Indian Financial System Code (IFSC).
It is used for electronic payment applications like Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT) and Centralised Funds Management System (CFMS) developed byReserve Bank of India (RBI). Code has eleven characters "Alpha Numeric" in nature. First four characters represent bank, fifth character is default "0" left for future use and last six characters represent branch.
MICR Code: Magnetic Ink Character Recognition is printed on cheque book to facilitate the processing of cheques.
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The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002:
It allows banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans. It enables banks to reduce their non-performing assets (NPAs) by adopting measures for recovery or reconstruction.
When do properties fall under this Act?
If a borrower defaults on repayment of his/her home loan for six months at stretch, banks give him/her a 60-day period to regularise the repayment, that is, start repaying. On failure to do so, banks declare the loan an NPA and auction it to recover the debt.
If a borrower defaults on repayment of his/her home loan for six months at stretch, banks give him/her a 60-day period to regularise the repayment, that is, start repaying. On failure to do so, banks declare the loan an NPA and auction it to recover the debt.
What is NPA?
Once the borrower has failed to make interest or principle payments for 90 days the loan is considered to be a non-performing asset., a non-performing asset (NPA) shall be a loan or an advance where;
- Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan,
- The account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC),
- The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,
- Interest and/or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and
- Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.
- Non submission of Stock Statements for 3 Continuous Quarters in case of Cash Credit Facility.
- No active transactions in the account (CAsh Credit/Over Draft/EPC/PCFC) for more than 90 days.
Classification of NPA's:
- Sub-standard assets: a sub standard asset is one which has been classified as NPA for a period not exceeding 12 months.
- Doubtful Assets: a doubtful asset is one which has remained NPA for a period exceeding 12 months.
- Loss assets: where loss has been identified by the bank, internal or external auditor or central bank inspectors but the amount has not been written off, wholly or partly.
Some useful terms in banking