Certificate of Deposit

Certificate of Deposit

👉This is debt instrument similar to commercial paper, but issued by Banks or other eligible financial institution.

👉CD is a negotiable instrument and generally bear interest rates higher than regular deposits of the bank.

👉Amount : Min 1 lac and multiple thereof, no maximum

👉Maturity : can range between 7 days and 1 year from date of issue

👉However FIs can issue CDs for (1-3 year)

CDs may be issued at a discount on face value

Bank have to maintain CRR and SLR on the issued price of CDs

👉All OTC trade in CP shall be reported within 15 min of the trade to the financial market trade reporting of clearcorp dealing system.

Treasury Bills

Treasury Bills Issued by Govt of india through RBI 

Maturity : 91-days, 182-days and 364 days for pre-determined amount

Minimum Amount : Rs.25000/-

Treasury bills are zero coupon securities and pay no interest. Instead, they are issued at a discount and redeemed at the face value at maturity. They are risk free bonds.

The price of T-bills is determined through an auction process where banks and primary dealers are the main participants however it is open for financial institutions, mutual funds, corporate, other business entities, as also individuals.

These are kept in demat form ans is held in a SGL account maintained by banks with RBI

Secondary market settlement of T-bills take place through clearing corporation of india ltd (CCIL) Yield is known as implicit yield.

MSME Classification

*MSME CLASSIFICATION*

👉 *MICRO ENTERPRISES* Investment in Plant & Machinery does not exceed Rs.1 crore and turnover Rs.5 crores.

👉 *SMALL ENTERPRISES* Investment in Plant & Machinery does not exceed Rs.10 crores & turnover upto Rs.50 crores.

👉 *MEDIUM ENTERPRISES* Investment in Plant & Machinary does not exceed Rs.50 Crores & Turnover Rs.250 Crores.

*Calculation of Investment in plant and machinery or equipment*

👉Include all tangible fixed assets other than Land and building, furniture and fittings.

👉 Purchase value of a plant and machinery or equipment old or new excluding GST.

👉 Cost of pollution control , cost of research & Developement , Industrial safety devices and such other items to be excluded.

PRIORITY SECTOTR CLASSIFICATION MODIFICATION

PRIORITY SECTOTR CLASSIFICATION 

👉Mandated Target for Small & Marginal Farmers to be increased to 10% by 2023-24.

👉Mandated Target Weaker Section should be increased to 12% by 2023-24.

👉EL Loan 20 Lacs.

👉HL Loan for repair Rs.10 Lacs in Metro and Rs.6 Lacs in Other Centre.

👉Loans to Renewable Energy increased to Rs.30 Crore. 

👉Loan to FPO/FPC Undertaking Farming upto Rs.5 Crore. 

👉 Startup upto Rs.50 Crore for Agriculture and Allied Activity.

👉 Loan under Social Infrastructure upto Rs.10 Crore.

Priority Sector Lending (PSL):

Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the Commercial Banks for providing a specified portion of the bank lending to few specific sectors.

Priority Sector includes the following categories:

Agriculture

Micro, Small and Medium Enterprises(MSME)

Export Credit

Education

Housing

Social Infrastructure

Renewable Energy

Others

This is essentially meant for an all-round development of the economy as opposed to focusing only on the financial sector.

Targets and Sub-targets for banks under Priority Sector Lending (PSL):

Domestic scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) and foreign banks with 20 branches and above are included for PSL.

40% of the total net bank credit should go to priority sector advances.

10% of the priority sector advances or 10% of the total net bank credit, whichever is higher should go to weaker section.

18% of the total net bank credit should go to agricultural advances.

Within the 18 target for agriculture, a target of 8 per cent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed for Small and Marginal Farmers.

7.5 of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher should go to Micro enterprises.

Priority Sector Lending Certificates (PSLCs):

Priority Sector Lending Certificates (PSLCs) are a mechanism to enable banks to achieve the priority sector lending target and sub-targets by purchase of these instruments in the event of shortfall.

This also incentivizes surplus banks as it allows them to sell their excess achievement over targets thereby enhancing lending to the categories under priority sector.