Money Laundering Essays - Money Laundering, Financial Regulation

Money Laundering Money Laundering The word money laundering, according to the myth, is derived from Al Capone's practice of using a string of coin-operated launderettes in Chicago to disguise his revenues from gambling, prostitution and protection rackets. It's a nice story but not true, money laundering is so called because it perfectly describes the process of removing the stains and smells which money acquires when criminals earn it. In this report I will go on to discuss the topic of money laundering in the following order; firstly, I will begin by explaining what is money laundering?, why it is done?, and how it is done? I will then go on to explain the effects of money laundering and the institutions/organisations that are at risk from these activities. I will also be discussing the current situation in the UK regarding money laundering and whether anything can be done to prevent or restrict laundering activities, and will then go on to conclude my findings. Money laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities. If they are successful they can then maintain control over the proceeds and, so, provide a legitimate cover for their source of income. J.D. Mclean defined money laundering in the International Judicial Assistance as: Although the proceeds of crime will be kept as capital for further criminal ventures, the sophisticated offender will wish to use the rest for other purposes. If this is to done without running a risk of detection, the money which represents the proceeds of the original crime must be laundered; put into a state in which it appears to have an entirely respectable provenance It is important to bear in mind that money laundering is a process (often a highly complex one) rather than a single act. In an effort to expose and analyse this phenomenon it has become common to use a three-stage model which encompasses an ideal money laundering scheme. The three stages are as follows: * Placement Stage This is where cash derived directly from criminal activity (e.g. from sales of drugs) is first placed either in a financial institution or used to purchase an asset. * Layering Stage The stage at which there is the first attempt at concealment or disguise of the source of the ownership of funds. * Integration Stage The stage at which the money is integrated into the legitimate economic and financial system and is camouflaged with all other assets in the system. Money launderers try to prevent authorities from tracing the source of their ill-gotten gains by moving their funds around financial and economic system. The funds are then spent as if they were legitimate money. The more blatant by the money launderer will directly involve a person or a business in the crime. i.e. A launderer could simply ask someone for permission to use their account for deposits in return for a fee. Another scenario is for the money launderer to approach a business and ask them to set up transactions in which a sum of money is regularly deposited in the company's account. The business will then send the money back as a fictitious payment for non-existent goods. Although this method is very popular amongst the criminal underworld, there are other ways of laundering money without a business becoming aware of being involved in a crime. e.g. The money launderer could place an order for an industrial machine/robot to be manufactured to a specific standard. The company may ask for a 60% deposit with the understanding that the order won't be put through for three months. Before the three months are up the money launderer cancels the order and gets the deposit refunded minus a penalty. The money launderer will always be willing to pay the penalty because although he/she will want to get as much back as possible, what he/she really wants is the money back clean. Money Laundering is said to be the third biggest industry by value world-wide. Research in the USA has shown that 90% of currency bills in circulation are contaminated with narcotics. In the UK, similar research showed 40% to be contaminated. In 1994, about 15,000 suspicious transactions were reported to the National Criminal Intelligence Service's (NCIS) economic crimes unit. About one in five was found to have some criminal connection. In the UK the following organisations are most vulnerable to fall prey to the money launderers: * Deposit-taking institutions Because of the money launderers need to get rid of cash, deposit taking institutions are particularly vulnerable to being used. i.e. Banks, Building

Article Review on Marketing Ethics

Article Review on Marketing Ethics Article Review on Marketing Ethics: Marketing is one of the most important strategies towards the growth of a company. Most business people and marketers are coming up with strategic ways in which they can sell their products to different consumers in a given region. This has led to the need for close focus on ethnic minority groups especially in the United States where there are different ethnic communities. Ethnic marketing is all about a marketer or business person using marketing strategies aimed at attracting a particular ethnic group. With the big numbers of ethnic minority groups in major countries in the world especially in the US, marketers have to develop their marketing strategies to incorporate these other communities since they are part of the larger market. This has grown over time leading to focus on African Americans, Hispanics, and Asians among others since marketers have realized that most of the expenditure is from the ethnic groups thus a need to make them feel more recognized and appreciated by the companies. This is an analysis on the article, ‘Ethnic Marketing: McDonalds is Lovin It’ McDonald Company was among the first companies to implement ethnic marketing strategy. According to Helm, McDonalds have taken cues from Asians, African Americans and Hispanics to develop menus and advertising to encourage middle class Caucasians to buy smoothies and snack wraps in the same way they consume hip hop and rock ‘n’ roll (Helm 4). The CEO says that the ethnic minorities seem to set the trend on how they should enter into the market. This is because they prefer things done in a certain way and the snacks prepared according to their taste and preferences which make them make frequent purchases. Ethnic marketing also involves the marketer incorporating staff from the ethnic communities to show the customers that they also appreciate working with people of their kind. McDonald’s has set the trend for minority groups advertisements which are special for each group to feel represented other than the generalized advertisement (Helm 1). There are various principles to help a marketer successful in ethnic marketing that include valuing; cultural uniqueness of the target group, cultural group’s beliefs, symbols, and practices, differences in language, practices, accents and social conduct, bridge building and cooperation between leaders and other interest communities and valuing word of mouth and interpersonal communication to spread the message. McDonald is ranked as the best at standardization of its marketing through the Big Mac which has been used to measure inflation in the world. Through its low prices and the new menus McDonald’s sales have increased in the year. The launch of the Fiesta menu led to more sales in Hispanic neighborhoods and more sales from the whites as a way of appreciating the strategy and variety of its products. Definitely, people want to try different tastes of other ethnic communities too. The sensitivity in ethnic marketing has led to development of new product. The advertising committee is comprised of more African American, Asian and Hispanic focus groups, to reach out to their target consumers. Many companies adopt ethnic marketing as they are left with no choice but to standardize their advertisements, personal selling among other marketing tools. Having a large market, which is comprised of consumers with different preferences, requires a marketer to focus on the needs of these groups to help in making your products acceptable to satisfy the needs of the large market like McDonald does.

Employee Relations in Germany Essay Example | Topics and Well Written Essays - 2000 words

Employee Relations in Germany - Essay Example When compared with the corresponding scenario of several other zones of the Globe, it is being seen that, in Germany, the law strictly controls employee relations. Here, a reference needs to be made to the several condemnation laws that have been in vogue in the zone (Germany), since 1945. As a direct consequence of all those laws, lot of importance is now given to the aspect of industrial democracy and harmony. But subsequent to the reuniting of East and West Germany, several major economic and other issues have manifested. In Germany, for companies with manpower numbering over two thousand, it is legally mandatory that, apart from management board, they have also a supervisory board. Since the initial half of the 1990s, the employers in Germany started to get disillusioned with the country’s model related to employee relations. As a matter of fact, the region (German) adhered to this model for a very long time. It was being strongly opined by many that, the duration for which the model has been in vogue was too lengthy and hence, it can no longer be relevant to the modern scenario. It is high time that the German Model is modified and reformed, in accordance with the corresponding standards of the present millennium.... The model has ensured that the employees were provided with right training programs, not to mention the aspect of aptly motivating the manpower. Also, it has to be stated that it (German Model) enabled the employees to have access to key information pertaining to their respective workplaces, courtesy the related laws and stipulations. (3) Roles played by the key actors At this point, it would be worthwhile in having a brief look at the roles played by the key actors, in terms of employee relations. The following are the four categories to which these key actors pertain to: state, managements, employees and worker unions & councils. It is not at all an exaggeration in maintaining that, the state played an extremely crucial role, with regard to the conventional German Model. By bringing out rules and laws that were aimed at the well-being of employees, the state made sure that they (employees) are assured of an amicable environment. Also, the state ensured that the managements meticulo usly adhere to all the corresponding laws, lest the workers’ interests are ignored. All these laws governed issues of utmost relevance to workers, such as working hours, bonuses, leaves and compensations, among many others. (2) & (3) Here, it needs to be stated that the role played by the managements is also noteworthy. The company managements scrupulously abided by all the norms and regulations pertaining to welfare of employees, and thus making sure that the workforce has literally no reason for complaint. The managements shared information with their respective employees, and this in turn enhanced the motivation level of the personnel. They were more than happy that due importance was being given to them, and

Econ 101 Model Building Exercise Research Paper

Econ 101 Model Building Exercise - Research Paper Example This means that economic recession cues may actually enhance interest in products that make people more attractive and presentable, despite the fact that recessions dampen interest in majority of product segments. By identifying why and how economic depressions and recessions affect the psychology of women, this model should enrich developing links between consumer behavior, economic conditions, and gender relationships psychology. Civi (2013) establishes that economic recessions can be associated reliably with increased consumer spending on traditional inferior goods, for example foregoing salmon for tuna due to budgetary constraints, as well as morale boosters like films. Whereas his research identifies increased spending on beauty and personal care products, the suggestion made is that this spending could be a third economic recession indicator, which has deep roots in human ancestral psychology. Ratner et al (2014), in turn, note that the economic recession of 2007/2008 saw a down-turn in spending for most consumer products and real estate consistent with other economic declines, while people were less likely to go on vacation to instead spending time at home. However, even with the predictable decline in consumer spending during the last recession, beauty and personal care products fared unusually well. Lopaciuk and Loboda (2013) supports this conclusion, showing that while the rest of the economy suffere d record sales decline, cosmetic companies like L’Oreal experienced a 5.3% sales growth, using this evidence as proof of the ‘lipstick effect’. This idea, it is noted, has been subject to discussion and debate in recent economic downturns, especially in the Great Depression during which sales in cosmetics grew dramatically. While consumer spending has always tended to decline in the midst of economic downturns and recessions, there is compelling evidence that economic recessions are linked to increased consumer spending on

Micro economics extra credit Coursework Example | Topics and Well Written Essays - 750 words

Micro economics extra credit - Coursework Example There are various concepts that explain microeconomics in the case of Mr Shea, who faced an eviction notice after renting his terrace to a visitor who turned out to be a private investigator (OTTERMAN page 1-2). Consumer protection This concept refers to the assurance of quality and safety in the products the consumers purchase and consume. Trusting the producers makes the economy flourish. In the case of Mr Shea, he provides room for visitors at cheap prices and there is no assurance of protection and safety (OTTERMAN page 1-2). When one of the visitors arrives , Mr Shea smuggles the visitors’ language using a laundry cart to avoid attention from the neighbors or the co-op board (OTTERMAN page 1-2). He goes to the extent of asking the visitor to identify himself as a friend to Mr Shea in case anyone asked. The internet communication from the visitors to private hosts is not an assurance of safety since some of the hosts may take advantage of the situation to make money out of the visitors (OTTERMAN page 1-2) Demand Demand refers to the extent at which a good or service is needed in the market. Demand not only refers to the quantity but also to the demand curve of a product. This traces the degree at which a good or service is demanded at different prices. ... This was to ensure to the quality of the rooms thus attract many visitors (OTTERMAN page 1-2). Profits Profits refer to the earning of returns by the capitalists through their efforts in the provision of their inputs. The capitalists are willing to go through denial of self gratification to invest some of their resources in fruitful activities (OTTERMAN page 1-2). Profits occur as a result of taking risks by different investors. The investments yield profits while others don’t. David Shea and the co-op board of affordable development rent out terrace to earn profits (OTTERMAN page 1-2). Mr Shea estimated a reasonable number of fifty visitors between 2011 and 2012 making an income of $6,000 which served as his profits because there was no taxation. Mr Shea goes against the rules of the co-op board which prohibits sub renting for profits even though David Shea says he was unaware of the rule (OTTERMAN page 1-2). Receiving anything of value from the invitee, occupant or the guest in exchange of habitation, whether it is permanent or temporary is not curable since it is fraud and profiteering. . Hosts present for the visitors added up to fifteen thousand thus losing millions in the hotel occupancy taxes (OTTERMAN page 1-2). Producers A producer refers to a person creating and supplying goods or services to potential consumers (OTTERMAN page 1-2). The producers combine the labor and capital which are factors of production. When a producer offers their services to the consumers, they get a reward, in this case a profit. Mr Shea offers services to his guests through the renting of terrace to guests at affordable prices (OTTERMAN page 1-2). The idea of renting came about when a therapist suggested to David

An Investigation Into The Causes Of Migraine Headache Nursing Essay

An Investigation Into The Causes Of Migraine Headache Nursing Essay Migraine is a neurological disorder which affects almost 10% of the worlds population (Woeber et al., 2007). In 2003, the World Health Organization (WHO) estimated the number of migraineurs worldwide at 303 million people. A similar study in 2004 found that approximately 20 million migraine attacks occur every day (Forshaw, 2003). Individuals who suffer from migraine headaches carry the burden of pain and suffering that can lead to an impaired quality of life. At a community level, migraine headaches can also be problematic because of absences from work or decreased productivity from migraine sufferers (NINDS Migraine Information Page). As a result of the problems associated with migraine headaches, there is significant interest in discovering the triggers for migraines. A migraine is a specific type of headache characterized by altered bodily perceptions, pulsing pain in the cranial region, and nausea (Forshaw, 2003). Most migraines are unilateral, meaning they affect only one side of the head, and the pain is usually localized to a very specific area (Forshaw, 2003). A typical migraine can last anywhere from 4 to 72 hours. The most frequent symptoms of a migraine include nausea, vomiting, and increased sensitivity to sensory input (Gallagher et al., 2002). Most commonly, individuals affected by migraine headaches have increased sensitivity to light (photophobia) and sound (phonophobia) (Gallagher et al., 2002). A smaller percentage of migraine sufferers report an aura which accompanies their migraine. An aura usually consists of unusual visual, olfactory, or other sensory experiences that give the individual some forewarning that a migraine will soon occur (Gallagher et al., 2002). The diagnosis of migraine can be difficult, especially because this specific type of headache mimics several other types. Migraines are also habitually written off by those who experience them infrequently as a result of the cold or flu (Gallagher et al., 2002). Because of these difficulties, migraines are often underdiagnosed or misdiagnosed (Lyons, 2007). The International Headache Society (IHS) has laid the foundation for the diagnosis and classification of migraine headaches. According to the IHS, there are seven different classes of migraines (Headache Classification Subcommittee, 2004). These include migraine without aura, or common migraine, migraine with aura, hemiplegic migraine, childhood periodic syndromes which are precursors of migraine, retinal migraine, complications of migraine, and probably migraine. Although there are many classifications of migraine headaches, there are really only two methods of diagnosis, which correlate with the two main types of migraine: migraine without aura and migraine with aura. Migraine without aura can be diagnosed using the 5, 4, 3, 2, 1 criteria: 5 or more attacks, 4 hours to 3 days in duration, 2 or more of unilateral location, pulsating quality, moderate to severe pain, aggravation by or avoidance of routine physical activity, and 1 or more accompanying symptoms which could include nausea and/or vomiting, photophobia, or phonophobia (Headache Classification Subcommittee, 2004). In the method of diagnosing migraine with aura, only two attacks are necessary to make the diagnosis. Although migraine headaches are experienced by individuals from many different lifestyles and backgrounds, there are some demographics in which migraine is more commonly seen. Although migraine headaches are equally prevalent in male and female prepubescent patients, 75% of adult patients are women (Lay et al., 2009). Migraines become more common with age, though 98% of patients experience their first migraine before the age of 50 (Forshaw, 2003). Migraines are also thought to be genetically linked, as 70% of migraine patients have some other, first-degree relative (e.g. brother) who has experienced migraine headaches (Forshaw, 2003). Perhaps the most intriguing question pertaining to migraines is that no one knows what causes them. To date, research has not been able to definitively discern which of the suspected triggers of migraine may actually cause the headaches, nor has anyone determined which of the suspected triggers might play the largest role in producing migraines (Woeber et al., 2007). The list of suspected triggers for migraines is extensive, including, but not limited to: weather, missing a meal, stress, alcohol, various types of food and changes in sleeping patterns (Forshaw, 2003). Women have also reported menses as a trigger, and studies of both men and women have also shown that environmental factors and even certain activities, such as using a computer for too long, can bring on a migraine (Woeber et al., 2007). Because it would be impossible to investigate each and every one of these suspected triggers, the comparison of this studied has been narrowed to include sleep-related, hormonal and food triggers. Sleep Disorders (Amelia Van Handel) The role of sleep in migraine has not been fully explained (Kelman, 2005). Studies have determined that disturbed sleep patterns may trigger a migraine attack, and it is also widely accepted that sleep can alleviate and even terminate a migraine (Blau, 1982). Although the exact relationship between changes in sleep patterns and migraine is unclear, many researchers believe there is a correlation (Woeber et al., 2007; Kelman, 2005). Much of the argument for the relationship between migraine and sleep disorders stems from the preponderance of migraine in the morning hours (Fox, 1998). Patients with sleep disorders are far more prone to have morning headaches, and chronic migraine sufferers often experience morning migraines after interruptions in their sleep cycle. This has led researchers to speculate that the circadian clock plays a role in migraine pathophysiology, though no one has yet determined why changes in sleep pattern are a trigger for migraine headache (Cohen, 2005). Several sleep disorders are speculated to be triggers for migraine. Insomnia, which involves difficulty getting to sleep or staying asleep, is one of the most researched causes for sleep-related migraine (Pallesen, 2001). Excessive daytime sleepiness (EDS) is also commonly associated with migraine. EDS is defined as difficulty maintaining a desired level of wakefulness, and patients diagnosed with the disorder often experience migraine headaches after dosing off during the day (Young, 2004). EDS is relatively prevalent in the general population, ranging from 10% to 20% and increasing in the very young and very old (Hasler, 2005). EDS is usually caused by poor sleep quality at night, which can sometimes be associated with insomnia (Carskadon, 1993). To a lesser extent, narcolepsy (symptoms similar to EDS) and sleep apnea (pauses in breathing during sleep which cause an individual to wake up sporadically) have been studied to determine whether or not they might be associated with migra ine (Bixler, 2005). For more than 100 years, medical personnel and researchers alike have noticed an association between sleep problems and headaches (Sahota, 1990). One of the main causes of confusion, however, is whether the headaches are the cause or the result of disrupted sleep. While interruptions in sleep patterns can cause migraine headaches to become more prevalent, migraines can have the same affect on the sleeping disorders themselves (Paiva, 1997). The determination of which comes first, the sleep disruption or the migraine, is the subject of much current research (Woeber, 2007; Lee, 2009). Hormones (Kelly Pritzl) Previous research indicates that headaches are three times more common in adult females than adult males. (Evans et al, 2000) The reason for this staggering statistic could be due in part to differences in male and female hormones and levels of hormones. (Evans et al, 2000) The major male and female hormones are estrogens and androgens. Men produce significantly more testosterone, a type of androgen, per day than women (7 mg vs. .5 mg), while women produce more estrogen per day than men. A woman experiences more fluctuations in hormone levels during her life than a male does. During these times of fluctuation, many women will have an increased incidence of migraine, suggesting that fluctuations in hormone levels play a role in the onset of migraine. (Lee, 2009) Some of the hormones that may be involved in the onset of migraine are estrogen, progestin, androgens, testosterone, and serotonin. (Glass, 2009) The mechanisms by which these hormones are involved are not clear, but there is strong evidence for the role of hormones in precipitating migraine attack. (Glass, 2009) There is particular evidence for the role of hormones in causing migraine attacks in women. Before puberty, males and females tend to experience migraines at the same rate, there is a sharp increase in the number of girls over boys who experience migraine at the mean age that girls begin menstruating. (Dzoljic et al, 2002) Pregnancy also seems to have an effect on the occurrence of migraines. During pregnancy, there is an increased level of estrogen in the body. Many women either experience an absense of headache when they otherwise suffered from migraine on a regular basis, or they experienced an increase in frequency of headache when they typically did not have migraines. (Robbins, 2002) Another instance of the role of hormone involvement in migraine attack in women is the increase in incidence of migraine as women near menopause, a time of decreased estrogen production. (Robbins, 2002) While there are many different hormones that may have an effect on incidence of migraine, the main focus of this research will primarily be on the mechanisms by which estrogen may induce migraine, with respect to different times in a womans life estrogen levels fluctuate, such as during menstruation, pregnancy, and menopause. Estrogen is a type of steroid hormone and is considered the primary female sex hormone responsible for regulating the normal sexual and reproductive development in women. (Robbins, 2002) Organ systems such as the musculoskeletal system, the cardiovascular system, and the brain are affected by estrogen. (Robbins, 2002) There are two approaches to the current understanding of the role of estrogen in migraines. One type is estrogen withdrawal headache. This happens after a severe drop in estrogen levels in the body, such as during menstruation, during menopause, or post-partum. The second type is exogenous hormone induced headache. This occurs during or after the u se of oral contraceptives or hormone replacement therapy. (Kibler et al, 2005) A comparison of studies that examines the correlation between levels of estrogen during certain periods of a womans life and the incidence of migraine will allow better understanding of the function of this hormone as a cause of migraine. Very little is known about the way in which estrogen actually precipitates migraine, but with an enhanced understanding of the current research that has been done, future research will be promoted on a topic that affects such a considerable proportion of migraineurs. Food (Brandon Pellerin) Various foods have been suspected of triggering migraines for decades (Grant, 1979; Peatfield, 1984). In susceptible people, certain foods and particular compounds contained in these foods are believed to induce trigeminovascular (warning system to protect the brain from tissue injury and toxins) neurons to release neurotransmitters such as calcitonin, gene-related peptide and substance P. The release of these neurotransmitters leads to vasodilation (widening of blood vessels), mast cell degranulation (release of molecules from secretory vesicles called granules), increased vascular permeability (capacity of a blood vessel wall to allow the flow of small molecules), and meningeal edema (accumulation of fluid within the meninges) resulting in neurogenic inflammation (release of inflammatory mediators from neurons) (Sun-Edelstein, 2009). Many common foods such as wheat, eggs, beef, and corn are documented migraine triggers (Grant, 1979). However, the most prevalent food precipitants of migraine are alcohol, chocolate, coffee, fatty foods and artificial sweeteners (Peatfield, 1984). Various compounds present in common foods are suspected to play important roles in the triggering of migraines. Certain amines such as tyramine and phenylethylamine are thought to be precipitators of migraines and are present in alcohol and chocolate (Sun-Edelstein, 2009, Marcus, 1997). Caffeine, also present in chocolate, is believed to be the culprit of coffees capacity of being a trigger (Sun-Edelstein, 2009). Artificial sweeteners themselves such as aspartame and more recently sucralose, have been subjects of research as to their ability to precipitate migraines (Sun-Edelstein, 2009; Bigal, 2006). However, not all migraineurs exhibit sensitivity to food and those that do are not equally affected by each trigger. The food that affects one person may not be the same food that triggers migraine in another, while at the same time a third person may be affected by both. The inconsistency of results keeps food as a continued subject of debate and study in migraine precipitation. The purpose of this research was to determine the role, if any, that sleep disorders, hormones, and food play in the triggering of migraine headaches. The goal of this study was to determine if there is any validity to the conjectures that these are triggers for migraine and if so, which trigger plays the largest role in determining whether or not migraine will occur. To answer these questions, data was gathered from primary sources by searching PubMed and Biological Abstracts. From these studies, each researcher conducted his or her own analysis of the data found within a particular subtopic to determine what correlation that specific cause might have with migraine headache. The information collected in this portion of the research was then combined to determine the relative relationship between the triggers and migraine, using correlation data and p-values to determine which was the overriding cause of migraine headaches. METHODS Sleep Disorders (Amelia Van Handel) In order to find articles relating sleep disorders to migraine, the database Biological Abstracts was used. This database was chosen because Biological Abstracts includes articles from all science-based subject areas and includes many reviews and other literature forms, which proved helpful for background or supplemental information. This database was also chosen because it was a good resource for primary research sources relating to the specific subject matter. Having chosen this database, the search was initiated using keywords relating to the topic. Initially, the subtopic for this section of the research was sensory stimuli, so the search began with the keywords migraine headache* and light. The word headache was truncated so as to provide a larger base of results. This returned 31 articles, but after looking through them, it was determined that most of them were reviews. The lack of primary research led to a search other types of stimuli, common food triggers, and even specific symptoms of migraine associated with the senses. When none of these provided the intended results, it was determined that this subtopic should be changed. Leaving the idea of sensory stimuli behind completely, a search was performed using the words migraine and sleep, which yielded 38 articles. The number of articles and the quality of the source material fit the needs of the research, and thus the search was completed. With a manageable number of articles, those which were most pertinent to the subtopic of sleep disorders were chosen for further analysis. The initial 38 were narrowed by removing those articles which were not primary research. Although the reviews and other literature forms would be helpful for background information, they would not be useful in making comparisons and finding correlation. The article selection was further narrowed by looking for those articles which contained the metrics the research would focus on. With these parameters in place, only 12 articles remained, a number which was determined to be appropriate for drawing conclusions about the correlation between certain triggers and migraine. The metrics of focus chosen for this research pertained to the quality of patients sleep and the correlation this had to the number of migraines they experienced. Epworth Sleepiness Scale scores and Pittsburgh Sleep Quality Index made it possible to measure the quality of patients sleep. The association between migraine and sleep disorders was reported in the chosen articles, which aided in the determination of the relationship between sleep quality and the number of migraines experienced. Hormones (Kelly Pritzl) All of the primary research articles relating to hormones as a cause of migraines were found online through the search engines Biological Abstracts and PubMed. The same process for finding citations was used with both engines. The search strategy consisted of first examining the results when migraines was entered into the search box. This yielded far too many results; the goal was to restrict the number of articles relevant to hormones as precursors of migraines to 40 or less. In order to refine the search, the entities migraines AND hormones were entered into the search box. To further refine the search, migraines AND estrogen was entered in and results were limited to only clinical trials and articles in English only. After gathering 40 relevant research articles, five articles within these were found containing specific criteria in order to properly conduct the meta-analysis within the topic of hormones and across the three topics of sleep-induced migraines, nutrition and migraines, and hormones and migraines. The criteria for selecting the five best articles included: relevant and useful primary data, p-values, similar subjects and number of subjects, similar methods of data collection, and recentness of publication. Food (Brandon Pellerin) To find relevant articles on the subject of food triggered migraines, the electronic databases Biological Abstracts and PubMed were used. Biological Abstracts was used using a title search for the word migraine* with a secondary title search of food* or diet*. This search turned up 30 records. The asterisk is used to search for any result which contains the root word. More specific searches were done by a title search of migraine* with topic searches of chocolate*, alcohol*, caffeine*, aspartame*, or sucralose*. Similar methods were used using the PubMed database with the exception of the use of the asterisk and the differentiating of topic searches and title searches. General searches were done using migraine and diet and migraine and food. More specific searches were done using the same keywords used in biological abstracts, joined by the and limiter. The articles searched for were published in relevant scientific journals and pertained to the topic of food and its potential to precipitate migraines. Articles that were chosen contained two types of data. One set of data included the results of general surveys that were done to ascertain details of migraineurs attacks, such as various triggers. The second type of data obtained were results from studies of specific foods documented as triggers for migraine. When an article seemed to contain useful information and was able to be accessed online, it was saved as a PDF file for future reference. The data collected from the general surveys consisted of questionnaires asking for details of subjects migraines. A vast amount of information was collected in these surveys such as the type of migraine (with or without aura), associated symptoms of migraine (photophobia, nausea, etc.), frequency, duration, and so on. The information important to this study was that concerning precipitants of migraines. Each survey documented the reported triggers of each subject if a trigger existed. This information is used to ascertain the prevalence of foods as triggers within the population that suffer from migraines. The second data set used results from studies that sought to test whether suspected foods did indeed trigger migraines. The studies relied on correlating migraine occurrences with the consumption of particular foods. The studies analyzed diet and migraine diaries kept by the subjects. The diet records often required subjects to record all food consumption and the time at which it was consumed. Likewise, the migraine diaries required subjects to document the occurrence of migraines and details regarding them such as severity, duration, type, associated symptoms, etc. The studies analyzed the results by comparing the onset of migraine with the consumption of a particular food. If there was a significant increase in the amount of migraines after consumption of a particular food, it was reasonable to conclude it played a role in the triggering of the migraine. RESULTS Sleep Disorders (Amelia Van Handel) As preliminary research, the results of five studies were analyzed. These studies were interested in finding the correlation, if one existed, between sleep disorders and migraine. Four of the five articles documented research conducted by asking patients to record the quality of their sleep and the number of migraine headaches they experienced, either in diary format or by answering questions in a comprehensive questionnaire (Woeber et al., 2007; Alstadhaug et al., 2007; Barbanti et al., 2007; Peres et al., 2005). The fifth article focused on removing the stimulus i.e. sleep problems by providing targeted behavioral sleep invention (Calhoun et al., 2007). The researchers then analyzed whether or not there was an improvement in headache frequency to determine if sleeping disorders were correlated with migraine. In order to conduct research on the relationship between sleeping disorders and migraine, only patients who suffered from both conditions could be included in the studies. To determine the level of sleep disruption, two studies measured excessive daytime sleepiness (EDS) as a function of a score on the Epworth Sleepiness Scale (Barbanti et al., 2007; Peres et al., 2005). A score of 10 or higher on the Epworth Sleepiness Scale indicated EDS. The first study (Barbanti et al., 2007) found that EDS was more common in migraineurs than in controls (14% vs. 5%), and the second study (Peres et al., 2005) found EDS occurred in 85% of chronic migraine sufferers. In the same study, dozing off was a headache trigger in 30% of all patients and 70% of patients with EDS. In both studies, patients who presented with EDS had more frequent migraines (Barbanti et al., 2007; Peres et al., 2005). In the same two studies, the quality of sleep was measured using the Pittsburgh Sleep Quality Index (Barbanti et al., 2007; Peres et al., 2005). An overall score of greater than 5 separated poor sleepers from good sleepers on this scale. In both studies, about 90 percent of patients diagnosed with EDS were also categorized as poor sleepers using the Pittsburgh Sleep Quality Index (Barbanti et al., 2007; Peres et al., 2005). This provided further evidence that poor or inadequate sleep and migraine headaches often occurred in the same patients. On the subject of correlation, all of the articles chosen for analysis found a correlation between sleep disorders and migraine, though most were hesitant to state definitively that the sleeping disorders were the direct cause of the migraine. Two studies found that patients with excessive daytime sleepiness and/or insomnia experienced more migraines after a night of restless or inadequate sleep (Alstadhaug et al., 2007; Barbanti et al., 2007). These migraines were more likely to occur during the morning hours (Alstadhaug et al., 2007). Conversely, another study which focused on EDS noticed a correlation between fatigue and migraine, but they did not believe the results to be conclusive enough to state whether migraines lead to EDS or if EDS is the primary condition leading to migraine (Peres et al., 2005). One study was tracking several different sleep disorders, but found their results to be inconclusive in determining which sleep disorder was most correlated with migraine (Woeber et al., 2007). The researchers did, however, come to the conclusion that tiredness increased the risk of headache and migraine (headache ratio increased from 0.689 to 1.184 in cases where patients were tired) (Woeber et al., 2007). The final study, which attempted to remove the sleep disruptions by using behavioral sleep intervention, found a significant decrease in headache frequency and intensity after successful sleep modification (Calhoun et al., 2007). They were also able to revert chronic migraineurs to episodic migraineurs after improving the quality of sleep in their patients. By the final visit, 48.5% of those who had received behavioral sleep modification instructions had reverted to episodic migraine (Calhoun et al., 2007). Hormones (Kelly Pritzl) The purpose of the individual meta-analysis was to determine when hormones were most involved in the precipitation of migraine. Two of the studies used only females as subjects. (Dezoljic, 2002 and Kibler, 2005) The subjects in two other studies consisted of males and females with medically diagnosed cases of migraine. (Kelman, 2007 and Rasmussen, 1993) The subjects in the remaining study were self-reported male and female migraineurs (Russel, 1996) All of the studies were researching adults. The mean age of subjects for all the studies was the mid-thirties. (Dezoljic, 2002; Kelman, 2007; Kibler, 2005; Rasmussen, 1993; Russell, 1996) The methods used in all of the articles were very similar. Four of the studies conducted a clinical examination to confirm a diagnosis of migraine and were followed by a questionnaire or an interview to collect data on lifestyle of the subjects and possible causes of their migraines. One of the studies involved self report of migraine status and if the subject indicated positively, they were issued a questionnaire. (Russell, 1996) In all of the studies, incidence of migraine caused by fluctuations in hormones was overwhelmingly more prevalent in females than by males. This indicates that female sex hormones, such as estrogen, play a significant role in the onset of migraine. Food (Brandon Pellerin) Four articles were used that studied triggers of migraine in various populations (Kelman, 2007; Spierings, 2001; Takeshima, 2004; Chabriat, 1999). The studies used surveys to gather information about a population. The individuals chosen for the surveys were either random people or known migraine sufferers. In the case of the random surveying, individuals that reported having migraines were instructed to complete a detailed migraine questionnaire. Three of these studies (Kelman, 2007; Spierings, 2001; Chabriat, 1999) show evidence of food as a precipitant for migraine. Of these three studies, at least 26% of individuals documented food as being a trigger. The fourth study (Takeshima, 2004) shows little evidence of this as it reports less then 1% of surveyors listing food as a trigger. Of these four studies, two (Kelman, 2007; Spierings, 2001) listed alcohol as a separate category and reported about 40% of individuals claiming alcohol as a trigger for migraine. Alcohol, chocolate, caffeine, and artificial sweeteners are among the most often cited food triggers for migraine (Sun-Edelstein, 2009; Peatfield, 1984). The high frequency of these claims makes these subjects of particular interest. Articles were obtained that studied these particular triggers in order to ascertain whether they did indeed trigger migraine. Two case studies were found that documented the artificial sweetener sucralose as a probable precipitant of migraine (Bigal, 2006; Rajendrakumar, 2006). In the two studies, migraine attacks were documented at least 90% of the time after the individuals consumed a beverage containing the sweetener. In one study this was ascertained through correlating a food diary with the occurrences of migraine (Bigal, 2006). The other study (Rajendrakumar, 2006) relied on administering different sodas that contained and did not contain sucralose. It was found that only the sodas containing the sweetener triggered migraines.

Books Vs. Movies Essay

Why are audiences so upset with the way the movie turned out after reading the book? † Ask any reader who has seen the movie version of a favorite book, and the answer will usually be, the book was better.† (Corliss, 2005, p. 1)They are frequently disappointed because the movie versions are not sticking to their all-time favorite book. Growing up with books like Harry Potter, as readers or having someone reading to us our minds wonder off to this mystical land, picturing how our heroes and villains would look and act. As they take in the words, the reader can almost smell the trees and here the wind blow through the castles. Reading a book compared to watching the movie brings up controversy; with books readers use their minds while watching a movie people sit back and enjoy. It all starts with the book and how the reader’s mind starts to imagine what it will look like; the smell, taste, and feel. Then they bring the movie with the director’s view on the story. Let’s start with how people view the story that they are reading. The reader will take the story from the book and make it their own personal story, internalize from their own perspective and imagination. Each reader will see and interact with the story in their way. With Harry Potter readers, some say they feel closer to the main characters because it easier to see what’s going on in their minds. The directors have read the same books too and have challenges to overcome. Bringing Harry Potter to life on the big Screen, and appease all the children that have read the books. His job is to make the movie exciting; some books have some narrative that can just drag on. Sometimes what you read may not work in the movies. Some directors like to change things up so the viewers will be surprised and not be bored because they know everything that was going to happen. Now, back to how the audience sees the main character in a different light concerning reading, then on the big screen. The book builds this character that they grow to like; readers may see themselves as the leading actor. Some readers will picture their favorite actor playing the part. Characters are what keeps the readers coming back every time or make it impossible to put the book down because they want to find out what happens next. As a reader, you feel closer to what’s happening; you feel all the emotion that the characters are going through. Concerning the big screen, the character usually gets a brief back ground. The director determines the character for you; he will pick the actor for the spot. Sometimes they will pick a different gender to play the part. The director has to take a book like Harry Potter and cut some of the characters out so that the main character gets more time. They also cut out scenes. Let’s take for example, the Dursley’s family that was to keep Harry safe when not in school. After the third film they cut them out most of the other films. In book 4 they were to meet the Weasleys and that was cut out for the movie. (Bibbiani (2011)), â€Å"The audience spent way too much time with the Dursley family over the course of the franchise to deny them their only redeeming moment.† The director will put his own insights and how he pictures the characters to be and what scenes he wants. The story line people see in our mind from reading may change on the big screen. With reading, they get the whole story from beginning to the end, the readers will know everything about their character; including where they live and what time period they’re from. It all goes back to how they imagine it will be like. In every story it starts out slow so it can build you up to the main event. It may take up to 100 pages to explain a character. After reading the book, must readers feel that they lived another life, unless it’s a series, the reader will feel completed. However, with the movie there are time constraints to think about and they need to achieve the right rating for the movie. In the books the writers has more freedom with the story line, when it comes to the movie they need to make sure it targets the right audience. The Harry Potter movies always have been geared toward children and teens, so they cut things out to achieve that goal. The Goblet of Fire was a 734- page book that would be a 10 hour movie. The screen writer Steve Kloves said †it took him two years to figure out how to make the movie and deciding what parts to cut out† (Corliss, 2005, pp. 3-3). They took the first hundred pages and put it into a thrilling 20 minutes. They need to make the movie exciting by cutting out some of the narrative and zipping through some of it. There are some movie critics that love the movies because they cut out the boring narration of the books. Readers interact with the book and use their minds to imagine the story while movie-audiences are more passively enjoying the movie. We see how and why things change from reading books and how the movie may have a different concept. When reading books, a person is creating their own movie in a sense. You know how the character speaks, what they look like. Where the director is showing how he perceived the story and characters. Can we as readers see books and movies as different entities? Not all movie versions might be considered worse than the books. Books require your imagination to run wild with in the story. Movies are an in-depth perspective toward the story. In some people opinion they need to change some of the details from the book to make the movie more enjoyable. Think about how dull that movie may be if you put everything from the book into the movie. Next time you are out watching a movie and you have already read the book try to remember that it is not going to be how you imagined it, it’s someone else’s story and how they perceived it. â€Å"If we were more naà ¯ve, new to the plot and characters, things might be different, but since we’ve read the books, and read them emphatically, possibly more than once we can’t know that for sure. We can only compare to what we know, and already love† (Mario & Mario, 2012, pp. 3-2). References: Bibbiani, W. (2011). Crave Online. Retrieved from http://www.craveonline.com/film/articles/171155-the-top-ten-things-the-harry-potter-movies-left-out Corliss, R. (2005, Nov.). Books Vs. Movies. Time, (),. Retrieved from http://www.time.com/time/magazine/article/0,9171,1134742,00.html Mario, A., & Mario, R. (2012, may). The Trouble with Making Books We Love into Movies. The Atlantic Wire, (), 5. Retrieved from http://www.theatlanticwire.com/entertainment/2012/03/trouble-making-books-we-love-movies/50220/

Credit Appraisal Process

TABLE OF CONTENTS Chapters 1. INTRODUCTION * Reason for selecting the project * Scheme of the project * Research Methodology * Limitation of the study 2. CREDIT POLICY OF COMMERCIAL BANK * Commercial banks and its objectives * Recent policy developments regarding bank credit * Changing phase of bank credit * Trends of bank credit in India * Procedure for providing bank credit * Credit Appraisal 3. THE PROFILE OF THE ORGANIZATION OF PNB * Indian banking sector & its major challenges * Punjab National Bank at a glance * Mission and Vision * Organizational structure of PNB 4. CREDIT PHILOSOPHY & POLICY WITH REGARDS TO PNB Credit philosophy * Credit policy * Introduction to loans * Classification of loans * Building up of a proposal * Requirements as per constitution of borrower * Financial Appraisal 5. ANALYSIS AND INTERPRETATION OF DATA * Credit Appraisal techniques * Process of credit appraisal for providing cash credit * Appraisal techniques for retail loans 6. CONCLUSION * Conclusio n * BIBLIOGRAPHY Introduction The last year financial crises have become the main cause for recession which was started in 2006 from US and was spread across the world. The world economy has been majorly affected from the crisis.The securities in stock exchange have fallen down drastically which has become the root cause of bankruptcy of many financial institutions and individuals. The root cause of the economic and financial crisis is credit default of big companies and individuals which has badly impacted the world economy. So in the present scenario analysing one’s credit worthiness has become very important for any financial institution before providing any form of credit facility so that such situation doesn’t arise in near future again. Analysis of the credit worthiness of the borrowers is known as Credit Appraisal.In order to understand the credit appraisal system followed by the banks this project has been conducted. The project has analysed the credit appraisa l procedure with special reference to Punjab National Bank which includes knowing about the different credit facilities provided by the banks to its customers, how a loan proposal is being made, what are the formalities that is to be satisfied and most importantly knowing about the various credit appraisal techniques which are different for each type of credit facility. Before going further it is necessary to understand the need and basic framework of the project.Therefore this chapter provides an introduction to the topic, objective of the project, reasons for selecting the project and the basic structure and framework how the project proceeds. In order to understand the importance of the topic selected an introduction to the overview of the commercial bank , its functions, and present trends and growth in bank credit are required and it is covered in this chapter. Reasons for selecting the project Whenever an individual or a company uses a credit that means they are borrowing mone y that they promise to repay with in a pre-decided period.In order to assess the repaying capability i. e. to evaluate their credit worthiness banks use various techniques that differ with the different types of credit facilities provided by the bank. In the current scenario where it is seen that big companies and financial institutions have been bankrupted just because of credit default so Credit Appraisal has become an important aspect in the banking sector and is gaining prime importance. It is the incident of credit defaults that has given rise to the financial crisis of 2008-09.But in India the credit default is comparatively less that other countries such as US. One of the reasons leading to this may be good appraisal techniques used by banks and financial institutions in India. Eventually the importance of this project is mainly to understand the credit appraisal techniques used by the banks with special reference to Punjab National Bank. Scheme of the project It covers the o bjective and structure of the project which is discussed as follows:- Objective of the project The overall objective of this project is to under stand the current credit appraisal system used in banks.The Credit Appraisal system has been analysed as per the different credit facilities provided by the bank. The detailed explanation about the techniques and process has been discussed in detail in the further chapters. Structure or Plan of the project The project first of all makes a study about the commercial banks- its important functions. Then it highlights on the concept of Bank Credit & its recent trends. The project then proceeds towards the lending procedure of banks and here it highlights about credit appraisal being the first step in building up of a loan proposal.Then it discusses the bank credit policy with respect to Punjab National bank where the project was undertaken. The project then proceeds with the review of literature i. e. review of some past work regarding credit appraisal by various researchers. The project then moves towards research methodology where it covers the information regarding the type of data collected and the theoretical concepts used in the project are discussed in detail. Then the project proceeds with the next chapter consisting of the analysis part which covers the analysis of various techniques used by the banks for the purpose of credit appraisal.Then the project moves to its next chapter i. e. findings where some results found out are interpreted and then moving on to the last and the final chapter i. e. the suggestions and conclusions where some steps are suggested to be implemented to increase the work efficiency and to reduce to work pressure Commercial banks and its objectives A commercial bank is a type of financial intermediary that provides checking accounts, savings accounts, and money market accounts and that accepts time deposits.Some use the term â€Å"commercial bank† to refer to a bank or a division o f a bank primarily dealing with deposits and loans from corporations or large businesses. This is what people normally call a â€Å"bank†. The term â€Å"commercial† was used to distinguish it from an investment bank. Commercial banks are the oldest, biggest and fastest growing financial intermediaries in India. They are also the most important depositories of public savings and the most important disbursers of finance. Commercial banking in India is a unique banking system, the like of which exists nowhere in the world.The truth of this statement becomes clear as one studies the philosophy and approaches that have contributed to the evolution of banking policy, programmes and operations in India. The banking system in India works under constraints that go with social control and public ownership. The public ownership of banks has been achieved in three stages: 1995, july 1969 and April, 1980. Not only the public sector banks but also the private sector and foreign ban ks are required to meet the targets in respect of sectoral deployment of credit, regional distribution of branches, and regional credit deposit ratios.The operations of banks have been determined by lead bank scheme, Differential Rate of interest scheme, Credit authorization scheme, inventory norms and lending systems prescribed by the authorities, the formulation of credit plans, and service area approach. Commercial Banks in India have a special role in India. The privileged role of the banks is the result of their unique features. The liabilities of Bank are money and therefore they are important part of the payment mechanism of any country.For a financial system to mobilise and allocate savings of the country successfully and productively and to facilitate day-to-day transactions there must be a class of financial institutions that the public views are as safe and convenient outlets for its savings. The structure and working of the banking system are integral to a countryâ€℠¢s financial stability and economic growth. It has been rightly claimed that the diversification and development of Indian Economy are in no small measure due to the active role banks have played financing economic activities of different sectors.Major objectives of commercial banks Bank Credit The borrowing capacity provided to an individual by the banking system, in the form of credit or a loan is known as a bank credit. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual. The operating paradigms of the banking industry in general and credit dispensation in particular have gone through a major upheaval. * Lending rates have fallen sharply. * Traditional growth and earning such as corporate credit has been either slow or not profitable as before. Banks moving into retail finance, interest rate on the once attractive retail loans also started coming down. * Credit risks has went up and new types risks are surfaced Types of credit- Bank in India provide mainly short term credit for financing working capital needs although, as will be seen subsequently, their term loans have increased over the years. The various types of advances provide by them are: (a) Term Loans, (b) cash credit, (c) overdrafts, (d) demand Loans , (e) purchase and discounting of commercial bills, and, (f) instalment or hire purchase credit. Volume of Credit-Commercial banks are a major source of finance to industry and commerce. Outstanding bank credit has gone on increasing from Rs 727 crore in 1951 to Rs 19,124 crore in 1978, to Rs 69,713 crore in 1986, Rs 1,01,453 crore in 1989-90 , Rs 2,82,702 crore in 1997 and to Rs 6,09,053 crore in 2002. Banks have introduced many innovative schemes for the disbursement of credit. Among such schemes are village adoption, agriculture development branches and equity fund for small units. Recently, most of the banks have introduced attractive education loan schemes for pursuing studies at home or abroad.They have introduced attractive educational loan schemes for pursuing studies at home or abroad. They have moved in the direction of bridging certain defects or gaps in their policies, such as giving too much credit to large scale industrial units and commerce and giving too little credit to agriculture, small industries and so on. The Public Sector Banks are still the leading lenders  though growth has declined compared to previous quarter. The credit growth rate has dipped sharply in foreign and private banks compared to previous quarter. In all, the credit growth has slipped in this quarter. Credit (YOY Growth)March 28 2008  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   March 27 2009| Public Sector Banks| 22. 5| 20. 4| The rates have gone down compared to previous quarter when it was seen that there was no changes in loan rates in private and foreign banks. But then compared to rate cuts done by RBI, they still need to go lower. Table 16: Reduction in Deposit and Lending Rates | (October 2008 – April 2009*)| (Basis points)| Bank Group| Deposit Rates| Lending Rates (BPLR)| Public Sector Banks| 125-250| 125-225| Private Sector Banks| 75-200| 100-125| Five Major Foreign Banks| 100-200| 0-100| | | |BPLR| Oct – 08| Mar – 09| Apr – 09| Change (from Oct to Apr)| Public Sector Banks| 13. 75-14. 75| 11. 50-14. 00| 11. 50-13. 50| 125-225| Private Sector Banks| 13. 75-17. 75| 12. 75-16. 75| 12. 50-16. 75| 100-125| Five Major Foreign Banks  Ã‚  Ã‚  | 14. 25-16. 75| 14. 25-15. 75| 14. 25-15. 75| 0-100| Sector-wise credit points credit has increased to agriculture, industry and real estate whereas has declined to NBFCs and Housing. A bank group wise sectoral allocation is also given which suggests private banks have increases exposure to agriculture and real estate but has declined to industry.Public sector banks have increased allocation to industry and rea l estate. There is a more detailed analysis in the macroeconomic report  released before the monetary policy. Sector| As on February 15, 2008|   | As on February 27, 2009|   |   | % share| Variations| % share | Variations| | in total| (per cent)| in total| (per cent)| Agriculture| 9. 2| 16. 4| 13| 21. 5| Industry| 45. 2| 25. 9| 52. 5| 25. 8| Real Estate| 3. 1| 26. 7| 8. 5| 61. 4| Housing| 7. 3| 12| 4. 7| 7. 5| NBFCs| 5. 7| 48. 6| 6. 6| 41. 7| Overall Credit| 100| 22| 100| 19. 5| To sum up, the credit conditions seems to have worsened after January 2009.The rates have declined but lending has not really picked up. However, the question still remains – whether credit decline is because banks are not lending (supply) or because  people/corporates are   not borrowing (lack of demand). It is usually seen that all financial variables as lead indicators say if credit growth (along with other fin indicators) is picking, actual growth will also rise. However, it is actuall y seen the relation is far from clear. In fact, the financial indicators  hardly help predict any change in business cycle. Most rise in good times and fall in bad times.Most financial indicators failed to predict this global financial crisis and kept rising making everyone all the more complacent. Recent policy developments Regarding Bank Credit Bank lending was done for a long time by assessing the working capital needs based on the concept of MPBF (maximum permissible bank finance). This practice has been withdrawn with the effect from April 15th 1997 in the sense that the date, banks have been left free to choose their own method ( from the method such as turnover , cash budget, present MPBF , or any other theory) of assessing working Capital requirement of the borrowers.The cash credit system has been the bane, yet it has exhibited a remarkable strength of survival all these years. In spite of many efforts which were direct in nature, only a slow progress has been made to red uce its importance and increase bill financing. Therefore a concrete and direct policy step was taken on April 21, 1995 which made it mandatory for banks, consortia, syndicates to restrict cash credit components to the prescribed limit , the balance being given in the form of a short term loan, which would be a demand loan for a maximum period of one year, or in case of seasonal industries , for six months.The interest rates on the cash credit and loan components are to be fixed in accordance with the prime lending rates fixed by the banks. This â€Å"loan system† was first made applicable to the borrowers with an MPBF of Rs 20 crore and above; and in their case , the ratio of cash credit (loan) to MPBF was progressively reduced(increased) from 75 (25) per cent in April 1995 , to 60 (40) percent in September 1995, 40 (60) per cent in April 1996 , and 20 (80) percent in April 1997.With the withdrawal of instructions about the MPBF in April 1997 , the prescribed cash credit and loan components came to be related to the working capital limit arrived in banks as per the method of their choice. With effect from September 3, 1997, the RBI has permitted banks to raise their existing exposure limit to a business group from 50% to 60%; the additional 10% limit being exclusively meant for investment in infrastructure projects. The term lending by banks also has subject to the limits fixed by RBI. In 1993, this limit was raised from Rs 10 crore to Rs 50 crore in case of a oan for a single project by a single bank, and from Rs 150 crore to Rs 200 crore for a single project by all the banks. The latter limit was subsequently raised to Rs 500 crore in the case of general projects and Rs 1000 crore for power projects. From September3, 1997 these caps on term lending by banks were removed subject to their compliance with the prudential exposure norms. The banks can invest in and underwrite shares and debentures of corporate bodies. At present, they can invest five perc ent of their incremental deposits in equities of companies including other banks.Their investment in shares/ Bonds of DFHI, Securities trading Corporation of India (STCI), all Indian financial institutions and bonds (debentures) and preference shares of the companies are excluded from this ceiling of five per cent with affect from April 1997 . From the same date banks could extend loans within this ceiling to the corporate against shares held by them. They could also offer overdraft facilities to stock brokers registered with help of SEBI against shares and debentures held by them for nine months without change of ownership. CHANGING PHASE OF BANK CREDIT-A study group headed by Shri Prakash Tandon, the then Chairman of Punjab National Bank, was constituted by the RBI in July 1974 with eminent personalities drawn from leading banks, financial institutions and a wide cross-section of the industry with a view to study the entire gamut of Bank's finance for working capital and suggest w ays for optimum utilization of Bank credit. This was the first elaborate attempt by the central bank to organize the Bank credit. Most banks in India even today continue to look at the needs of the corporate in the light of methodology recommended by the Group.The report of this group is widely known as Tandon Committee report. The weaknesses in the Cash Credit system have persisted with the non-implementation of one of the crucial recommendations of the Committee. In the background of credit expansion seen in 1977-79 and its ill effects on the economy, RBI appointed a working group to study and suggest- i) Modifications in the Cash Credit system to make it amenable to better management of funds by the Bankers and ii) Alternate type of credit acilities to ensure better credit discipline and co relation between credit and production. The Group was headed by Sh. K. B. Chore of RBI and was named Chore Committee. Another group headed by Sh. P. R. Nayak (Nayak Committee) was entrusted th e job of looking into the difficulties faced by Small Scale Industries due to the sophisticated nature of Tandon ; Chore Committee recommendations. His report is applicable to units with credit requirements of less than Rs. 50 lacs.The recommendations made by Tandon Committee and reinforced by Chore Committee were implemented in all Banks and Bank Credit became much more organized. However, the recommendations were perceived as too strict by the industry and there has been a continuous clamor from the Industry for movement from mandatory control to a voluntary market related restraint. With recent liberalization of economy and reforms in the financial sector, RBI has given the freedom to the Banks to work out their own norms for inventory and the earlier norms are now to be taken as guidelines and not a mandate.In fact, beginning with the slack season credit policy of 1997-98, RBI has also given full freedom to all the Banks to devise their own method of assessing the short term cre dit requirements of their clients and grant lines of credit accordingly. Most banks, however, continue to be guided by the principles enunciated in Tandon Committee report. Trends of Bank Credit in India The face of Indian banking has changed radically in the last decade. A perusal of the Basic Statistical Returns submitted by banks to the Reserve Bank of India shows that between 1996 and 2005, personal loans have been the fastest growing asset, increasing from 9. per cent of the total bank credit in 1996 to 22. 2 per cent in 2005. Of course, this is partly due to the huge rise in housing loans, which rose from 2. 8 per cent of the bank credit to 11 per cent over the period, but ‘other personal loans’ — comprising loans against fixed deposits, gold loans and unsecured personal loans — also rose from 6. 1 per cent to 10. 7 per cent. Other categories whose share increased were loans to professionals and loans to finance companies. In contrast, there has been a sharp decline in the share of lendings to industry. Credit to small scale industries fell from 10. per cent of the total in 1996 to 4. 1 per cent in 2005. Reasons for declining trend of bank credit * A major share of the economic growth has been led by the expansion of the service sector * Capital intensity and investment intensity required for growth in the current economic context may not be as high as it used to be in the past. * In manufacturing sector more efficient utilization of existing capacities contributed to the sectoral growth rather rather than any large addition of fresh capacities. The consequential increase in the demand for credit was also subdued. Greater and cheaper avenues for credit resulted in a bigger share of disintermediation being resorted to by large borrowers. The other trend has been the substantial drop in the share of rural credit, while the share of metropolitan centres has increased. While bankers say that up gradation of rural centres into semi- urban could be one reason (the share of semi-urban centres has gone up), it is also true that the reforms have been urban-centric and have tended to benefit the metros more. The number of rural bank offices fell from 32,981 in March 1996 to 31,967 by March 2005.The states have been the main beneficiaries of bank credit are the northern region as it has increased its share from 18. 7 per cent of the total credit in 1996 to 22. 2 per cent in 2005. As it was seen that Delhi’s share went up from 9. 5 per cent to 12. 1 per cent over the period. This is not due to food credit, the account of which is maintained in Delhi. Clearly, the national capital has gained a lot from liberalisation. Trends for the year 2008-09 The aggregate deposits of scheduled commercial banks have expanded during 2008-09 at a somewhat slower rate (19. %) than in 2007-08 (22. 4%). Within aggregate deposits demand deposits have shown an absolute fall (-Rs 4,179 crore) in contrast to the sizeable increase (Rs 94,579 crore or by 22%) in 2007-08,. On the other hand, time deposits have shown an accelerated increase of 22. 6% (or Rs 647,806 crore) as against 21. 8% (Rs 512,844 crore) in the previous year. In the investment portfolio of banks, the expansion during 2008- 09 at Rs 194,031crore has been much lower than the expansion of Rs 340,250 crore as increase in net bank credit to government under onetary data for the same period. This has happened because the latter has a sizeable amount of RBI credit to government following the increased open market operations. Finally, there has occurred considerable slowdown in bank credit expansion. Because of relatively higher procurement of foodgrains, food credit has expanded by Rs 1,812 crore during 2008-09 as against an absolute fall of Rs 2,121 crore in 2007-08. Non-food credit growth at Rs 406,287 (17. 5%) has been slower than in the previous year at Rs 432,846 (23. 0%).Procedure for providing Bank Credit- Banks offers different types of credit facilities to the eligible borrowers. For this, there are several procedures, controls and guidelines laid out. Credit Appraisal, Sanctions, Monitoring and Asset Recovery Management comprise the entire gamut of activities in the lending process of a bank which are clearly shown as below: Source- Self constructed From the above chart we can see that Credit Appraisal is the core and the basic function of a bank before providing loan to any person/company, etc.It is the most important aspect of the lending procedure and therefore it is discussed in detail as below. Credit Appraisal Meaning – The process by which a lender appraises the creditworthiness of the prospective borrower is known as Credit Appraisal. This normally involves appraising the borrower’s payment history and establishing the quality and sustainability of his income. The lender satisfies himself of the good intentions of the borrower, usually through an interview. * The credit requirement must be assessed by all Indian Financial Institutions or specialised institution set up for this purpose. Wherever financing of infrastructure project is taken up under a consortium / syndication arrangement – bank’s exposure shall not exceed 25% * Bank may also take up financing infrastructure project independently / exclusively in respect of borrowers /promoters of repute with excellent past record in project implementation. * In such cases due diligence on the inability of the projects are well defined and assessed. State government guarantee may not be taken as a substitute for satisfactory credit appraisal.The important thing to remember is not to be overwhelmed by marketing or profit centre reasons to book a loan but to take a balanced view when booking a loan, taking into account the risk reward aspects. Generally everyone becomes optimistic during the upswing of the business cycle, but tend to forget to see how the borrower will be during the downturn, which is a short-sighted approach. Furthermore greater emphasis is given on financials, which are usually outdated; this is further exacerbated by the fact that a descriptive approach is usually taken, rather than an analytical approach, to the credit.Thus a forward looking approach should also be adopted, since the loan will be repaid primarily from future cash flows, not historic performance; however both can be used as good repayment indicators. Indian Banking Sector ; Its Major Challenges It is well recognised by the world that India is one of the fastest growing economies in the world. Evidence from across the world suggests that a sound and evolved banking system is required for sustained economic development. The last decade has seen many positive developments in the Indian banking sector.The policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in the sector. The sector now compares favourably with banking sectors in the region on metrics like growth, profitability and non-performing assets (NPAs). A few banks have established an outstanding track record of innovation, growth and value creation. This is reflected in their market valuation. However, improved regulations, innovation, growth and value creation in the sector remain limited to a small part of it.The cost of banking intermediation in India is higher and bank penetration is far lower than in other markets. India’s banking industry must strengthen itself significantly if it has to support the modern and vibrant economy which India aspires to be. While the onus for this change lies mainly with bank managements, an enabling policy and regulatory framework will also be critical to their success. The failure to respond to changing market realities has stunted the development of the financial sector in many developing countries.A weak banking structure has been unable to fuel continued growth, which has harmed the long-term health of their economies. In this â€Å"white paper†, we emphasise the need to act both decisively and quickly to build an enabling, rather than a limiting, banking sector in India. Indian banks have compared favourably on growth, asset quality and profitability with other regional banks over the last few years. The banking index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period.Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks. However, the cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. While bank lending has been a significant driver of GDP growth and employment, periodic instances of the â€Å"failure† of some weak banks have often threatened the stability of the system.Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCBs), unless addressed, could seriously weaken the health of the sector. Further, the inability of bank managements (with some notable exceptions) to improve capital allocation, increase the productivity of their service platforms and improve the performance ethic in their organisations could seriously affect future performance.India has a better banking system in place Vis a Vis other developing countries, but there are several issues that need to be ironed out. Major challenges of Indian banking sector are mentioned below. Interest rate risk Interest rate risk can be defined as exposure of bank's net interest income to adverse movements in interest rates. A bank's balance sheet consists mainly of rupee assets and liabilities. Any movement in domestic interest rate is the main source of interest rate risk. Over the last few years the treasury departments of banks have been responsible for a substantial part f profits made by banks. Between July 1997 and Oct 2003, as interest rates fell, the yield on 10-year government bonds (a barometer for domestic interest rates) fell, from 13 per cent to 4. 9 per cent. With yields falling the banks made huge profits on their bond portfolios. Now as yields go up (with the rise in inflation, bond yields go up and bond prices fall as the debt market starts factoring a possible interest rate hike), the banks will have to set aside funds to mark to market their investment. This will make it difficult to show huge profits from treasury operations.This concern becomes much stronger because a substantial percentage of bank depo sits remain invested in government bonds. Banking in the recent years had been reduced to a trading operation in government securities. Recent months have shown a rise in the bond yields has led to the profit from treasury operations falling. The latest quarterly reports of banks clearly show several banks making losses on their treasury operations. If the rise in yields continues the banks might end up posting huge losses on their trading books.Given these facts, banks will have to look at alternative sources of investment. Interest rates and non-performing assets The best indicator of the health of the banking industry in a country is its level of NPAs. Given this fact, Indian banks seem to be better placed than they were in the past. A few banks have even managed to reduce their net NPAs to less than one percent (before the merger of Global Trust Bank into Oriental Bank of Commerce OBC was a zero NPA bank). But as the bond yields start to rise the chances are the net NPAs will al so start to go up.This will happen because the banks have been making huge provisions against the money they made on their bond portfolios in a scenario where bond yields were falling. Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years. This does not seem to be the case. With increasing bond yields, treasury income will come down and if the banks wish to make large provisions, the money will have to come from their interest income, and this in turn, shall bring down the profitability of banks. Competition in retail bankingThe entry of new generation private sector banks has changed the entire scenario. Earlier the household savings went into banks and the banks then lent out money to corporate. Now they need to sell banking. The retail segment, which was earlier ignored, is now the most important of the lot, with the banks jumping over one another to give out loans. The consumer has never been so lucky with so man y banks offering so many products to choose from. With supply far exceeding demand it has been a race to the bottom, with the banks undercutting one another.A lot of foreign banks have already burnt their fingers in the retail game and have now decided to get out of a few retail segments completely. The nimble footed new generation private sector banks have taken a lead on this front and the public sector banks are trying to play catch up. The PSBs have been losing business to the private sector banks in this segment. PSBs need to figure out the means to generate profitable business from this segment in the days to come. The urge to merge In the recent past there has been a lot of talk about Indian Banks lacking in scale and size.The State Bank of India is the only bank from India to make it to the list of Top 100 banks, globally. Most of the PSBs are either looking to pick up a smaller bank or waiting to be picked up by a larger bank. The central government also seems to be game ab out the issue and is seen to be encouraging PSBs to merge or acquire other banks. Global evidence seems to suggest that even though there is great enthusiasm when companies merge or get acquired, majority of the mergers/acquisitions do not really work. So in the zeal to merge with or acquire another bank the PSBs should not let their common sense take a back seat.Before a merger is carried out cultural issues should be looked into. A bank based primarily out of North India might want to acquire a bank based primarily out of South India to increase its geographical presence but their cultures might be very different. So the integration process might become very difficult. Technological compatibility is another issue that needs to be looked into in details before any merger or acquisition is carried out. Impact of BASEL-II norms Banking is a commodity business. The margins on the products that banks offer to its customers are extremely thin vis a vis other businesses.As a result, for banks to earn an adequate return of equity and compete for capital along with other industries, they need to be highly leveraged. The primary function of the bank's capital is to absorb any losses a bank suffers (which can be written off against bank's capital). Norms set in the Swiss town of Basel determine the ground rules for the way banks around the world account for loans they give out. These rules were formulated by the Bank for International Settlements in 1988. Essentially, these rules tell the banks how much capital the banks should have to cover up for the risk that their loans might go bad.The rules set in 1988 led the banks to differentiate among the customers it lent out money to. Different weightage was given to various forms of assets, with zero percentage weightings being given to cash, deposits with the central bank/govt. etc, and 100 per cent weighting to claims on private sector, fixed assets, real estate etc. The summation of these assets gave us the risk-weighte d assets. Against these risk weighted assets the banks had to maintain a (Tier I + Tier II) capital of 9 per cent i. e. every Rs100 of risk assets had to be backed by Rs 9 of Tier I + Tier II capital.To put it simply the banks had to maintain a capital adequacy ratio of 9 percent. The problem with these rules is that they do not distinguish within a category i. e. all lending to private sector is assigned a 100 per cent risk weighting, be it a company with the best credit rating or company which is in the doldrums and has a very low credit rating. This is not an efficient use of capital. The company with the best credit rating is more likely to repay the loan vis a vis the company with a low credit rating.So the bank should be setting aside a far lesser amount of capital against the risk of a company with the best credit rating defaulting vis a vis the company with a low credit rating. With the BASEL-II norms the bank can decide on the amount of capital to set aside depending on the credit rating of the company. Credit risk is not the only type of risk that banks face. These days the operational risks that banks face are huge. The various risks that come under operational risk are competition risk, technology risk, casualty risk, crime risk etc. The original BASEL rules did not take into account the operational risks.As per the BASEL-II norms, banks will have to set aside 15 per cent of net income to protect themselves against operational risks. Over the last few years, the falling interest rates, gave banks very little incentive to lend to projects, as the return did not compensate them for the risk involved. This led to the banks getting into the retail segment big time. It also led to a lot of banks playing it safe and putting in most of the deposits they collected into government bonds. Now with the bond party over and the bond yields starting to go up, the banks will have to concentrate on their core function of lending.The banking sector in India needs t o tackle these challenges successfully to keep growing and strengthen the Indian financial system. Furthermore, the interference of the central government with the functioning of PSBs should stop. A fresh autonomy package for public sector banks is in offing. The package seeks to provide a high degree of freedom to PSBs on operational matters. This seems to be the right way to go for PSBs. The growth of the banking sector will be one of the most important inputs that shall go into making sure that India progresses and becomes a global economic super power. Products and Services Corporate banking * Personal banking * Industrial finance * Agriculture finance * Financing of trade * International banking * Home loan * Auto loan * ATM/Debit card * Deposit interest rate * Credit interest rate * Other services: lockers facility, internet banking, EFT ; Clearing services etc Review of Literature Literature review provides available research with respect to the selected topic of the project or the research findings by an author which has been done with respect to the research topic. This chapter provides the overall view of the available literature with respect to the topic of the project.The review of the related research works are described as under:- 1. A research work on the topic â€Å" On the appraisal on consumer credit banking products with the asset quality frame: A multiple criteria application. † done by Panagiotis Xidonas, Alexandros Flamos, Sortirios Koussouris, Dimitrious Askouins ; Ioannis Psarras from National Technical University of Athens in 2007 says that Asset quality refers to the likelihood that the bank's earning assets will continue to perform and requires both a qualitative and quantitative assessment.Decision problems like the â€Å"internal appraisal of banking products†, are problems with strong multiple-criteria character and it seems that the methodological framework of Multiple Criteria Decision Making could provide a reliab le solution. In this paper, the Asset Quality banking indicators are the, so called, â€Å"criteria†, the value of these indicators are the, so called, â€Å"scores† in each criterion and the P. R. O. METH. E. E. [Preference Ranking Organization Method of Enrichment Evaluations, Brans & Vincke (1985)] Multiple Criteria method is applied, towards modelling banking products appraisal problems.A Multiple Criteria process, strictly mathematically defined, integrates the behaviour of each indicator-criterion and utilizes each score in order to rank the so called â€Å"alternatives†, i. e. categories of banking products. 2. The research Paper on â€Å"Evaluation of decision support systems for credit management decisions† by S. Kanungo, S. Sharma, P. K. Jain from Department of studies, IIT Delhi have conducted a study to evaluate the efficiency of decision support system (DSS) for credit management. This study formed a larger initiative to access the effectiven ess of the I.T based credit management process at SBI. Such a study was necessitated since credit appraisal has become an integral sub-function of the Indian banks in view of growing incidence of non-performing assets. The DSS they have assessed was a credit appraisal system developed by Quuattro pro at SBI. This system helps in analysis of balance sheets, Calculation of financial ratios, cash flow analysis, future projections, sensitivity analysis and risk evaluation as per SBI norms. They have also used a strong Quassi experimental design called Solomon’s four group design for the assessment.In the experiment the managers of SBI who attended the training programme were the subjects the experiment consisted of the measurements that were taken as pre and post tests. An experimental intervention was applied between the pre-tests and the pro-tests. The intervention or stimulus consisted of DSS training and use. There were four groups in the experiment. The stimulus remained con stant as the they took care to ensure that the course content as well as the instructors remained the same during the course of the experiment. Two were experimental groups and two were control groups.All four groups underwent training in credit management between the pre and the post tests. Results from research shows that while the DSS is effective, improvement needs to be done in the methodology to assess such improvements. Moreover such assessment frameworks while being adequate from a DSS-centric viewpoint do not respond to the assessment of DSS in an organizational setting . In the concluding section they have discussed how this evaluative framework can be strengthened to initiate an activity that will allow the long term and possibly the only meaningful evaluation framework for such a system. . The research paper on the topic â€Å"Towards an appraisal of the FMHA farm credit program: A case study of the efficiency of borrower by S. Mehdian, Wm. McD. Herr, Phil Eberle, and R ichard Grabowski† have studied that the a production frontier methodology is used to measure the overall efficiency of a sample of farmers home administration(FMHA) compared to non participants. The study did not find evidence that the efficiency FMHA farms improved between a time period Results indicated that overall efficiency of FMHA borrowers is associated with selected financial characteristics of the farms.A review of the literature shows that agricultural finance specialists have not been successful in evaluating whether FMHA pro- grams improve the efficiency and income of probability of success. Liberal loan policies Eligible borrowers. Inadequate evaluation of the FMHA program occurs partly because of because the difficulty of adequately deter-mining the impacts of changes in the econ- borrowers in a more normal period of the loan.This study addressed these difficulties by utilizing a nonparametric production frontier technique to measure overall efficiency and a matc hed pair statistical procedure to measure how efficiency of farms receiving FMHA credit changed relative to a Non-FMHA farmers. 4. The book named â€Å"Financial Analysis for Bank Lending in Liberalised Economy† by Sampat. P. Singh and Dr. S. Singh have discussed the subject financial analysis for bank lending has assumed considerable importance, particularly since early 1990's when, like most of the countries, India opted for the policy of liberalisation and globalisation after 1991.The present volume is meant to be a standard reference as well as text book on the varied facets of financial analysis with reference to credit management by Banks and Financial Institutions. The book consists of three parts. Part I discusses the concepts and tools of Financial Analysis; Part II explains various concepts of working capital in its historical context; while Part III demonstrates the application of these tools in the changing context of liberalised economy by focusing on new concept s like ‘Credit Worthiness', Risk-Analysis, Credit Rating, Products-Differentiation, Pricing-Differentiation, Asset-Liability Management, etc.The book contains- Bank Lending and Industrial Finance in India ,Basic Economics for Bankers and Business Managers ,Introduction to Fundamentals Accounting Principles ,Profit and Loss Account (Operating Statement) ,Analysis of Profit and Loss Account (Operating Statement) ,Structure and Analysis of Balance Sheet ,Ratios as Tools of Financial Statements Analysis ,Accounting Flows : Income, Cash and Funds ,Break-even Analysis and Margin of Safety ,Appraisal of Capital Projects ,New Conceptual Framework for Analysis, Liberalised Era and New Focus of Bank Lending ,Managing Working Capital by Strategic Choice , Financing Working Capital : Conceptual and Historical Exposition,Creditworthiness and Credit Rating : At Centre stage Nucleus of Credit Appraisal , Working Capital Management-I : MPBF System of Appraisal and Bifurcation of Fund-Based Li mit in Two Components Working Capital Management-II : Alternative Methods of Appraisal ,Working Capital Management-III : Follow-up and Supervision , Appraisal of a New Project Involving Term Loan , Management of Problem Accounts , Management of Non-Performing Assets (NPAs), Rehabilitation of Sick Industrial Units, Working Capital Management : Concepts and Techniques , 1st Committee on Financial Sector Reform and the 2nd Committee on Banking System Reform (Known as Narasimham Committee Report, 1998). 5. The research paper on the topic â€Å"Competitive analysis in banking: Appraisal of the methodologies† by Nicola Cetorelli has discussed about the U. S. banking industry has experienced significant structural changes as the result of an intense process of consolidation. From 1975 to 1997, the number of commercial banks decreased by about 35 percent, from 14,318 to 9,215.Since the early 1980s, there have been an average of more than 400 mergers per year (see Avery et al. , 1997, and Simmons and Stavins, 1998). The relaxation of intrastate branching restrictions, effective to differing degrees in all states by 1992, and the passage in 1994 of the Riegle. Neal Interstate Banking and Branching Efficiency Act, which allows bank holding companies to acquire banks in any state and, since June 1, 1997, to open interstate branches, is certainly accelerating the process of consolidation. These significant changes raise important policy concerns. On the one hand, one could argue that banks are merging to fully exploit potential economies of scale and/or scope.The possible improvements in efficiency may translate into welfare gains for the economy, to the extent that customers pay lower prices for banks. services or are able to obtain higher quality services or services that could not have been offered before. 1 On the other hand, from the point of view of public policy it is equally important to focus on the effect of this restructuring process on the competitive co nditions of the banking industry. Do banks gain market power from merging? If so, they will be able to charge higher than competitive prices for their products, thus inflicting welfare costs that could more than offset any presumed benefit associated with mergers.In this article, analysis of competition in the banking industry is done highlighting a very fundamental issue: How market power is measured and how do regulators rely on accurate and effective procedures to evaluate the competitive effects of a merger. Credit Philosophy ; Policy with regards to Punjab National Bank An ideal advance is the one given to a reliable customer for an approval purpose with adequate experience, safe in knowledge that the money will be used to advantage and repayment will be made within a reasonable period from trade receipts or known maturities due on or about given dates. Credit philosophy – â€Å"To achieve credit expansion required for sustaining the profitability of the bank and emphas is on quality assets, profitable relationships and prudent growth. † CREDIT POLICY Bank follows following broad policy imperatives:- Reduction in dependence upon short term corporate loans, especially unsecured exposures. * Aiming to achieve more sanctions at levels closer to the customer. * Changing the mix of the portfolio in favour of better diffused and higher yielding credit. * Building competencies in credit management through training ; promotion of self directed learning. Objectives of credit policy 1. A balanced growth of credit portfolio, which does not compromise safety. 2. Adoption of a forward looking and market responsive approach for moving into profitable new areas on lending which emerge, within the pre determined exposure ceilings. 3. Sound risk management practices to identify measure, monitor and control risks. 4.Maximize interest yields from credit portfolio through a judicious management of varying spreads of loan assets based upon their size, credit rati ng and tenure. 5. Leverage on strong relationships with existing long-standing clients to source a bulk of new business by addressing their requirements comprehensively. 6. Ensure due compliance of various regulatory norms including CAR, income recognition and asset classification 7. Accomplish balanced development of credit to various sectors and geographical regions. 8. Achieve growth of credit to priority sectors / subsectors and continue to surpass the targets stipulated by reserve bank of India. 9.Using of pricing as a tool of competitive advantage ensuring however that earnings are protected. 10. Develop and maintain enhanced competencies in credit management at all levels through a combination of training initiatives, promotion of self directed learning and dissemination of best practices. Objectives in Credit To maintain healthy balance between- * Credit volumes * Earnings * Asset quality within the framework of regulatory prescriptions, corporate goals and bank’s soc ial responsibilities. Introduction to loans Loans are advances for fixed amounts repayable on demand or in instalment. They are normally made in lump sums and interest is paid on the entire amount.The borrower cannot draw funds beyond the amount sanctioned. A key function of the Bank is deploying funds for income-yielding assets. A major part of Bank’s assets are the loans and advances portfolio and investments in approved securities. Loans ; Advances refer to long-term and short-term credit facilities to various types of borrowers and non-fund facilities like Bank Guarantees, Letters of Credit, Letters of Solvency etc. Bill facilities represent structured commitments which are negotiable claims having a market by way of negotiable instruments. Thus, Banks extend credit facilities by way of fund-based long-term and short-term loans and advances as also by way of non-fund facilities.Loans/Advances Classification of Loans Loans/Advances Pre-shipment Finance Post shipment Financ e Letter of Credit Bank Guarantee Term Loan Export Finance Bill Discounting Cash Credit Retail Loan Non-Fund Based Fund Based Fund Based Bank provides credit in various forms. These are broadly classified into two categories- Fund based and Non –Fund Based. Fund based refers to the type of credit where cash is directly involved i. e. where bank provides money to the seeker in anticipation of getting it back. Where as in a Non-fund Based, Bank doesn’t pay cash directly but gives assurance or takes guarantee on behalf of its customer to pay if they fail to do so.In case on Fund Based there are different categories of loans which are discussed as follows I. RETAIL LOANS- Retail banking in India is not a new phenomenon. It has always been prevalent in India in various forms. For the last few years it has become synonymous with mainstream banking for many banks. The typical products offered in the Indian retail banking segment are:- * Housing loans * Consumer loans for purc hase of durables * Auto loans * Educational loans * Credit Cost. * Personal loans Retail loan is the practice of loaning money to individuals rather than institutions. Retail lending is done by banks, credit unions, and savings and loan associations.These institutions make loans for automobile purchases, home purchases, medical care, home repair, vacations, and other consumer uses. Retail lending has taken a prominent role in the lending activities of banks, as the availability of credit and the number of products offered for retail lending have grown. The amounts loaned through retail lending are usually smaller than those loaned to businesses. Retail lending may take the form of instalment loans, which must be paid off little by little over the course of years, or non-instalment loans, which are paid off in one lump sum. These loans are marketed under attractive brand names to differentiate the products offered by different banks.As the Report on Trend and Progress of India, 2007- 08 has shown that the loan values of these retail lending typically range between Rs. 20, 000 to Rs. 100 lakh. The loans are generally for duration of five to seven years with housing loans granted for a longer duration of 15 years. Credit card is another rapidly growing sub-segment of this product group. In recent past retail lending has turned out to be a key profit driver for banks with retail portfolio. The overall impairment of the retail loan portfolio worked out much less then the Gross NPA ratio for the entire loan portfolio. Within the retail segment, the housing loans had the least gross asset impairment.In fact, retailing make ample business sense in the banking sector. Basic reasons that have contributed to the retail growth in India are- * First, economic prosperity and the consequent increase in purchasing power has given a fillip to a consumer boom. Note that during the 10 years after 1992, India's economy grew at an average rate of 6. 8 percent and continues to grow at the almost the same rate – not many countries in the world match this performance. * Second, changing consumer demographics indicate vast potential for growth in consumption both qualitatively and quantitatively. India is one of the countries having highest proportion (70%) of the population below 35 years of age (young population).The BRIC report of the Goldman-Sachs, which predicted a bright future for Brazil, Russia, India and China, mentioned Indian demographic advantage as an important positive factor for India. * Third, technological factors played a major role. Convenience banking in the form of debit cards, internet and phone-banking, anywhere and anytime banking has attracted many new customers into the banking field. Technological innovations relating to increasing use of credit / debit cards, ATMs, direct debits and phone banking has contributed to the growth of retail banking in India. * Fourth, the Treasury income of the banks, which had strengthened the botto m lines of banks for the past few years, has been on the decline during the last two years. In such a scenario, retail business provides a good vehicle of profit maximisation.Considering the fact that retail’s share in impaired assets is far lower than the overall bank loans and advances, retail loans have put comparatively less provisioning burden on banks apart from diversifying their income streams. * Fifth, decline in interest rates have also contributed to the growth of retail credit by generating the demand for such credit. According to K V Kamath, the changing demographic profile and a downward trend of the interest rates will propel retail credit in India. â€Å"There is a huge retail credit opportunity that is surfacing. Banks have low penetration in this segment currently. But it is the one area that is providing the momentum in the banking business now,† India has among the lowest penetration of retail loans in Asia.Though the sector has been growing at arou nd 15 per cent, there is still a huge opportunity to tap into. Middle and -high-income homes in India has increased to 2. 57 crore (25. 7 million). Interest rates on retail loans have been dropping rapidly too. For instance residential mortgages slumped by 7 per cent over the last four years. â€Å"The entry of a number of banks in India in the last few years has helped provide increased coverage and a number of new products in the market,† says Kamath. II. WORKING CAPITAL / CASH CREDIT Cash credit is a short-term cash loan to a company. A bank provides this type of funding, but only after the required security is given to secure the loan.Once a security for repayment has been given, the business that receives the loan can continuously draw from the bank up to a certain specified amount. The bank provides certain amount to the company for its day to day working keeping certain margin in hand. III. TERM LOANS A bank loan to a company, with a fixed maturity and often featuring amortization of principal. If this loan is in the form of a line of credit, the funds are drawn down shortly after the agreement is signed. Otherwise, the borrower usually uses the funds from the loan soon after they become available. Bank term loans are very a common kind of lending. Term loans are the basic vanilla commercial loan. They typically carry fixed interest rates, and monthly or quarterly repayment schedules and include a set maturity date.Bankers tend to classify term loans into two categories: * Intermediate-term loans: Usually running less than three years, these loans are generally repaid in monthly instalments (sometimes with balloon payments) from a business's cash flow. According to the American Bankers Association, repayment is often tied directly to the useful life of the asset being financed. * Long-term loans: These loans are commonly set for more than three years. Most are between three and 10 years, and some run for as long as 20 years. Long-term loans are c ollateralized by a business's assets and typically require quarterly or monthly payments derived from profits or cash flow. These loans usually carry wording that limits the amount of additional financial commitments the business may take on including other debts but also dividends or principals' salaries), and they sometimes require that a certain amount of profit be set-aside to repay the loan. Appropriate For: Established small businesses that can leverage sound financial statements and substantial down payments to minimize monthly payments and total loan costs. Repayment is typically linked in some way to the item financed. Term loans require collateral and a relatively rigorous approval process but can help reduce risk by minimizing costs. Before deciding to finance equipment, borrowers should be sure they can they make full use of ownership-related benefits, such as depreciation, and should compare the cost with that leasing. Supply: Abundant but highly differentiated.The degr ee of financial strength required to receive loan approval can vary tremendously from bank to bank, depending on the level of risk the bank is willing to take on. IV. BILL DISCOUNTING While discounting a bill, the Bank buys the bill (i. e. Bill of Exchange or Promissory Note) before it is due and credits the value of the bill after a discount charge to the customer's account. The transaction is practically an advance against the security of the bill and the discount represents the interest on the advance from the date of purchase of the bill until it is due for payment. Bills of exchange- A bill of exchange or â€Å"draft† is a written order by the drawer to the drawee to pay money to the payee.A common type of bill of exchange is the cheque (check in American English), defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay the bearer a specific sum on a specific date. Prior to the advent of paper currency, bills of exchange were a common means of exchange. They are not used as often today. A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at fixed or determinable future time a sum certain in money to order or to bearer.It is essentially an order made by one person to another to pay money to a third person. A bill of exchange requires in its inception three parties–the drawer, the drawee, and the payee. The person who draws the bill is called the drawer. He gives the order to pay money to third party. The party upon whom the bill is drawn id called the drawee. He is the person to whom the bill is addressed and who is ordered to pay. He becomes an acceptor when he indicates his willingness to pay the bill. The party in whose favor the bill is drawn or is payable is called the paye e. Promissory Note- A promissory note is a written promise by the maker to pay money to the payee.Bank note is frequently transferred as a promissory note, a promissory note made by a bank and payable to bearer on demand. A maker of a promissory note promises to unconditionally pay the payee (beneficiary) a specific amount on a specified date. A promissory note is an unconditional promise to pay a specific amount to bearer or to the order of a named person, on demand or on a specified date. A negotiable promissory note is unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at fixed or determinable future time, sum certain in money to order or to bearer V. EXPORT FINANCE- This type of a credit facility is provided to exporters who export their goods to different places.It is divided into two parts- pre-shipment finance and post-shipment finance. * Pre Shipment Finance is issued by a financial institution when the seller w ant the payment of the goods before shipment. * Post Shipment Finance is a kind of loan provided by a financial institution to an exporter or seller against a shipment that has already been made. This type of export finance is granted from the date of extending the credit after shipment of the goods to the realization date of the exporter proceeds. Exporters don’t wait for the importer to deposit the funds. Non Fund Based loans generate income for the bank without committing the funds of the bank. Bank generates substantial income under this head.There are two types of credit under this category which are discussed as follows:- I. BANK GUARANTEE- A bank guarantee is a written contract given by a bank on the behalf of a customer. By issuing this guarantee, a bank takes responsi