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.

FACTS ABOUT INDIA

1. India is the world's largest, oldest, continuous civilization.

2. India is the world's Largest democracy.

3. India never invaded any country in her last 1000 years of history.

4. India invented the number system. Zero was invented by Aryabhatta.

5.When many cultures were only nomadic forest dwellers over 5000 years ago, Indians established Harappan culture in Sindhu Valley (Indus Valley Civilization)

6. There are 300,000 active mosques in India , more than in any other country, including the Muslim world

7. Sanskrit is the mother of all the European Languages . Sanskrit is the most suitable language for computer software - a report in Forbes magzine July 1987.

8. Chess (Shataranja or AshtaPada) was invented in India.

9. India has the second largest pool of Scientist and Engineers in the World.

10. India is the largest English speaking nation in the world.

11. India is the only country other than US and Japan, to have built a super computer indeigenously.

12. India has the largest number of Post Offices in the world

13. One of the largest employer in the world is the Indian Railways , employing over a million people

14. India was one of the richest countries till the time of British rule in the early 17th Century. Christopher Columbus, attracted by India's wealth, had come looking for a sea route to India when he discovered America by mistake.

15. The Baily Bridge is the highest bridge in the world. It is located in the Ladakh valley between the Dras and Suru rivers in the Himalayan mountains. It was built by the Indian Army in August 1982

16. The Vishnu Temple in the city of Tirupathi built in the 10th century, is the world's largest religious pilgrimagedestination. Larger than either Rome or Mecca, an average of 30,000 visitors donate $6 million (US) to the temple everyday.

17. Varanasi, also known as Benaras, was called "the Ancient City" when Lord Buddha visited it in 500 B.C., and is the oldest, continuously inhabited city in the world today.

18. Martial Arts were first created in India, and later spread to Asia by Buddhist missionaries.

19.Yoga has its origins in India and has existed for over 5,000 years.

20. Until 1896, India was the only source of diamonds in the world.

21. The value of "pi" was first calculated by the Indian Mathematician Budhayana, and he explained the concept of what is known as the Pythagorean Theorem. He discovered this in the 6th century, long before the European mathematicians.

22. Ayurveda is the earliest school of medicine known to mankind. The Father of Medicine, Charaka, consolidated Ayurveda 2500 years ago.

23. India provides safety for more than 300,000 refugees originally from Sri Lanka, Tibet, Bhutan, Afghanistan and Bangladesh, who escaped to flee religious and political persecution.

24. Sushruta is regarded as the Father of Surgery. Over2600 years ago Sushrata & his team conducted complicated surgeries like cataract, artificial limbs, cesareans, fractures, urinary stones, plastic surgery and brain surgerie

25. The Art of Navigation & Navigating was born in the river Sindh over 6000 years ago. The very word Navigation is derived from the Sanskrit word 'NAVGATIH'. The word navy is also derived from the Sanskrit word 'Nou'.