Adjusted Net Bank Credit To Understand ANBC, we need to understand certain other terms first.....So here we go....Bill discounting s For e.g. a customer of a Bank, has purchased a service or al product from his supplier. The supplier has raised a bill to the customer for the services provided. (A bill is a document like a Bill of Exchange or a Promissory note and is payable on a due date and / or on demand). | Bill discounting is a process whereby a Bank (a) Accepts a Bill before the due date and (b) credits the value of the bill after a discount charge to the customer’s account. The transaction is practically an advance against the security of the bill and the discount represents the interest on the advance from the date of purchase of the bill until it is due for payment. Bye samezoce consuerine pvt tOBill Purchasing o Banks, sometimes, purchase bills instead of discounting them. The bankers purchase bills, which are accompanied by documents of title to goods such as bills of landing or railway receipt. In such cases, the banker grants loans in the form of overdraft or cash credit against the security of the bills. The term ‘Bills Purchased’ implies that the bank becomes the purchaser/owner of such bills. But in almost all cases the bank holds the bill only as a security for the advances. ey smezoceconsuunns rvs 0Bill Rediscounted F Rediscounting refers to the act of discounting a short-term negotiable debt instrument for a second time. Banks may rediscount these short-term debt securities to assist the movement of a market that has a high demand for loans. When there is low liquidity in the market, banks can generate cash by rediscounting short-term securities. A central bank's discount facility is often called a discount window. The term comes from the days when a clerk would go to a window at the central bank to rediscount a company's securities. 5. sineoceconsurrme vr troHeld To Maturity (HTM) = Any investment by scheduled commercial banks in the long-term bonds issued by companies engaged in executing infrastructure projects and having a minimum residual _maturity of seven years may be classified under HTM category. The intention of the bank should be to hold the bonds till maturity. 6Statutory Liquidity Ratio (SLR) s * SLR Refers to the amount that the commercial banks are required to maintain in the form of cash, gold or investments in govt. approved securities before providing credit to the customers. Approved securities refer to, bond and shares of different companies. * SLR is measured as a % of total demand and time liabilities. Top smeevoeconsutrwervt uoStatutory Liquidity Ratio (SLR) sé Statutory Liquidity Ratio is determined and maintained by the Reserve Bank of India in order to & SINEEDGE CONSULTING PVT LTDBANK CREDIT IN INDIA =F Inland Bills purchased and discounted: ¥ Bills Purchased (Full amount paid and Interest deducted when actual Foreign Bills purchased and discounted ¥ Bills Purchased (Full amount paid and Interest deducted when actual ne t ically for sight draft: ) Note — Bank Credit in India excludes Inter-Bank Advances 9 2 smecoseconsuarin vr iro*ANBC — ADJUSTED NET BANK CREDIT x STEPS IN CALCULATION OF ANBC Bank Credit in India (As prescribed in item No.VI of Form ‘(Special Return ason March 31s") under Section 42 (2) of the RBI Act, 1934, ' Bills Rediscounted with RBI and other approved Financial Institutions " Net Bank Credit (NBC) mm (et) Bonds/debentures in Non-SLR (Statutory Liquidity Ratio) categories under HTM (Held to Maturity) category + other investments eligible Nv to be treated as priority sector. ANBC liv Wareeoceconswrmer iroEXERCISE 1 ON ANBC se Calculate the ANBC for the bank assuming the following: ~ Term Loans = Rs 200 CrSOLUTION TO EXERCISE 1 ON ANBC = (I) BANK CREDIT IN INDIA = (200+100+50+100) = 450 Cr (Il) BILLS REDISCOUNTED = 60 Cr (Ill) NET BANK CREDIT 450-60 = 390 Cr al (IV) DEBENTURES HELD UNDER NON SLR UNDER HTM CATEGORY = 200 Cr (V) ADJUSTED NET BANK CREDIT = (II!) + (IV) =590 Cr Uenernceconsitnmanvr mo