Islamic Finance Industry
analytical Essay
933 words
Islamic finance industry in Malaysia has been in existences more than 30 years. The enactment of the Islamic Banking Act 1983 enabled the country’s first Islamic Bank to be established. Malaysia’s long track record of building a successful domestic Islamic financial industry of over 30 years gives the country a solid financial that adds to the richness, diversity and maturity of the financial system. (RosniaMasruki, 2010).
Before the advent of Islamic banks, financial market had been monopoly by conventional banks. However, in recent years Malaysian Islamic banks have to operate in an increasingly competitive environment. Alongside the conventional banking system, the Islamic banking system has steadily evolved to become a major player on the Malaysian financial landscape. The establishment of Bank Islam Malaysia Berhad (BIMB) in 1983 really marks the beginning of a new era in Islamic banking in Malaysia. The Islamic banking system received a further boost when a scheme where conventional banks can open windows for Islamic banking products that called Interest-free banking system. (Mariani Abdul Majid, 2003).
However, the world has known several financial crises over the course of history, particularly in the 20th century, since the Great Depression of 1930s followed by the oil price boom in the 70s. Apart from these major crises, smaller breakdowns occurred in economy, which is normal, considering the cyclical nature of the economic system in economic production, inflation rate, the level of GDP, trade, and other factors. Yet it does not occur in each cycle, or downturn, that so many factors coexist in one time that shakes the global economic system as much as it happened in the latest crisis starting in 2007-2008. (Renata JankaT...
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...-free nature.
From the development of Islamic banks in Malaysia, it is imperative for Islamic banks to play their role effectively and efficiently to contribute to the overall stability of the financial system, and the growth and development of the economy as well as less effective during global financial crisis. The issues that arise are whether the Islamic banks are able to survive in the Malaysian economy, and the performance and stability of Islamic banks in Malaysia during financial crisis question remains. Although consideration is given in the volatile financial environment, would Islamic banks in Malaysia be able to withstand financial crisis.
These raise the need to undertake this research to examine this performance and stability issues. There are many reasons why Islamic banks can survive during the financial crisis in terms of performance and stability.
In this essay, the author
- Explains malaysia's long track record of building a successful domestic islamic financial industry adds to the richness, diversity, and maturity of the financial system.
- Explains that the establishment of bank islam malaysia berhad (bimb) in 1983 marked the beginning of a new era in islamic banking in malaysia.
- Explains that the world has known several financial crises over the course of history, including the great depression of 1930s followed by the oil price boom in the 70s.
- Explains that the financial crisis of 2007-2008, also known as the global financial crisis, resulted in the threat of collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world.
- Explains that the islamic banking institutions remained stable and registered commendable performance during the crisis period. the extent of their impact was not as bad as that on the conventional banks.
- Explains that islamic intermediation is asset-based, and centers on risk sharing. the latter's model does not allow investing in or financing instruments that have adversely affected their conventional competitors and triggered the global financial crisis.
- Explains the goal of this paper is to understand the effect of financial crisis on islamic banks in malaysia during the middle of 2008.
- Explains how the paper is organized into five sections. the first section reviews the literature on the effects of financial crisis on banking industry, and the second section discusses the findings and results.
- Explains that the recent global financial crisis has induced a series of failures of many conventional banks and led to an increased interest in the islamic banking business model.
- Argues that the current financial crisis could have been avoided if the islamic finance and banking system had been in place instead of conventional one.
- Analyzes how kassim and abd.majid (2010) empirically examine the impacts financial shocks on the islamic banks and conventional banks in malaysia.
- Opines that it is imperative for islamic banks to play their role effectively and efficiently to contribute to the overall stability of the financial system.
- Opines that islamic banks can survive during the financial crisis in terms of performance and stability.
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- What Is Financial Crisis?argumentative essayAccording to Abdulkareem Abu al Nasr, The CEO of NCB, or Al-Ali Bank, global financial crisis happens because of " excessive use of structured debt and securities which drove unsustainable levels of financial leverage'' (Could Islamic Banks Help, 2012). On the other hand, Islamic banks that prohibits riba prevents this kind of situation from happening. Islamic banks focused their activities mainly on domestic markets, where most of the activities involved tangible objects instead of debt based financing. That way, Islamic banks would not be seriously affected even when financial crises hits the economy. Conventional banks gain their profit mainly from giving out loans to borrowers and receive interest in the process by using money deposited by customers. This causes conventional banks to be exposed to banking crisis where the bank is incapable of returning the money to depositors due to the moneys given out for loans or investment purposes. Therefore, it can be conclude that the nature of Islamic law, Shariah has a major contribution to the stability of Islamic banks around the world during financial
In this essay, the author
- Explains that financial crisis is a situation where one or more institutions lose their nominal values. it can be explained as the situation when the supply of money cannot compensate for the demand for money.
- Explains that there are many forms of financial crisis in the economy nowadays. banks gain their profit by providing deposit accounts to users, and use those deposits to provide loans and investments.
- Explains that speculative bubble is a situation where the price of security suddenly spikes above their actual value, causing major loss to the company that issues the security.
- Analyzes how the financial crisis has given islamic banks a chance to show their capabilities to withstand the crisis.
- Concludes that islamic law based structure of the islamic banks has made them more resilient and capable to maintain stability during financial crisis.
- Compares islamic banks' unique banking structure to conventional banks, which is based on islamic law, shariah, that prohibits earning interest through loans and discourages financial speculations.
1216 wordsRead More - The Global Financial Crisisanalytical essayThis paper is divided into several sections. Following introduction in Section 1, Section 2 discusses the causes of the global current financial crisis. Next, Section 3 examines the Islamic theory of finance and how it can or cannot provide a solution to the current crisis. Section 4 provides a critical analysis of what lies ahead for Islamic finance and managerial implications of Islamic finance.
In this essay, the author
- Defines financial crises as disturbances in financial markets causing constraint to the flow of credit to families and businesses and having opposing effect on the real economy.
- Explains that financial bubbles are commonly linked to easy credit, extreme debt, assumption, greed, fraud, and corruption. easy credit forefronts to lack of satisfactory market discipline, which in rank derives excessive and irresponsible lending.
- Explains that the difference between a bank's deposits and its long term assets leads to banks' inability to reintroduce short-term debt.
- Opines that it makes it possible for financial institutions to operate without having sufficient assets to meet their votive obligations.
- Opines that failure of one particular financial institution to meet its financial obligations threatens the stability of the financial market.
- Explains that the global financial crisis has brought the most important economic recession, which has shattered the world as over 100 million more people are forced into poverty. this paper presents islamic finance (if) as an alternative to conventional financial system.
- Argues that the main cause of financial crisis is recognized to a carelessness of lending standards, determined by greed and appetite for higher earnings.
- Argues that the global financial crisis is a crisis of failed morality and debatably the cause of greed, exploitation and corruption.
- Explains that the current global financial crisis has accentuated the urgent need to embark on one of the most radical reshape of international financial system. they propose adjusting the rate of interest to 0% and revising the tax rate to about 2%.
- Argues that islamic finance has the potential to become an alternative model for global system. shariah-compliant banking proposes uncompromising moral guidelines for dealing with money.
- Argues that islamic finance is well accomplished to deliver important contributions towards a more healthy and fixed international economy.
2091 wordsRead More - Financial performance of Islamic banking and conventional banking in United Kingdom- A Comparative Studyexplanatory essayChapter 1: Introduction 1.1-Introduction to Chapter: This chapter describes the brief introduction about research title, research aims, research objectives, research hypothesis, research context and research limitation used in this research. 1.2-Research Title: Financial performance of Islamic banking and conventional banking in United Kingdom- A Comparative Study. 1.3-Research Aim: The Aim of this research is to analysed and evaluate the financial performance of European Islamic Investment Bank (UK) with Allied Irish bank (UK) and Northern Bank (UK), In Terms of their Profitability, Liquidity, Risk & solvency & Efficiency Ratios which will give an insight comparison of overall financial performances of European Islamic Investment Bank with Allied Irish bank And Northern Bank. 1.4- Research Objective Research Objectives are set of goals which researchers intends to make from the research conducted.
In this essay, the author
- Describes the research title, aims, objectives, hypothesis, research context, and research limitation in this chapter.
- Explains the aim of this research is to analyze and evaluate the financial performance of european islamic investment bank with allied irish bank and northern bank.
- Explains that research objectives are set of goals which researchers intend to make from the research conducted. comparing financial performance of islamic bank with other conventional banks can measure the overall financial health over the given period.
- Explains that islamic banking refers to the way of doing commerce and transactions which are sharia compliance.
- Defines riba al fadl as the addition compensation without any consideration resulting from a sale of commodity.
- Explains that the above hypothesis will be tested by the following research questions.
- Compares the financial performance of european islamic investment bank (eiib) with two conventional banks, allied irish bank and northern bank.
- Explains that european islamic investment bank is regulated and approved by financial service authority. it invests money in middle east, asia, and europe.
- Explains that the dissertation is limited to islamic banking, excluding the closely connected subject islamic insurance. there are three islamic banks and more than ten non-islamic banks operating in uk, but researcher has chosen one islamic bank and two conventional banks.
- Explains venardos. angelo, 2006, islamic banking & finance in south east asia: its development and future, volume 3 of asia-pacific business series, second edition.
- Explains that fsa encourages growth of islamic finance in the uk.
- Cites fsa, ukinvest.gov.uk, and islamic bank of britain.
- Explains that islamic banking was first introduced in egypt in 1963, since then many islamic banks were established in asia & middle eastern region.
- Explains that the researcher wants to pursue a career in islamic banking and this research would help him to know about islamic banks.
- Explains that northern bank is one of the most established providers of financial services within the island of ireland, with origins dating back as far as 1809.
- Explains that allied irish bank was formed in 1966 by the merger of three banks — the munster and leinster bank, the royal bank of ireland, and the provincial bank. aib is the largest irish banking group by market capitalisation.
1634 wordsRead More - Essay On Islamic Bankingopinion essayThis study debates upon the history of Islamic banking. What are the ethical issues involved in the implementation of Islamic banking. Since the birth of Islam what type of steps are taken and by whom these measurements were taken. Besides this this paper also declares the response and customers point of view regarding Islamic banking with the help of different studies.
In this essay, the author
- Explains that the paper debates the history of islamic banking, the ethical issues involved in its implementation, and the response and customers' point of view regarding it.
- Explains that islamic banking got regular in the 1960's, but the framework was suggested and utilized since the conception of islam.
- Analyzes how islamic revivalism, petrodollars, and islamic mass trading have created an autonomous territory of study around islamic researchers and economists.
- Explains that the sharia standards for items and administrations of islamic banks could be characterized extensively into four classes.
- Argues that islamic standards can be recognized emphatically when they fit in with islamic targets both in structure and in substance. the support for judgment as to the quality or shortcoming of a given rule is the degree to which that mode helps the accomplishment of the targets.
- Explains that islamic banks apply benefit and misfortune imparting standards for both stores taking and financing, but their provision in financing has been negligible. they favor expense based transactions due to straightforwardness, more level danger, and decided altered rate of return.
- Opines that islamic banks should adhere to the benefit and-misfortune imparting rule.
- Explains that 66.66% of interviewees said that changing from conventional banking to islamic banking had a constructive impact on the mobilization of funds.
- Opines that half of interviewees concurred unambiguously on the constructive impact of islamic banking on fiscal offices.
- Explains that 66.66% of interviewees agree that islamic banking in iran has swayed individuals to manage the managing an account framework.
- Opines that half of interviewees accept that the role of islamic banks in the financial emergency is truly positive.
- Opines that 33.33% of interviewees accept that the framework has had a positive impact on exchange, for which the procurement of monetary offices to this segment.
- Explains that islamic saving money financing is connected with financial development and collection of capital. islamic banks are less unsafe than traditional banks, both for moguls and business visionaries.
- Explains that islamic banking items have been decently acknowledged by malaysians. this is reflected in the expanding sums for stores and advances dependent upon islamic standards put by muslim and non-muslim clients.
1496 wordsRead More - What is Islamic Finance?explanatory essayINTRODUCTION What is Islamic Finance? Islamic finance is a financial system that operates according to Islamic law (which is called sharia) and is, therefore, sharia-compliant. Just like conventional financial systems, Islamic finance features banks, capital markets, fund managers, investment firms, and insurance companies. However, these entities are governed both by Islamic law and the finance industry rules and regulations that apply to their conventional counterparts. Therefore, islamic finance is to be assets based as oppose to the currency based whereby investment structured on exchange or ownership of assets, and money is simply mechanism for transaction process.
In this essay, the author
- Explains that islamic finance is a financial system that operates according to islamic law and is therefore sharia-compliant.
- Explains that the modern islamic finance industry is young, its timeline begin only a few decades ago, but islamic finance is involving rapidly and continues to expend to serve muslims and conventional.
- Explains that mit ghamr savings bank in egypt became the first modern islamic bank record in 1963.
- Explains that in 1963, the pilgrims saing corporation of malaysia began to incorporate basic islamic banking concepts.
- Explains that the islamic development bank opened in saudi arabia in 1975 and gave the islamic finance industry an international presence. it recruited member countries and offered them financial products to promote economic and community development.
- Explains that in 1979, the first islamic insurance (takaful) company was established. all muslims at that time couldn't purchase conventional insurance products due to interest-based transactions, uncertainty, and gambling.
- Explains that the amana income fund, the world's first islamic mutual fund, was created in indiana in 1986.
- Explains that in 1990, the accounting and auditing organization for islamic finance institutions (aaoifi) was created to establish industry accounting and auditing standards.
- Explains that in 1990, the islamic bond market emerged when first tradeable (sukuk) were issues by shell mds in malaysia.
- Explains that citibank began offering islamic banking services in 1996 when it established the citi islamic investment bank in bahrain.
- Explains that the dow jones islamic market index (djimi) became the first successful benchmark for the performance of islamic investment funds in 1999.
- Explains that the malaysia-based islamic financial services board (ifsb) was established as an international standard setting body for islamic financial institutions.
- Explains that there are many issues involved in the islamic finance, such as lack of liquidity instruments and risk analysis and measurement.
- Explains the importance of risk analysis and measurement in islamic finance. islamic banks focus more on equity financing and expect to monitor investment risk carefully.
- Explains that in islamic finance or banks, employees face poor management and poor services. they do not know how to explain the islamic products well to their customers.
- Explains that wadiah is a trust and the depository is the guarantor and guarantees repayment of the whole amount of deposits.
- Explains that for the person that enters this type of product, the bank will give the passbook and atm card for them to use it.
- Explains the profit sharing concept for an agreement made between two parties. one party will provide capital and another will become an entrepreneur. both parties will share the profits according to the ratios agreed.
- Explains a partnership or joint venture, whereby the distribution of profits will be apportioned according to an agreed ratio.
- Explains the concept of sale of goods at a price which includes profit margin which have been agreed by both parties. the bank purchases the goods wanted by the borrower and the bank/lender marks-up the price.
- Explains that bai' bithaman ajil (bba) is a mode of financing suggested by the muslim economists. it is where the buying and selling goods or services based on the deferred payment or installment that has been agreed to pay.
- Explains that debt financing is used for production, commerce and services of sale or purchase of trade documents and papers. only documents evidencing debts arising from bona fide commercial transactions can be traded.
- Explains the concept of leasing, where a lessor leases an asset to the lessee, and the principle of "al-takjiri" where the owner of the asset agrees to sell the assets.
- Explains the term benevolent loan or charity loan, which is a loan without interest and given by the bank for welfare purpose.
- Explains that bank guarantees a third party that the bank's customer will fulfil his obligation. the bank compensates any loss due to the failure of the customer.
- Explains borrowing with collateral. if the borrower fails to pay, the valuable asset can be disposed to compensate for the loan.
- Explains that islamic finance is not prohibitive for accumulating wealth. it encourages customers to put some portiob of money for "zakat" or charity purpose.
- Explains that products in islamic finance are more simple compared to conventional products that is more complex and difficult to understand because it more to gamble on their transactions process.
- Explains that islamic finance is slower than conventional finance and encourages investors to make responsible decisions and avoid investments that will harm people and the environment. this reduces risks, increases stability and is socially responsible.
- Explains that islamic finance is based on the shariah compliant and prohibits the use of products with interest, speculation, and gambling.
- Explains that the islamic bank of britain became the first islamic commercial bank established outside the muslim world in 2004.
- Explains that the islamic principles started in malaya in the 16th century.
- Explains that shariah compliant or islamic principles are based on the secular banking law and practices of the respective countries.
- Explains that islamic finance provides equity financing to the business, projects and venture. if there is a loss occur, it will be bear equally based on the ratio agreement.
- Explains that transactions involved in gharar are prohibited by islamic financing because it involved uncertainty on buying and selling the goods and services.
- Explains that all transactions are based on the shariah principles, therefore the profits that business will get share equally and no interest on profits or loss. returns for customers do not depend on banks performance.
- Explains that islamic finance is focused more on creation of wealth, recognized private property, emphasized fullfilment of contracts and equally transactions. it is free from riba, speculation and gambling.
- Recommends that islamic finance be more efficient and effective in terms of liquidity, risk analysis, and management.
3003 wordsRead More - The Advantages of Islamic Finance and Bankingargumentative essayAs the world has recently passed through the global financial crisis that begun in 2008 in the USA with the banks’ collapsing, analysts are giving different opinions and making new economic hypothesizes about the origin of, as well as the process of different countries escaped from the crisis. Among all these new “theories”, the case of Islamic banks is interesting in terms of its nature and consequences. In my essay, I will try to highlight the basic principles of the Islamic finance, the reasons of the restriction of interest, the most important tools used by Islamic banks in economic activities and brief explanation of them, and finally my view point of the probable future improvement of the Islamic financial system.
In this essay, the author
- Explains that analysts are giving different opinions and making new economic hypotheses about the origin of, as well as the process of different countries escaped from the crisis. they will highlight the basic principles of islamic finance, the reasons of the restriction of interest, and the most important tools used by islamic banks.
- Explains how islamic banks operate and what their main differences are in comparison with conventional banks.
- Argues that interest is a negative factor when it comes to the economic impact of the interest (riba) on the whole economy and individuals.
- Explains that islamic banks provide investment management service which enable customers to earn profit over their investments. mudarabah is a special kind of partnership where one partner gives money to another for investing it in commercial enterprise.
- Compares musharakah to mudarabah, where all partners invest and share the profits. this is an alternative to interest-based funding of conventional banks.
- Explains that murabahah is a term of islamic fiqh and refers to sale transactions that have nothing to do with financing in its original sense.
- Explains that the gain from all these activities comprises a part of the islamic banks finance. the investment portfolio is mainly comprised by customers’ funds and shareholders’ equity.
- Concludes that islamic banks are operated according to islamic financial principles which is set by sharia law.
- Cites islamic economic studies, vol. 12, no. 1, august 2004, and mufti muhammad taqi usmani, an introduction to islamic finance.
1173 wordsRead More - Wakalah with Waqf Models: Meaning of Waqfexplanatory essayAbdul Ghafar Ismail. 2010. Money, Islamic Banks and the Real Economy. Cengage Learning Asia Pte
In this essay, the author
- Explains that waqf is the tying up of property in perpetuity for the public's benefit.
- Explains that waqf can be classified in three main categories, which are based on timing, purpose and object.
- Explains the sale of a portion of waqf property to develop the remaining portion.
- Explains that waqf models in the takaful contract apply the principle of tabarru or ‘donation’ contract and it is not under mudarabah contract.
- Explains that tabarru is a voluntary specific amount of donation made among participants and managed by the takaful operator.
- Explains that mudarabah or profit-sharing contract can be used to generate a profit to an investment and for the operator to share at the end of the period.
- Explains the modified wakala models with waqf, where the participants and the operator are part of direct funds. the compensation contract will be applied to overcome this kind of uncertainty.
- Describes al-ahkam, jilid 6, dewan bahasa, and jid 6 of wakaf in the development of the muslim society.
- Explains abdul ghafar ismail's book money, islamic banks and the real economy. cengage learning asia pte.
- Explains that waqf is used for the settlement of beneficiaries named or intended by the donor/settler in his or her waq
1272 wordsRead More - Cultural and Financial Managementanalytical essayDar, A.H., & Presley, R.J. (2001) Lack of Profit Loss Sharing in Islamic Banking: Management and Control Imbalances, Loughborough University
In this essay, the author
- States that the assignment asks them to examine the impact of culture on financial management, which they find not to have a true correlation to economics.
- Explains that many economists are reluctant to consider culture because it is too broad and vague to enter the economic discourse with a testable hypothesis.
- Argues that marx is not only factually correct, (economy supersedes culture) but morally as well.
- Argues that marx is factually correct because he can use his hypothesis to logically dispute all claims that culture supersedes the economy.
- Explains that while yankees were generally more profitable, the german-catholic model did not become less prevalent after more than a century, because of the higher fertility of german catholics.
- Analyzes how the german catholics chose their cultural traditions over economic gain despite being less economically. marx would still be right about the importance of production/capabilities, effect on culture.
- Presents an alternative scenario that shows financial management defying traditional values. islamic financial institutions operate with a different set of cultural guidelines and are bound to the real economy.
- Opines that the notion that culture plays a dominant role on the economy is an immoral one. it perpetuates the justification of eurasian superiority.
- Explains that marx's theory dispels prejudice and racist ideology that existed for thousands of years, stating that production and technology created powerful nations/cultures which in turn were logically dependent upon their given geography.
- Concludes that although financial management varies across nations and cultures, culture is not the primary causation of the differences.
- Cites dar, a.h., presley, r.j. and diamond, j. (1997) guns, germs and steel: a short history of everybody for the last 13,000 years.
1494 wordsRead More - Islam is More than Just a Religionexplanatory essayIslam is more than just a religion; Islam is a way of life. The Quran and teachings of Prophet Muhammad (pbuh) provide an outline for the daily life of a Muslim. Islam encompasses all aspects of our existence, from lawful food and drink, to ethics and marriage…Islam covers it all. Part of the aspects that Islam addresses is finance, in which Muslims are expected to deal with matters of finance in a precise manner. Islam has its own financial system; this system is founded on justice and faith, rather than a prospect to make additional capital. Within this financial system, Islam addresses matters such as the prohibition of usury, dealings with banks, and redistribution of wealth through Zakat.
In this essay, the author
- Explains that islam encompasses all aspects of our existence, from lawful food and drink to ethics and marriage. islam's financial system is founded on justice and faith, rather than a prospect to make additional capital.
- Explains that capitalism is a system in which trade and industry are controlled by private owners for profit, rather than by the state.
- Defines socialism as a system that advocates that the means of production, distribution, and exchange should be owned or regulated by the community. the production of goods and services is dependent on the economic demand of society.
- Explains that islam is neither capitalistic nor socialistic; it is a way of life declared for mankind by allah (swt). islam strives for social justice and lessens material differences.
- Explains that islam follows neither the capitalistic nor socialistic system. the islamic system is founded on the belief that allah (swt) is the absolute owner of all the wealth in the world.
- Explains that islamic finance is based on the orders of allah (swt) and the example of muhammad (pbuh).
- Explains that a man can acquire wealth through labor, and the wealth he acquires from that labor is his payment. islam works to protect all people and lessen the gap of material differences.
- Explains that zakat is the practice of charity given by muslims to those in need to promote justice in relation to the distribution of wealth.
- Explains that in sensitive issues, such as dealing with banks, muslims acquire scholarly opinions on how to deal with these western banks.
- Explains that using western banks is just one part, but the obligatory regulations are placed when you open an account with the bank.
- Explains that islam's system is founded on the submission and worship to allah and not profit or societal demands. islam certifies distribution of wealth in a method that follows islamic ethics.
1084 wordsRead More - History Of Banking Essayexplanatory essayOver the years, religion has played a major impact on the functioning of Banks. Judaism, Jewish, Christianity and Islam being the ma...
In this essay, the author
- Explains that the indian banking system was established with the introduction of its first bank in 1786.
- Explains that the government undertook a large number of reform activities in the banking sector. the imperial bank of india was nationalised in 1955.
- Opines that there has been immense growth in the banking domain over the years, and they have become self-reliant.
- Explains that heavy build up of competition has led banks to take on augmenting risks.
- Explains that banking is a field where the employees are transferred regularly. it has been found that employees who have freshly graduated tend to quit within one year.
- Opines that banks must also grow with technology. the most challenging part a bank faces is to adopt new technology, as they compete with each other to improve their technological status.
- Explains that banks collect deposits from the public, which are repayable on demand, and give out short-term loans for trade, commerce and industry. they have a large number of branches across the nation.
- Explains that these banks specify in foreign exchange transactions and are specialists in providing finance for foreign trade.
- Explains that these banks encourage savings among the general public and channelize the widely spread savings of the nation into one common pool.
- Explains that the central bank of india is the reserve bank, which is responsible for regulating and supervising the banking industry and come up with monetary and credit policies.
- Explains that the international bank for reconstruction and development (ibrd) provides member countries with financial assistance.
- Describes the types of banks where the ownership and control lies with the government.
- Explains that they are banks where ownership and control lies with private individuals or corporate and not with the government.
- Explains that any bank registered in india is a domestic bank. a banking company registered as an indian bank is one.
- Explains that any bank that is registered and has its head office in a foreign country is called foreign bank.
- Explains that banks where their name appears in the second schedule of the rbi are called scheduled banks.
- Explains non-scheduled banks are banks where their name does not appear in the second schedule of the rbi.
- Explains that banks, which have received licence from the rbi as per the banking regulation act 1949 are called licensed banks.
- Explains that non-licensed banks are those that haven't received rbi's licence.
- Explains that micro-small and medium enterprises drive the growth story of any economy. they play a key role in attaining various socio-economic aims, in terms of employment generation, adding to national output and exports.
- Describes the methods and techniques of credit appraisal at bank of india in order to assess the loan proposal specifically of the msme sector.
- Explains that appraisal is the process of decision making through a proper structured framework using analytical tools to sanction loans. it is done to ensure the future action of repayment by the borrower.
- Explains that the main source of revenue generation in the banking industry is through credit or loan. earnings of the bank are based on excess after all costs are met, which include resources, administrative costs and intangible costs in terms of risks.
- Explains that a loan has to be approved by the sanctioning authority of the bank. it must be viable in terms of purpose and comfort level.
- Explains that banks were risk averse and didn't want to lend to msmes at the time of the industrial revolution.
- Explains that liberalisation, privatisation and globalisation brought in competition, technological advancement, international standards, and policy changes, thereby bringing more borrowers in the picture.
- Explains how to evaluate risks such as management, financial and market-industry risks that is important in sanctioning a loan to an msme.
- Explains that credit appraisal is done for funded and non-funded facilities as well as the evaluation of credit risk with the use of given credit rating.
- Explains the primary source of primary data is the chief manager and the credit manager.
- Explains that credit appraisal is a vast field hence not all areas are covered in the study. concentration is given only to the msme sector.
- Explains that the officers of the bank were busy at their job, so it was difficult to actually find time to dwell into the details of all aspects of study.
- Explains that the borrower fills an application form for loan, and the bank gets the required credit information from the borrowers.
- Opines that all inquiries from the concerned officials are critical, especially to keep to the regulatory guidelines prescribed by the rbi.
- Opines that the banks should ensure the authenticity and bona fide of all documents, deed titles, financial statements, return statements and income statements in connection with credit proposals.
- Opines that the feasibility of the loan's purpose is an important aspect while appraising it.
- Explains that the borrowers' character is the next important criteria to be analysed and also the ability to repay back the loan.
- Explains that it is important to have credit worthiness, even if the proposal is financially and economically strong.
- Explains that appraisal notes are prepared and sent to the regional hub and the national hub for further scrutiny.
- Explains that credit information from cibil, experian, equifax, and other credit hubs of good repute will be got before processing the proposal.
- Explains that the business of banking is as old as money. rich merchants gave loans on grains to farmers and traders who traded their goods between cities.
- Explains that the general bank of india was established in 1786 to meet the banking needs in india.
- Explains that a committee was set up in 1991 under the leadership of mr. m narasimha to liberalize banking practices. with advancement in technology and communication, indian banking system has seen the growth of phone banking and net.
- Explains that the bank of india was formed by a diverse group of hindus, muslims, parsees and jews to meet the needs of indians at large.
- Explains that micro, small and medium enterprises are defined as enterprises engaged in the manufacture or production, processing or preservation of goods.
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