Bank Management

Basel Committee On Banking Supervision

The Basel Committee on Banking Supervision (BCBS) was formed in response to the messy liquidation of a Cologne-based bank in 1974. On 26 June 1974, a number of banks had released Deutsche Mark (German Mark) to the Bank Herstatt in exchange for dollar payments deliverable in New York. On account of differences in the time zones, there was a lag in the dollar payment to the counter-party banks, and during this gap, and before the dollar payments could be effected in New York, the Bank Herstatt was liquidated by German regulators.

This incident prompted the G-10 nations to form towards the end of 1974, the Basel Committee on Banking Supervision, under the auspices of the Bank of International Settlements (BIS) located in Basel, Switzerland.… Read the rest

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Know Your Customer (KYC) Guidelines in Banking

Know Your Customer (KYC)

It is important, in these days of drugs smuggling, terrorism, financial fraud, money laundering and arms dealing that banks know whom their customers are. Banks must be comfortable with the bona fides and the integrity of their customers. The need increases as external people like general selling agents introduce a number of customers. Apart from this, in order to develop a long- term relationship, it is an imperative that the banker knows as much as possible about his customer.

What does KYC mean?

It means that a banker should know his customers. He should know about their business and as far as possible the nature of their earnings and their moral standing.… Read the rest

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The Concept of Debt Recovery Management

Banks were never so serious in their efforts to ensure timely recovery and consequent reduction of Non-Performing Assets (NPAs) as they are today. It is important to remember that recovery management, be of fresh loans or old loans, is central to NPA management. This management process needs to start at the loan initiating stage itself. Effective management of recovery and Non-Performing Assets comprise two pronged strategy. First relates to arresting of the defaults and creation of NPA thereof and the second is to handling of loan delinquencies. The tenets of financial sector reforms were revolutionary which created a sense of urgency in the minds of staff of bank and gave them a message that either they perform or perish.  … Read the rest

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Case Studies on Debt Recovery Management

Case Study 1: HDFC Bank Recovery

Mr.Kaushik Agarwal, about 18 months back had purchased 1 Tata Indigo, financed by HDFC bank. His EMI for this month (May’08) was bounced due to some reasons.

The recovery person called him on the 22nd May for the payment of the same. He was out of town at that moment so Mr.Kaushik had asked him to send someone to his office on the 24th to collect cash.

Now on 24th it slipped out of Kaushik’s mind that he had to pay cash to HDFC Bank and hence he did not withdraw any cash from the bank.… Read the rest

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Functions of Debt Recovery Agents

The core function of a debt recovery agent is to collect dues/receivables from specified debtors of the bank as per agency agreement entered with the principal.   Remitting the collected funds to principal, keeping account of the receivables collected and yet to be collected and reporting the position and developments to the principal are essential but ancillary to the core function.   All these functions will be specified in most agency agreement and would require to be accordingly discharged by the debt recovery agent.

Apart from the easily collectible receivables, most banks have on their books over due receivables from debtors who are not traceable, or who show unwillingness pay or who resist surrendering the security charged.  … Read the rest

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Debt Recovery Agent

The phrase “Debt Recovery Agent” comprises three terms- Debt, Recovery and Agent.   Let us understand the meaning of these terms separately, before we explain the meaning of Debt Recovery Agent.

  • Debt: It refers to a sum of money owed by one person or entity (debtor) to another person or entity (creditor).   Thus there are two parties to a debt- debtor who receives money by way of a debt; and creditor who lends money to the debtor.   To illustrate, if Ram takes a loan of Rs. 3 lacs from a bank for purchasing a car, Ram becomes the debtor (or borrower), the bank is the creditor (or lender) and the loan of Rs.
… Read the rest
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