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Fintech / NBFC / Banking Terms

Banking Parameters​

  1. CASA Ratio
  2. Deposits
  3. Advances
  4. Advance to deposit ratio
  5. Profit margin
  6. Net interest margin
  7. Cost to income ratio
  8. Gross NPA
  9. Net NPA
  10. Provision coverage ratio
  11. Revenue
  12. EPS

ALM (Asset Liability Mismatch)​

Asset/liability management is the process of managing the use of assets and cash flows to reduce the firm’s risk of loss from not paying a liability on time. Well-managed assets and liabilities increase business profits. The asset/liability management process is typically applied to bank loan portfolios and pension plans. It also involves the economic value of equity.

Asset/Liability Management: Definition, Meaning, and Strategies

NPA (Non Performing Assets)​

A Non-performing asset(NPA) is defined as a credit facility in respect of which the interest and/or installment of principal has remained 'past due' for a specified period of time. In simple terms, an asset is tagged as non performing when it ceases to generate income for the lender.

GNPA: GNPA stands for gross non-performing assets. GNPA is an absolute amount. It tells you the total value of gross non-performing assets for the bank in a particular quarter or financial year as the case may be.

NNPA: NNPA stands for net non-performing assets. NNPA subtracts the provisions made by the bank from the gross NPA. Therefore net NPA gives you the exact value of non-performing assets after the bank has made specific provisions for it.

Capital Adequacy Ratio (CAR)​

  • CAR is critical to ensure that banks have enough cushion to absorb a reasonable amount of losses before they become insolvent.
  • CAR is used by regulators to determine capital adequacy for banks and to run stress tests.
  • The downside of using CAR is that it doesn't account for the risk of a potential run on the bank, or what would happen in a financial crisis.

Risk-Weighted Assets​

Risk-weighted assets are used to determine the minimum amount of capital that must be held by banks and other institutions to reduce the risk of insolvency. The capital requirement is based on a risk assessment for each type of bank asset. For example, a loan that is secured by a letter of credit is considered to be riskier and requires more capital than a mortgage loan that is secured with collateral.

CAR = (Tier 1 capital + Tier 2 capital)/risk weighted assets

Tier 1 capital: This can absorb the losses without a bank being required to stop trading. Also called core capital, this consists of ordinary share capital, equity capital, audited revenue reserves, and intangible assets. This is permanently available capital and readily available to absorb losses incurred by a bank without it having to cease operations.

Tier 2 capital: This can absorb losses if the bank is winding-up and so gives depositors a lesser measure of protection. This consists of unaudited reserves, unaudited retained earnings, and general loss reserves. This capital cushions losses if the bank is winding up and is used to absorb losses after a bank loses all its tier 1 capital.

What the Capital Adequacy Ratio (CAR) Measures With Formula

Credit Cards​

A Brief History of Credit Cards (or What Happens When You Swipe)

https://twitter.com/arampell/status/1435692945387048964

https://productcoalition.com/lets-talk-about-card-payment-processing-df25c37614bd

Renauld Leplanche is known as the father of the fintech industry and is an investor in Stashfin

Maker Checker / Dual Approval Process / 4 Eyes Principle​

Maker-checker (or Maker and Checker, or 4-Eyes) is one of the central principles of authorization in theinformation systemsof financial organizations. The principle of maker and checker means that for eachtransaction, there must be at least two individuals necessary for its completion. While one individual may create a transaction, the other individual should be involved in confirmation/authorization of the same. Here the segregation of duties play an important role. In this way, strict control is kept over system software and data, keeping in mind functional division of labor between all classes of employees.

Dual Approval is a control that requires two separate people to authorize a transaction. The first person is responsible for creating the request (known as the maker), while the second person checks and approves the activity (known as the checker).

Why is Dual Approval important?​

Humans are not perfect. It does not matter how clever, trusted or trained we are, sooner or later everybody will make a mistake. A maker-checker processintroduces a second pair of eyes and helps spot things that appear suspicious, strange or incorrect. Dual Approval clearly helps protect your business, but it also helps protect your employees from making unintended errors or deviating from process.

How does it work?​

The ability to configure the process flow, approvers and approval limits to meet the individual needs of your business. Any eligible transactions will be transferred to a pre-selected pool of checkers for authorization.

What are the benefits of Dual Approval?​

Adding Dual Approval can help strengthen your online controls and protect your business from several different types of operational risk

Payment Scams​

Payment fraud is a growing risk, and criminals continue to deploy increasingly clever scams. While a fraudster may be able to trick an individual, a system-enforced checker ensures that a second person looks at the transaction and can help capture the attempt before any money leaves your account.

Compromised Credentials​

Fraudsters are using advanced techniques to steal people's usernames and passwords, before logging intotheir victims' accounts and diverting funds. Even if a criminal was able to compromise one of your online user's credentials, Dual Approval would help stop the attacker from being able to make a withdrawal.

Processing Errors​

A checker can help spot a variety of mistakes, from breaches of internal procedure to typing errors on the account number or the value of a transfer.

Internal Fraud​

While all businesses want to be able to trust their staff, the reality is that a significant number of companies have been defrauded by an employee. External pressures and/or unexpected opportunities can lead a previously trusted staff member into making a poor ethical decision. Dual Approval helps mitigate this risk by acting as an effective deterrent and also providing an opportunity for any wrong doing to be identified early in the process.

https://en.wikipedia.org/wiki/Maker-checker

Breakage​

Breakage is a term used to describe revenue gained by retailers through unredeemed gift cards or other prepaid services that are never claimed. In these cases, the company pockets the money paid for these items, without actually providing the service or item for which the customer initially paid. Although nearly all of this money is considered to be a profit to the company, accounting uncertainty due to breakage has been a recurring problem throughout the years.

https://www.investopedia.com/terms/b/breakage.asp

Negative Interest Rate​

  • Negative interest rates are a form of monetary policy that sees interest rates fall below 0%.
  • Central banks and regulators use this unusual policy tool when there are strong signs of deflation.
  • Borrowers are credited interest instead of paying interest to lenders in a negative interest rate environment.
  • Central banks charge commercial banks on reserves in an effort to incentivize them to spend rather than hoard cash positions.
  • Although commercial banks are charged interest to keep cash with a nation's central bank, they are generally reluctant to pass negative rates onto their customers.

What Is a Negative Interest Rate, and Why Would We Have Them?

Monthly Reducing Balance Method?​

Most housing loans offered by banks and other financial institutions in the country are Reducing Balance Loans. In this method, the interest is calculated as per the outstanding principal amount after each repayment. Every time you pay an EMI, the outstanding loan amount falls.

So, if you’re paying monthly EMIs on your housing loan, the lender will calculate the interest after every payment on the reduced outstanding amount. This is why the interest component is the highest at the start of a repayment cycle. As the outstanding principal falls after every payment, so does the interest component in the EMI amount.

Why is the Reducing Balance Method better than the Fixed-Rate Method?​

In the Fixed-Rate method, the interest is calculated on the entire loan amount. Unlike the reducing balance method, the principal amount is not adjusted after repayments. So, you’ll continue to pay the same interest amount every month, throughout the loan tenure.

What is the monthly reducing balance method for calculating interest?

Reducing Balance Loan Calculator

Covenant​

In finance, a covenant is ==a promise or agreement between a borrower and lender that limits the borrower's actions, and ensures the borrower's financial ability to repay the loan==. Covenants are also known as debt covenants or banking covenants.  

Covenants can be financial, information, ownership, affirmative, negative, or positive. Examples of financial covenants include:  

  • Financial ratios - The borrower agrees to maintain a certain financial ratio, such as the interest coverage ratio, debt-to-equity ratio, or working capital ratio
  • Restrictive covenants - The borrower agrees to not take certain actions, such as issuing dividends, merging with another company, or purchasing or selling fixed assets without lender approval

If a borrower breaks a covenant, the lender may have the right to call the loan or collect interest at a higher rate.

Loan Tape​

A loan tape is a snapshot of a fintech's customer base and outstanding balances, as well as other information on customer characteristics (e.g., geography, industry, FICO scores, etc.) and risk profiles. In the context of fintech data and debt capital, you'll also hear loan tapes called servicing tapes, collateral feeds, and loan exposure tapes.

Finley Technologies | What is a loan tape?

Loan Tape - Open Risk Manual

Other Terms​

  • AML - Anti Money Laundering
  • Travel Rule
  • MOB - Monthly Outstanding Balance
  • FOIR - fixed obligation to income ratio / debt-to-income ratio

Credit Bureaus​

  1. TransUnion Cibil
  2. Equifax
  3. Experian
  4. CRIF Mark

Other products​

  • Home loan
  • Loan against property (LAP)
  • Auto loan
  • Two wheeler loan
  • Credit cards
  • Personal loans
  • Consumer loans

3 Ways Startups Are Coming for Established Fintech Companies -- And What To Do About It - YouTube

Fintech players​

  1. Stashfin
  2. Apply For MSME Loans, Loan Against Property & Vehicle Loans Online
  3. https://www.sliceit.com
  4. Dhani 50m+
  5. Red carpet (RedCarpetUp)
  6. dmifinance - Best Non-Banking Finance Company | Powering India's Digital Lending Ecosystem
  7. Ok credit
  8. CreditMantri
  9. Moneytap
  10. CashTap
  11. Earlysalary
  12. https://www.truebalance.io
  13. Navi
  14. KreditBee
  15. Cashbean
  16. Kissht - 10m+
  17. Moneyview
  18. Fairmoney
  19. Kartbee
  20. Indialends
  21. Creditt
  22. Mi credit - 5m+
  23. Groww
  24. InCred
  25. Freo
  26. HyperVerge
  27. Finbox
  28. Karza
  29. Krowd
  30. OneAssist
  31. Slice
  32. Niyo (goniyo)
  33. Khatabook
  34. Bajaj finance
  35. Bajaj finserv - https://www.youtube.com/watch?v=odiaekxLY0g
  36. Chola
  37. Mutooth Finance
  38. Paisa bazaar
  39. Bank bazaar
  40. Home credit
  41. Propelled (Education loan)
  42. Jodo
  43. Cred
  44. Lazypay
  45. Bharatpe
  46. Payu
  47. Amex
  48. Uni pay 1/3rd card (uni app)
  49. OfBusiness
  50. axio, formerly Capital Float
  51. Piramal Finance, one of India's largest non-banking lenders
  52. Affirm (US - fintech)

https://tracxn.com/d/soonicorn-awards/top-startups-in-india-fintech-2021

http://www.startuplanes.com/top-50-fintech-startups-in-india

https://fintechnews.sg/62502/fintech-india/updated-top-30-open-banking-influencers-list-for-india-2022

P2P​

  • 12% club - BharatPe
  • Lendenclub
  • Liquiloans

Debt Bonds​

  • WintWealth
  • FixedIncome

SASS Tools​

BNPL

Best Bank Stocks to Buy | Banking Industry in India | SBI, HDFC Bank, ICICI Bank, Axis Bank & Kotak - YouTube

Why Should Wealth Industry Think Beyond IRR - YouTube