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Bank fund

The largest source by far of funds for banks is deposits; money that account holders entrust to the bank for safekeeping and use in future transactions, as well as modest amounts of interest.

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Bank fund

  1. 1. Sources of Bank Fund Sources Deposits Liabilities Management Repurchase agreement Mortgage loans Capital funds
  2. 2. Deposit • The major source of funds is saving • Gathered through local market • Lower interest rate • No minimum maturity period is required
  3. 3. Liabilities Management • Minimize risk and achieve goal. • Liabilities of commercial banks  Equity  Reserves  New account  Money market liabilities  Wholesale and retail certificate  Negotiable instructs  Short term loan  Bills payable
  4. 4. Repurchase Agreement • Temporary borrowing in money market • Required reserves loaned • Own securities
  5. 5. Mortgage Loans • Loan Against Property • Loan for Purchase of Commercial Property • Loan through Lease Rental Discounting • Loan may have maturity upto thirty years
  6. 6. Capital Funds • Bank capital is divided into two groups 1. Tier 1 :-  Capital is known as core or primary capital 2. Tier 2 :-  Capital is known as supplementary capital • This fund includes common stocks, suppliers, retained earnings and undivided profit.
  7. 7. Uses of Bank Fund uses Capital expenditure Decrease in Long- term Loans Increase in Current Assets Interest on Long- term Loans Taxation Dividend
  8. 8. Capital Expenditure • Spent for acquiring additional fixed assets • Emplacement and renewals separately under the relevant periods • Undertake new projects or investments
  9. 9. Decrease in Long-term Loans • Raised form financial institutions are repayable in installments. • Payment for plants and machinery purchased
  10. 10. Increase in Current Assets • Increase in the amount of book debts, stock in trade, bills receivable • Assets increases in the level of working • Capital raise through short –term borrowings.
  11. 11. Interest on Long-term Loans • Interest payable on term loans • The term loans are repayable in installments • Amount of interest payable on the outstanding amount of loans goes on declining
  12. 12. Taxation • Compulsory money collection by a levying authority • Term "taxation" applies to all types of involuntary levies • Concern starts earning profits, provision for taxation is to be taken into account.
  13. 13. Dividend • Refers to a reward and cash • It can be issued in forms of payment and stocks • Dividend is decided by the board of directors • It’s a part of profit that company shares with share holder

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