Business Finance

Business Finance is that business activity which is concerned with the acquisition and conservation of capital funds in meeting financial needs and overall objectives of business enterprises.

Universal Banking In India

RBI states: “The emerging scenario in the Indian banking system points to the likelihood of the provision of multifarious financial services under one roof. This will present opportunities to banks to explore territories in the field of credit/debit cards, mortgage financing, infrastructure lending, asset securitisation, leasing and factoring. At the same time it will throw challenges in the form of increased competition and place strain on the profit margins of banks”

The evolving scenario in the Indian banking system points to the emergence of universal banking. The traditional working capital financing is no longer the banks major lending area while FIs are no longer dominant in term lending.… Read the rest

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Scenario of Indian Banking Sector in Pre and Post Reform Period

Scenario of Indian Banking Sector in Pre Reform Period

Banking is an ancient business in India. Initially, the growth of Indian banks was very slow and also experienced periodic failures between 1913 and 1948. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act, 1949 as per amending Act of 1965 (Act No. 23 of 1965).

During those days, public had lesser confidence in the banks. As an aftermath deposit mobilization was slow. Government took major steps in Indian banking sector reform after independence.… Read the rest

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Problems of Leasing

Leasing has great potential in India. However, leasing in India faces serious handicaps which may mar its growth in future. The following are some of the problems.

1. Unhealthy Competition:

The market for leasing has not grown with the same pace as the number of lessors. As a result, there is over supply of lessors leading to competitor. With the leasing business becoming more competitive, the margin of profit for lessors has dropped from four to five percent to the present 2.5 to 3 percent. Bank subsidiaries and financial institutions have the competitive edge over the private sector concerns because of cheap source of finance.… Read the rest

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Sales tax provisions relevant for leasing

The major sales tax provisions relevant for leasing are as follows:

  1. The lessor is not entitled for the concessional rate of central sales tax because the asset purchased for leasing is meant neither for resale nor for use in manufacture. (It may be noted that if a firm buys an asset for resale or for use in manufacture it is entitled for the confessional rate of sales tax).
  2. The 46th Amendment Act has brought lease transitions under the purview of ‘sale’ and has empowered the central and state government to levy sales tax on lease transactions. While the Central Sales Tax Act has yet to be amended in this respect, several state governments have amended their sales tax laws to impose sales tax on lease transactions.
… Read the rest
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Accounting Treatments for Non-Performing Leases

There is no information in the guidance note on lease accounting, 1995, for non-performing assets. The general accounting principles for non-performing assets is contained in accounting standard 9 on Revenue Recognition which is more or less on the lines of the International Accounting Standards on the issue.

The Standard provides that whereas, in general, incomes are to be recognized on the basis of accrual, in case of an uncertainty in the ultimate realization of an income, the treatment is as follows:

  • If the uncertainty is prevalent at the time of raising the claim for the income, the recognition of the income shall be postponed
  • If the uncertainty arises subsequent to the claim being made, there shall be a provision made to the extent of the uncertainty.
… Read the rest
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Legal Aspects of Leasing

As there is no separate statue for equipment leasing in India, the provisions relating to bailment in the Indian Contract Act govern equipment leasing agreements as well section 148 of the Indian Contract Act defines bailment as:

“The delivery of goods by one person to another, for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed off according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’ and the person to whom they are delivered is called the ‘bailee’.

Since an equipment lease transaction is regarded as a contract of bailment, the obligations of the lessor and the lessee are similar to those of the bailor and the bailee (other than those expressly specified in the least contract) as defined by the provisions of sections 150 and 168 of the Indian Contract Act.… Read the rest

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