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Tag: Banking

The NBFC Fiasco in India and AI Linkage with the Sector

Posted on by Imarticus Learning
Reading Time: 2 minutes

 
The Non-Banking Financial Companies (NBFC) sector in India, which is also called the shadow banking system, provides financial services similar to commercial banks, but they do so outside the typical banking regulations. 
The trouble began with defaults by Infrastructure Leasing and Financial Services Ltd (IL&FS) since the end of August 2018. IL&FS which is classified by RBI as core Investment Company had a total consolidated debt nearing INR 1 lakh crore. Since the firm started missing its debt obligations, its ratings got abruptly downgraded from high investment grade (AAplus and AIplus) by rating agencies such as ICRA, CARE, etc. to junk status which indicates imminent or actual default status. This has stoked a fear of liquidity crunch in many of the banks, corporate and mutual funds that had stakes in IL&FS debt instruments.
The shadow banking sector is now comprised of over 11,400 firms. They have a consolidated balance sheet worth USD 304 billion or INR 22.1 trillion and are not as strictly regulated as banks. Since the biggest lenders to NBFC, the banks, have slowed down their lending to work through the USD 150 Billion in stressed assets, the NBFC has been attracting new investors. 
Their lending pace has far exceeded the banks, and several of their cream firms have received top credit ratings including IL&FS. The ratings are now in question, and the growing concern is that many of these firms may have taken excessive credit risk by lending to individuals who have little means of paying back. There are also speculations surrounding lax regulation which might have turned these firms into money laundering portals.

How Can AI Make A Difference?

The financial sector is one of the largest beneficiaries of the developments in Artificial Intelligence and Machine Learning. NBFCs are increasingly developing and utilizing state-of-the-art technology to automate their processes of lending. Everything from loan origination, customer-onboarding and loan disbursement can now be driven by AI and Big Data technology. One of the major challenges has always been tapping into unbanked sections of the economy that have no credit data or history. Once considered unsafe, they now have the potential for huge business growth.
Technology now drives the credit underwriting process which previously required a small army of people to go through the paperwork. Advancements in AI have led to algorithms for alternate credit scores that utilise customer data from social media, mobile apps data and online behavioural patterns to gain an insight into them. This offers a reliable method for psychometric scores and predictive analysis for default. AI can also help extensively in fraud detection and loan disbursements to newer segments of customers.  The role of AI can extend far beyond into the macrocosm and help in predicting potential financial crashes. Our ability to spot trouble at a distance is only as good as our ability to interpret existing data. 
Recent advances in technology have armed the industry with tools that can gather and analyse vast amounts of data in real time to help make important decisions. Keeping that in mind, the promise of AI and data analysis to prevent any future financial crisis is compelling.

6 Books About Investment Banking You Should Read!

Posted on by Imarticus Learning
Reading Time: 3 minutes

The field of Investment banking is highly specialized. In this domain, the financial entities are called investment banks that financially support the public and private corporations issue equity and deal with the debt securities. Investment banking also helps in facilitating corporate restructuring, along with mergers and acquisitions are commonly known as M&A and thus carry out a wide range of complex transactions.

If you are looking for the top books written on this subject, you have landed at the right place. Let’s check the top 6 Books About Investment Banking You Should Read as under:

      • Investment Banking: Valuation, Leveraged Buyouts, and Mergers And Acquisitions -By Joshua Rosenbaum & Joshua Pearl

        This book is a complete Investment banking book, which brings all the technical concepts accessible to the readers. The authors have used a simple step-by-step method to explain the concepts of investment banking which include the study of the viability of a corporate sale, buyouts, and M&As.While explaining the concepts of investment banking and corporate finance, this book gives a stable foundation to the readers to get a comprehensive understanding of the prevailing ideas methods, and procedures found in the investment banking field.

  • The Business Of Venture Capital – By Mahendra Ramsinghani
    It is a complete book for people who are into the venture capital business. This book caters to people who are keen on exploring the meticulous art of boosting up venture funds, value creation, structuring investments, and studying exit pathways.This book helps people practicing in this area as they get the details of everything including sourcing investment options and carrying out the due diligence for negotiating various investments. It is the best companion to people who are into venture capital business and help you in getting detailed views about the leaders in this world on this subject.
  • Investment Banking For Dummies – By Matthew Krantz & Robert Johnson
    This book is an excellent work in the investment banking field, which has a simple to understand approach when the authors have described the basic banking concepts and their day-to-day application in this real world. It starts with investment banking and its standing in the current market along with its role in M&As, critical corporate decisions, and buyouts.The authors have explained the role of investment bankers along with the way they work to make things happen. The book’s core focus is to develop a decent understanding of the main banking concepts and their practical implications like issuance of bonds & stocks, valuation of companies, and developing a financial model that makes things work.
  • Financial Modeling & Valuation: A Practical Guide To Investment Banking And Private Equity – By Paul Pignataro
    It’s a complete guide for doing precise stock valuations seeking the help of financial modeling. The authors have explained these concepts seeking complete length and practical illustration overvaluation of the Wal-Mart with the help of financial modeling. It helps in developing a good skill of developing a good financial model for stock valuation. It also talks about the conventional valuation methods carried out by professionals.
  •  Investment Banking Explained: An Insider’s Guide To The Industry- By Michael Fleuriet
    This book gives insight into the investment banking operations industry and discusses in detail the way things work in this domain from the perspective of a veteran. It starts with the basics like key industry terms, strategies, and structures. The authors in the book have explained the broader concepts of this field like changing the perspective of the risk, leading firms, and methods of managing the same.It talks about the role of professionals like traders, financial brokers, fund managers and relationship managers, and others. You will get an insight into investment banking along with giving relevant information.
  • Investment Banks, Hedge Funds, And Private Equity -by David Stowell 
    The book has unleashed the complex relationship between investment banks and private equity and hedge funds. It also discusses the way the financial companies seeking the help of innovative business strategies sustained during the global meltdown of 2007 and 2008.It also addressed the impact over the financial companies and the way these have attracted the investor funds and strengthen their corporate power.

Conclusion

For the professionals working in the field of investment banking or the people who are keen on making their career in this field, they can find a wealth of literature on investment banking with these six books on this subject.

Introduction to Reference Data Management

Posted on by Imarticus Learning
Reading Time: 2 minutes

What is Reference Data Management?
Reference data management is a process that drives efficiency across the market by maintaining high data quality standards.

What does reference data management provide?
It provides full terms and conditions data, including ratings and descriptive content, for each asset type.
Reference data maintains extensive market-level and issue-level industry standard numbering codes. These are associated with each equity instrument including official clearing code identifiers (SEDOL, CUSIP, ISIN, CINs, Local Exchange codes MIC).

Type of Reference Data:
Reference data includes static and dynamic.
Static Reference data – Data elements that have unalterable characteristics.

E.g.:
• Financial products specifications and expiration dates
• Information about counterparties and supply chain partners.
Dynamic reference data – Variable data such as closing and historical prices.

Why is reference data management required?

The market data for a particular instrument includes:
• An identifier of the instrument and
• Where it was traded – such as the ticker symbol and exchange code
• The latest bid and ask price and the time of the last trade
• Volume Traded
• Bid and offer sizes
• Static data about the financial instrument from a variety of sources.

Hence, they require Reference data management.

Reference data is utilized across the front, middle, and back-office systems of an investment bank. It helps banks and financial institutions reduce exposure to counterparty credit risk. It also manages capital and liquidity. All this is achieved by leveraging an Intelligent Data Platform.

What are the advantages of a reference data platform?

• Manage and deliver reliable reference data across the system and existing reference centers.
• Create a single source of the truth through onboarding the new entity identifier and cross-reference it with existing entity information and identifiers.
• Streamline hierarchy structures.
• Deliver and syndicate data to any system in any format, latency, or structure.

We at Imarticus Learning constantly update our course curriculum to enable you to build a firm foundation for sound careers in banking by contributing to resolving the challenges faced by the investment banking industry.

Reference data management is one of the top challenges faced by investment banks in 2016 and also a crucial part of our syllabus. This not only enables you to grab a coveted job but also keeps those already a part of the industry updated with the recent trends.

How Does Private Banking Differ From Retail Banking?

Posted on by Imarticus Learning
Reading Time: 2 minutes

Banking is no longer restricted to the traditional aspects, which was recognized within the earlier days. Today, a bank is no longer just a place to put your savings or to go take loans, it has become more of an all-encompassing body. With the advent of investment banking, globalization and the easy cash flow in the economy, the banks received a face-lift and started getting involved in the business spheres.

Today, there are many nationalized as well as private banks, offering a host of services to companies, the government, as well as private individuals. Banking as a sector, branches out into Investment Banking, Private Banking, New Age Banking and many more.

 

Private Banking, in simple word, refers to banking with private individuals. This field offers personalized financial services, to individuals who are also known as High Net Worth Individuals. These are affluent people with a lot of financial assets and thus are looking for conventional and non-conventional ways of investing them. The main purpose of these banks is to provide these individuals, with options that suit their needs of investing their financial assets.

These banks do not just provide investment advice, but go a step ahead and offer all of their services, exclusively to these individuals. These services include managing their portfolios, protecting and growing their assets, future financial planning; basically, they manage the entire financial situation of the individuals. One of the key benefits of private banks is the privacy and the anonymity offered, in terms of the dealings, these also provide tailored financial solutions, which adds to the lure.

Whereas on the other hand, retail banking basically deals with all the day to day activities of a bank. These banks provide all the services that any individual would be in need of like, account services, personal loans, mortgages, certifications of deposits and so on. In retail banking, the focus is more on the individual, than their financial assets. These banks are usually the local branches of larger commercial banks, which the customers use as a one-stop-shop for all of their banking needs.

As time progresses, these banks have begun to expand the purview of the services they offer, now customers are also provided with financial advice, from a board of financial advisors. Apart from this, retail banking has also widened its horizons through the concept of internet finance.

 

With the internet revolution in full swing, a lot of these banks have begun to offer services, exclusively through mobile phones applications and online. These services are very similar to those offered by any traditional bank, but cost comparatively less. While private banks offer specialized services, retail banks have a huge array of services to offer from wealth management, brokerage accounts to financial planning as well as private banking solutions.

While retail banking is a wider sphere, private banking forms a part under these services. Anyone looking to enter these fields is required to have a strong background in finance, economics, and commerce. While there are a lot of institutes, that offer specialization courses in the field of finance. Imarticus Learning is a leading education institute, offering courses in new-age banking, retail banking, wealth management and more.