The services bank offer the public. 1.Acceptance of deposits. a) Saving a/c b) current a/c c) fixed deposits. 2. 3. 4. 5. 6. 7.

Providing loans/ grants Discounting bill of exchange. Payment of cheque. Remittance. Exchange of foreign currency. collection and payment of credit instruments 8. consultancy. 9. Bank guarantee 10. Agent functions. a) Periodic payment. b) periodic collection. c) Purchase and sales of securities . d) Representative e) Trustee or executor. Others functions. a) Locker system. b) Traveler's cheque. c) Credit card. d) Underwriting securities. e) Collection of data f) Individual information of customer g) debit card h) ATM services. Trends Affecting Bank: 1. Service proliferation. 2. Competition . 3. Deregulation. 4. Raising funding costs. 5. Technology. 6. Interest & sensitive mix of funds. 7. Consolidation and geographic expression. 8. Globalization banking. 9. Increase risk of failure. The impact of government policy and regulation on banking. 1. company act,2063 2. bank & financial act, 2063 3. Nepal rastra bank act, 2058 Significance of regulation: Pros : Advantage 1.Protect public saving. 2.Lack of financial expert in public. 3.Safe guard public wealth. 4.Credit control. 5.Supply of loans and investment. 6.Avoid discrimination. 7.Credit and taxes. 8.Implantation of government. Cons : Disadvantage 1.Increase profitability 2.competition 3.civilized people

Major nepalese banking Laws: Nepal rastra bank act,2058 company act,2063 bank and financial form act,2063 bank and financial loan recovery act,2058 The major functions of Nep. Ras.Ba.

1. Issue of nepali currency notes and

coins. 2.Manage foreign exchange and reserve 3.Developing banking and financial slystem in the country. 4.Rendering advance to the government on financial and econommic matters 5.Mobilization capital and managing public debt 6.Act as banker of the bank 7.Act as banker of the Government. 8.Lender of the last resort to other banks and government 9.Implementation of monitory policy, mentization and accelerating economic development. The main objectives of regulatory sy 1.Promote efficiency of commercial bank to operate in profit 2.Ensure adequate fund to neet all cash demands 3.Maintain clear and fraud free financial transaction 4.Record all financial transction as per the banking rules. The principal tasks of Central bank 1.Issue of note. a)It brings uniformity in the monetary system of note issue and note criculation b)as the supreme monetary institution the central bank can exercise better control over the money supply in the market. c)It increases the public confidence in the monetary system of the country. d)It enables the central bank to exercise contral over the creation of credit by the commercial banks e)Granting the monopoly right of note sissue to the central bank avoids the political interference int the matter of note issue 2.Banker,Agent and adviser to the government

c).In fact the central bank function as the lender of last resort central reserve enable the central bank to providde finncial accommodation to the commercial banks in differece. d).centralized cash reserves inspire confidence of the public in the banking system of the country. e). The cash reserves in the central bank coanb e used to promote national welfare.

4. custodian

3. Bankers bank.

a). centralized cash reserve provieds the basic of a large and more elastic credit structure than the amount scattered among the individual banks. b. centralized reserve can be used in the most effective manner during the period of seasonal strains and financial emergency.

of foregin exchange reserve. 5.controller of credit. a). change the CRR rate for commercial banks b).change the interest rate of various bank account c).change the interest rate on loan proveded by bank change the facilities proviede by central bank to other banks. d). Change the ratios and priority sectors 6.Developmental Role 7.Lender of Last resort a).It increases the elasticity of overall ceonomy b).It increases the elasticity of the whole credit structure of the economic. c). It provieds financail help ot the commercial banks times of emergency. d)It enables the commercial banks to carry on their activites even with their limited cash resourced 8.Clearing agent a).It economizes the use of cash by bank while settling their claims and counter calims b).It reduces that commercial banaks to create credit a large scale c) It keeps the central bank fully informed about the liquidity position of the commercial banks 9.Control and supervise financial institution. 10. Other functions: a).It maintains relation with internatinal finanacial institution such as the international monerary fund , world bank asian bank, world trade organization etc. b) It collects various types of statisties providing in formation about currnet state of the economy c) It conducts survey , seminatrs etc. and pulbish reports on other matters. Factors affecting bank mgt decision 1.increment in government budet 2.Government borrowings 3.Tax policy Role and Nees of central bank in economy 1.Traditional role 2.Economic growth

3.price stability 4.Development of banking system 5.Branch expansion. 6.Developmentof financial instituations 7.Promoting the baning habits 8.training facilities 9.proper interest rate structure 10. national debt mgt 11. balance of payment 12. credit control 13. monetization of economy 14. implementation of monetary policy 15. other promotional roles The array of organizational structures in banking 1.Unit banking Advnatages a) Low capital b) help in developing economy c) established in local area with goodwn. Disadvantes a) Low features b) can't perform with competition c) general manger only work 2. Branch banking organizations. Advantes a) Help in develop economy b) many window facility c) wide area facility d) collect large capital e) specific mangement Disadvantages a) It forced to insolvent in small bank b) dont know all customer c) its service charge larg 3. Bnaking Holding company organization. A. One bank holding companies B. Multi bank holding companies Advantages a).Large capital b).Exapanses of more services c).high competition d).Economic development e).more employment f).Diversification Disadvantages a) money market b) indifference of local public c) high risk Banking Efficiency 1.Average cost cureve 2.Areas of banking services 3.Expansion and growth 4.Technology 5.personnel Benfit 6.Competition 7.Satatistical methodology What is the organizational form of foreign banks in domestic markets ? 1.Full Service Branches 2.Shell Branches 3.Joint ventures 4.Representative 5.Agency offices

Impct of organizaion type and size 1.Impact on profitability 2.Impact on competition 3.Impact on Areas of banking services 4.Impact on service change and interest rate 5.Existence 6.Expansion and growth Needs and importance of liquidity 1.Payment of cheque 2.cash reserve ratio 3.Statutory liquidity ratio 4.Loan advancement 5.Administrative expenses 6.Dividend 7.Risk 8.Expansion and growth Demand for bank liquidity 1.Withdrawals of customer deposit 2.Acceptable loan request 3.Repayment of non deposit borrowing 4.Payment of interest 5.operationg expenses and taxes 6.Payment of stockholder cash div. 7.Expansion and growth 8.Cash reserve ratio Supply of Bank liquidity 1.Customer deposits 2.Interest on bank loan 3.revenue from the sale of non deposit 4.Loan repayment 5.Sales of assets 6.Borrowings from money market 7.Reserve fund 8.Share capital Strategies for liquidity manager 1.Asstes liquidity management strateg a) Ready market b) stable price c) reversble 2.Borrowed liquidity managemet strate. 3.Balanced liquidity mangagement Estimating a banks liquidity needs 1.The sources and uses of funds aperoach Estmated liquidity deficit& surplus for the coming period = Estimated change in total deposits- Estimated change in total loans a) A trend component b) A seasonal component c) A cyclical component 2. Structure of fund approach a) Hot money "Liabilities" b) Vulnerable funds c) Stable funds 3. Liquidity indicator approacch a) Cash position indicator b) liquid securities indicator c) Capital ratio d) pledge security ratio e) Hot money ratio f) Deposit brokerage index g) core deposit ratio h) Deposit composition ratio Types of deposits 1. Demand deposit

a) Number of transactions b) Interest c) Overdraft facility d) Cheque collection e) Hadling charge A. Non interest bearing demand deposit B. Interest bearing demand depoists 2. Saving Deposits a) Withdrawal of amount b) Withdrawal frequency c) Interest d) Account operation e) cheque collection 3. Time deposits a) No provision of cheque b) Higher interest rate c) Investment opportunity d) Renewable e) Refund f) Loan facility Major methods of determining interest rates on bank deposits : 1. Cost plus profit margin deposit pricing. Unit price charging the customer for each deposit service = Operating exp. per unit of deposit service + Estimated overhead exp. allocated to the bank's function + Planned profit from each deposit service unit sold 2. Marginal cost deposit pricing MCDP= Change in total cost M Additional funds raised 3. Market penetration deposit pricing 4 . Conditional prcing ( price schedules to segment deposit) 5. Upscale target deposit pricing 6 . Customer relationship deposits pricing 7. Bnak goals deposit pricing 8. Basic lifeline deposit pricing Non deposit Investment products in Banking 1. Mutual funds a) Affiliated campanies b) Non affiliated companies 2. Annuities a) Fixed annuities b) variable annuities 3. Securities Transferring service Types of Loan made by banks 1. Real Estate loan 2. Financial institution loan 3. Agricultureal loan 4. Commercial and industrial Loan 5. Individual loans 6. Miscellaneous loans 7. Lease financing receivables Factors determining the growth and mix of bank loans 1. Market area 2. Participation with other banks

3. Bank size 4. Loan policy 5. Expected yield. Effective Loan policy 1. Characteristics of a good loan portfolio. 2. Specification of lending authority 3. Line of responsibility 4. Operating procedures 5. Documentation 6. Line of authority to review credit files 7. Collateral guidelines 8. Loan procedures 9. Qulaity standads 10. Loan limit 11. Loan area 12. Solving loan problems Steps in the lending process 1. Loan application 2. Loan interview 3. site visit 4. Reference check 5. Documentation 6. Credit Analysis 7. Perfecting collateral 8. Monitoring Sources of information about loan customers 1. Loan application 2. Other lenders 3. Financial record of borrower 4. Financial surveyor 5. Government agency Parts fo a typical loan agreemen 1. The note 2. Loan commitment agreement 3. Collateral 4. covenants a) affirmative covenant b) Negative covenants 5. Borrower guarantees or warranties 6. Events of default Principles of loan review 1. Regular 2. Large loans 3. Troubled loans 4. Deflation 5. Structuring Essential elements of a sound banking system 1. Liquidity 2. Safety 3. Stability 4. Elasticity 5. Profitability 6. Reserve management 7. Expansion Types of pure risk 1. Personal risks a) Risk of premature death b) Risk of insuffcient income after retirement c) Risk of poor health d) Risk of Unemplyment

2. Property risks a) direct loss b) Indirect loss 3. Liability risks a) Unlimited liability b) costs of defense c) caputer of assets and income Burden of risk on society 1. Emergency fund 2. Loss of property and services 3. worry and fear Methods of handling risk 1. Avoidance 2. Loss control a) loss increase the direct costs b) individual loss is social loss 3. Retention a) Active rentention b) passive retention 4. Non insurance transfers a) transfer fo risk of contracts b) Headging price risks c) Incorporation of a business firm 5. Insurance Characteristics of insurance 1. Pooling of losses 2. Payment of accidental losses 3. Risk trnasfer 4. Indemnification Requirements of an Insurable 1. Large number of exposure units 2. Accidental loss 3. Measurable loss 4. Economically feasible premium 5. Calculable chance of loss 6. No catastrophic loss Types of insurance 1. Private insurance a) Life and helath insurance b) Property and liability insurance i) Fire insurance ii) marine insurance *Ocean marine insurance *Inland marine insurance iii) Casualty insurance Auto insuance Burglary and theft insuranc Worker's compensation ins General liability insurance Health insurance Glass insuarance Boiler and machinery insu nuclear insurance crop hail insurance title insurnce credit insuarnce iv) Multiple line insurance v) fidelity bonds vi) Surety bonds 2.Government Insurance a) Social insuarance b) Other Government insurance progm Benefits of Insurance to society 1. Indemnification for loss 2. Fewer burdens to society 3. Source of investment funds

4. Less worry and fear 5. Prevention of loss 6. Enhancement of credit Cost of insurance to society 1. Cost of insurance business 2. Fraudulent claims 3. Inflated claims Scope of Fire Insurance 1. Flame 2. Suddenly 3. Nature of Goods Principles of Fire Insurance 1. Principle of Utmost good faith 2. Principle of Insurable interest 3. Principle of Indemnity 4. Principle of Subrogation 5. Principle of Proximate cause Importance of Fire insurance 1. Compensation 2. Economic Development 3. Secured Life 4. Social Benefits Procedures of Effecting fire insura 1. Proposal Forms a) Proposal's full name b) Address c) Profiession d) Previous and present insurance e) Loss experience f) sum insured g) Others 2. Survey 3. Evidence of Respectability 4. Acceptance of proposal 5. Payment of premium 6. Cover note 7. Fire policy Types of Fire insurance 1. Valued Policy 2. Valuabel policy 3. Specific policy 4. Floating policy 5. Average policy 6. Exess plicy 7. Declaration plicy 8. Adjustable policy 9. Maximum valu with discount plicy 10. Reinstatement policy 11. Conprehensive policy 12. Consequential lossplicy 13. Sprinkler leakage policy Scope of Marine insurance 1. Hull insurance 2. Cargo insurance 3. Freight insurance 4. Marine liability insurance Principles of marine insurance 1. Principle of insurable interest 2. Utmost good faith 3. Principle of indemnity 4. Principle of subrogation Procedures of effecting Marine insur 1. Proposal 2. Acceptance 3. Payment of premium 4. Issue of policy

Importance of Marine insurance 1.Marine insurance provides financial protectin to all risks on cargo on transit. 2. It provides separate policies for hull, cargo, freight and liabilities. 3.It provieds financial securities of cargo on sea as well as land 4. One policy anc proveid continued finanacial protection in marine insuarnace 5. It can prove d protection against the fluctuation in exchange rate in different countries. 6. it follows the principle of indemnity. so the insured have no problem avout the valutation after losss by marine acciednts. 7. The wonership of insured can be easily transferred from one trader to another trader after certain fromalities. Types of marine insurance 1. Voyage policy 2. Time policy 3. Voyage and time policy 4. Valued policy 5. valuable policy 6. floating policy 7. Blanket polcy 8. Currency policy 9. Honoured policy Principle of Indemnity Actual cash valu 1. Replacement cost less depreciation 2. Fair market valu 3. Broad Evidence rule 4. Broad Evidence rule Exceptions to the principle of indemnity 1. Life insurance 2. valued policy 3.Replacement cost insurance Principle of insurable interest Basic objectives of an inurable interest 1. Prevent gambling 2. Reduce moral hazard 3. Measure the loss of insured Exceptions to the principle of insurable 1. Potential legal liability 2. Credit insurance 3. Contractual right Principle of Subrogation Basic objectives of subrogation 1. Prevent twice collection for the same loss 2. Reduce premium rate 3. Make people responsible Importance of subrogation 1. The insurer is entitled only to pay the amount insured. 2. The insured cantnot impair the insurer's right of subrogation 3. The insurer can waive its rights of subrogation in contract

Principle of utmost good faith 1. Representation 2. Concealment 3. Warranty Requirements of an insurance contr. 1. Competent parties 2. Offer and acceptance 3. Consideration Distinct legal characteristics of insurance contrach 1. Indemnity contrach 2. Insurable interest contract 3. Subrogation contract 4. Utmost good faith contract 5. Conditional contract 6. Contingency contract 7. Unilateral contract 8. Adhesion contract 9. Presonal contract Law and rules regarding agency of incurance company 1. No presumption of an agency relationship 2. Authority to represent the principal a) Expressed authority b) Implied authority c) Apparent authority 3. Responsibility of principal for acts of agents. Commercial package policy 1. Common Policy Declaration a) The name and address of the insured b) the time period of the policy c) description of the insured property d) a list of coverage parts that apply e) the premium amount 2. General condiotion of a xommercial package policy a) inspections b) multiple insureds c) audit d) transfer of ownership e) alterations f) cancellation 3. Coverage parts a) the declaration page that applies to that coverage b) the coverage forms that describe the various coverages provided c) the specific condition that applies to that coverage part d) a cause of loss from that describe the various perils that are covered Building adnd personal property coverage form a) Building b) Business property c) property of others in custody d) additional coverage e) extension of coverage Cause of loss forms 1. Cause of loss basic from a) fire, lighting , exlosion b) floods, windstrom or hail c) smoke d) Aircraft or vehicles

e) riot or civil commotion , vandalism f) Sprinkle leakage, sinkhole collapes g) earthquake actions 2. Cause fo loss broad form a) water damage b) failling object c) weight of snow or sleet 3. Cause of loss special from a) the property in trnasit in a motor vehicle owned , leased or operated by the insured b) The dameage caused by water or other liquids and the cost of tearing out and replacing part of the structure to reapir the laeakages c) the damage caused by breakdown of glass materials . The insurer will also pary the expense of removing broken glass materials. 4. Cause of loss earthquake form Other commercial coverage 1. Building risk insurance 2. condominium insurance 3. equipment breakdown insurance 4. difference in condition insurance Transportation insurance 1. Ocean marine insurance a) Hull insurance b) cargo insurance c) protection and indemnity insurance d) freight insurance 2. Inland marine insurance a) Domestic goods in transit b) property held by bailee c) Mobile equipment d) Preeioud property e) means of transportation and communication Business owners policy 1. Building 2. Business property 3. Covered causes of loss 4. Addititonal coverage Financial impact of premature death 1. Single people 2. single parent families 3. Two income earners 4. Traditional family 5. Blenned families 6. Sandwiched families Types of life insurance 1. Term life insiurance a) yearly renewable term policy b) Term policy with more than one year c) Term policy up to age 65 d) Decreasing term policy e) Re entry term polcy Use of term life insurance policy a) Term insurance is appropriate if the need for protection is temporary. b) People want large aounts of permanent nsurance, but may be finanacial unalbe to purchase the needed protection today.

c) term insurance can be used effectively if the amount of income that can be spent on life insurance is limit.

Additionsal life insurance venefits 1. Guaranteed purchase option 2. Waiver of premium provision 3. Accidiental death benefits rider 4. Acclerated death benefits rider.

Limitation of term life insurance a) Term insurance premiums increase with age and eventually reach prohibiteve levels b) Term insurance is inappropriate if aone wishes to save money for a specific need. 2. Whole life insurance a) ordinary life insurance Use of i) life time protection ii) Saving money b) Limited payment life insurance 3. Endowment insurance Variation of whole life insurance 1. Variable life insurance 2. Universal life insurance 3. Variable iniversal life insurance 4. current assumption whole life insurance 5. Indeterminate premium whole life ins Other types of life insurance 1. Group life insurance 2. Saving bank life insurance 3. Modified life insurance 4. Preferred risks of the ploicy 5. second to die life insurance 6. home service life insurnce 7. juvenile insurnace Life insurance conractual provision 1. Ownership clause 2. Entire contract clause 3. Incontestable clause 4. Suicide clause 5. Grace period 6. Re instatement clause 7. Misstatement of age of sex clause 8. Beneficaiary designation 9. change of plan provision 10. Exclusions and restricitons 11. Premium payment 12. Assignment clause 13. Policy loan provision 14. Automatic premium loan Divident option 1. Cash 2. Reduction of premium 3. Accumulate at interest 4. Paid up additions 5. Term insurance 6. Maturing a polciy Non forfeiture option 1. Cash value 2. Reduced paid up insurance 3. Extended term insurance Settlement option 1. Interest option 2. Fixed period option 3. Fixed amount optoin 4. life income options