since there is geographical spreading and diversification of risks, the possibility of the failure of the of the bank is remote,(b) The losses incurred by some branches may be offset by the profits earned by other branches,(c) Large resources of branch banks increase their ability to face any crisis.

3. Economy in Cash Reserves: Under the branch banking system, a particular branch can operate without keeping large amounts of idle reserves. In time of the need, resources can be transferred from one branch to another.

4. Diversification on Deposits and Assets: There is greater diversification of both deposits and assets under branch banking system because of wider geographical coverage,(a) Deposits are received from the areas where savings are in plenty,(b) Loans are extended in those areas where funds are scarce and interest rates are high. The choice of securities and investments is larger in this system which increases the. safety and liquidity of funds.

5. Cheap Remittance Facilities: Since bank branches are spread over the whole country, it is easier and cheaper to transfer funds from one place to another. Inter-branch indebtedness is more easily adjusted than inter-bank indebtedness.

6. Uniform Interest Rates: Under branch banking system, mobility of capital increases, which in turn, brings about equality in interest rates. Funds are transferred from areas with excessive demand for money to areas with deficit demand for money. As a result, the uniform rate of interest prevails in the whole area; it is prevented from rising in the excessive demand area and from falling in the deficit demand area.

7. Proper Use of Capital: There is proper use of capital under the branch banking system. If a branch has excess reserves, but no opportunities for investment, it can transfer the resources to other branches which can make most profitable use of these resources.

8. Better Facilities to Customers: The customers get better and greater facilities under the branch banking system. It is because of the small number of customers per branch and the increased efficiency achieved through large scale operations.

9. Banking Facilities in Backward Areas: Under the branch banking system, the banking facilities are not restricted to big cities. They can be extended to small towns and rural as well as underdeveloped areas,. Thus, this system helps in the development of backward regions of the country.

10. Effective Control: Under the branch banking system, The Central bank than have a more efficient control over the banks because it has to deal only with few big banks and nor with each individual branch. This ensures better implementation of monetary policy.

DISADVANTAGES OF BRANCH BANKING SYSTEM:Following are the main disadvantages and limitations of branch banking system:

1. Problem of Management: Under the branch banking system a number of difficulties as regards management, supervision and control arise:(a) since the management of the bank gets concentrated at the head office, the managers can afford to be lax and indulgent in their duties and are often involved in serious irregularities while using the funds.(b) Since the branch manager has to seek permission from the head office on each and every matter, this results in unnecessary delay and red- tapism in the banking business.

2. Lack of Initiative: Branch managers generally lack initiative on all-important matters; they cannot take independent decisions and have to wait for. The clearance signal from the head office.

3. Monopolistic Tendencies: Branch banking encourages monopolistic tendencies in the banking system. A few big banks dominate and control the whole banking system of the country through their branches. This can lead to the concentration of resources into a few hands.

4. Regional Imbalances:Under branch banking system, the financial resources collected in the smaller and backward regions are transferred to the bigger industrial centres. This encourages regional imbalances in the country.

5. Adverse Linkage Effect: Under branch banking system, the losses and weaknesses of some branches also have their effect on other branches of the bank.

6. Inefficient Branches: In this system, the weak and unprofitable branches continue to operate under the protection cover of the large and more profitable branches.

7. Other Defects: Other defects of branch banking system arc as follows:(a) Preferential treatment is given to the branches near the head office,(b) Higher interest rates are charged in the developed area to compensate for the lower rates charged in the backward areas,(c) There is concentration and unhealthy competition among the branches of different banks in big cities,(d) Many difficulties are faced when a bank opens branches, especially in foreign countries. 

G 20:Developing Nations

About G-20

The Group of Twenty Finance Ministers and Central Bank Governors (also known as the G-20, G20, and Group of Twenty) is a group of finance ministers and central bank governors from 20 major economies: 19 countries plus the European Union, which is represented by the President of the European Council and by the European Central Bank.

The G-20 was proposed by former Canadian Prime Minister Paul Martin as a forum for cooperation and consultation on matters pertaining to the international financial system.

The group was formally inaugurated in September 1999, and held its first meeting in December 1999.

G-20 members represent around:

1. 85 per cent of global gross domestic product

2. Over 75 per cent of global trade, and

3. two-thirds of the world’s population.

  

The members of the G-20 are:

Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, United States, European Union.

Objective:

It studies, reviews, and promotes high-level discussion of policy issues pertaining to the promotion of international financial stability, and seeks to address issues that go beyond the responsibilities of any one organization.

Management Arrangements

The G-20 Presidency rotates annually according to a system that ensures a regional balance over time. Reflecting its nature as an informal political forum, the G20 does not have a permanent secretariat.

Instead, the G-20 President is responsible for bringing together the G-20 agenda in consultation with other members and in response to developments in the global economy.

To ensure continuity, the Presidency is supported in this by the “troika”, made up of the current, immediate past and future host countries.

During Australia’s host year, the members of the G20 troika are Australia, Russia and Turkey.

The G20 works closely with international organizations which are invited to attend a relevant G20 meeting which includes: 

1. Financial Stability Board

2. International Labour Organisation

3. International Monetary Fund

4. Organisation for Economic Co-operation and Development

5. United Nations

6. World Bank and the

7. World Trade Organization.