JAIIB PPB Short Notes Part 2: Capital Markets, Mutual Funds, Risk Management &

If you are hunting for crisp. Exam-ready JAIIB PPB short notes to revise the toughest concepts of Principles &. Practices of Banking before your IIBF attempt.

You have landed on the right page. This is Part 2 of our quick-revision series. Built for the 2026 syllabus.

Written so you can absorb high-yield facts in minutes. Not hours.

Part 1 covered the banking-operations basics. This Part 2 goes straight for the marks-heavy advanced units - capital markets. SEBI.

Mutual funds. IRDA, factoring, forfaiting, risk management, Basel norms, mergers and credit information companies. These are exactly the topics that decide whether you clear PPB comfortably or scrape through.

Why These PPB Topics Matter for Your 2026 Exam

IIBF conducts the JAIIB exam twice a year. Usually in May and November. JAIIB is one of its flagship qualifications. And Principles &. Practices of Banking (PPB) is one of its four papers.

The advanced units in PPB are heavily application-based. Examiners love testing definitions. Percentage limits.

The fine differences between similar terms - think IPO vs FPO. Factoring vs forfaiting, or Tier 1 vs Tier 2 capital. Get these right and you bank easy marks.

That is the whole purpose of these JAIIB PPB short notes: compress the syllabus into clean, scannable points you can revise the night before the exam. Pair them with regular mock tests and you will retain far more.

PPB Paper Structure at a Glance

Module	Focus Area
A	General Banking Operations
B	Lending Operations of Banks
C	Banking Technology
D	Ethics in Banks and Financial Institutions

Module and unit numbering can be revised by IIBF. So always confirm the exact split on the latest official IIBF notification. The concepts below remain the core of PPB regardless of renumbering.

Capital Markets, Securities and SEBI - Quick Notes

The capital market is the market for long-term debt and equity shares. Where both are issued and traded. It funds the long-term needs of companies and the government.

Primary vs Secondary Market

• Primary market: Securities like shares. Bonds and debentures are offered to the public for subscription. To raise fresh capital.
• Secondary market: Securities are traded after their initial offer and/or listing on a stock exchange. It comprises equity markets and debt markets.

Stock Exchange Structure and Ownership

1. Corporatization: Converting a stock exchange from a non-corporate to a corporate structure.
2. Demutualization: Transition of a stock exchange from a mutually-owned association to a shareholder-owned company.
3. FII investment in a stock exchange in India: can be up to 49%.
4. Single investor's stake in a stock exchange in India: can be up to 5%.
5. Broker: Registered with SEBI and a member of a recognised stock exchange. Permitted to trade on different exchanges.

Key Market Instruments You Must Know

Instrument	Key Feature
Government securities	Coupon-bearing instruments issued by RBI on behalf of GOI. Maturity ranges from under 1 year to over 30 years.
Debentures	Bonds issued by a company (usually unsecured debt) with a fixed interest rate. Often paid half-yearly.
Bonds	Negotiable certificates, usually unsecured, issued by GOI. Coupon bonds pay interest bi-annually; zero-coupon bonds pay at maturity.
Commercial paper	Money-market borrowing of a company from the market (the legacy note cites a 90-day tenor. Verify the current tenor norms).
Treasury bills	Securities issued by RBI on behalf of GOI (the classic 91-day T-bill. Multiple tenors exist - confirm on official sources).

IPO, FPO, Rights Issue and Private Placement

This cluster is a favourite of examiners. Memorise the distinctions:

• IPO: Fresh securities or an offer for sale to the public for the first time by an unlisted company.
• FPO: Fresh securities or an offer for sale to the public through an offer document by an already listed company.
• Rights issue: A listed company issues fresh securities to its existing shareholders as on a record date.
• Private placement: Issue of shares or convertible securities to a selected group of persons (the legacy note references section 81 of the Companies Act 1956. The governing provision now sits under the Companies Act 2013 - confirm the current section).

Offer Documents and Disclosure Norms

1. Filing with SEBI: A company making a public issue. Or a listed company making a rights issue above the prescribed value (the legacy note cites Rs 50 lakh). Must file a draft offer document with SEBI for observations.
2. DIP: Disclosure and Investor Protection guidelines.
3. Offer document: The prospectus in a public issue. An offer for sale and letter of offer in a rights issue.
4. Filing location: Offer documents are filed with the Registrar of Companies (RoC). Stock exchanges. Draft offer documents are filed with SEBI.
5. Timeline: The draft offer document is filed at least 21 days prior to the offer document.
6. Red Herring Prospectus (RHP): A prospectus without the exact price or issue amount. But disclosing the number of shares. The upper and lower price bands.

Book Building and Investor Categories

• In a book-built issue. Price cannot be determined until the bidding process is complete.
• Classic allocation ratio RII : NII : QIB has historically been cited as 35 : 15 : 50 (and in some cases 60 : 10 : 30) - verify the current SEBI allocation on the latest official notification.
• BRLM: A SEBI-registered merchant banker eligible to act as Book Running Lead Manager.
• QIB: Qualified Institutional Buyers with the expertise. Financial strength to evaluate. Invest in the capital market - mutual funds. Scheduled commercial banks, SEBI-registered FIIs, IRDA-registered insurers, and large provident funds.

Mutual Funds and IRDA - Fast Revision

A mutual fund pools resources from the public by issuing units. Then invests those funds in securities. It is set up as a trust and registered with SEBI. Investors are called unit holders.

NAV and Scheme Types

• NAV: Reflects the performance of a particular mutual fund scheme.
• NAV per unit: Market value of a scheme's securities. Minus expenses. Divided by the total number of units on a given date.
• Open-ended scheme: Available for subscription and repurchase on a continuous basis.
• Close-ended scheme: Available only during a specified period. Typically matures in 3-10 years.

Scheme Categories by Objective

Scheme	Where It Invests
Growth / equity	Equities - higher risk, higher potential return.
Income / debt	Fixed-income securities - bonds, G-secs, corporate debentures, money-market instruments.
Balanced	Both equities and debt, roughly in a 40-60% mix.
Money market / liquid	Safer short-term instruments - T-bills, CDs, commercial paper, call money, G-secs.
Gilt fund	Government securities only.

Repurchase or redemption price is the price or NAV at. An open-ended scheme redeems units from its unit holders.

Factoring and Forfaiting - Crisp Notes

Both terms relate to trade finance and are frequently confused. So lock in the difference now.

• Factoring: A service connected with the financing. Collection of account receivables in domestic and international trade.
• Forfaiting: A means of finance an exporter avails from an intermediary (the forfaiter) against export receivables. Without the obligation to repay the credit. It is used in international trade.

Off-Balance-Sheet Items and Contingent Liabilities

Off-balance-sheet items do not appear in the balance sheet. They are not assets or liabilities yet. But may convert into them on certain events -. Is why they are called contingent liabilities.

Instrument	Parties Involved
Bank Guarantee	3 parties: guarantor/surety, principal debtor, creditor/beneficiary. It is a contingent liability.
Letter of Credit (LC)	4 parties: buyer, opening bank/branch, seller, negotiating bank/branch.

A Bank Guarantee is a contract to perform a promise or discharge the liability of a third person if they default. A Letter of Credit is an undertaking by the buyer's bank to pay the seller if specified documents are presented within a stipulated date.

Hedging Instruments

1. Forward exchange contract: A firm contract between a bank. Customer to buy or sell a stated foreign currency at a pre-determined rate - protecting against exchange-rate fluctuations.
2. FRA (Forward Rate Agreement): A contract between two parties to exchange interest payments on a notional principal on the settlement date for a specified period.
3. IRS (Interest Rate Swap): A contract to swap a stream of interest payments on a notional principal on multiple occasions - typically fixed-to-floating or floating-to-floating.

Both FRA and IRS provide an effective hedge against interest-rate risk.

Risk Management and Basel Norms - Exam Notes

Risk management is one of the highest-scoring areas of PPB. Start with the three broad risk types.

Risk Type	Description & Examples
Credit risk	Loss from a fall in borrower/counterparty credit quality - direct lending. BG, LC, securities trading, treasury, cross-border exposure.
Market risk	Loss from adverse market moves - liquidity. Interest-rate, commodity-price, forex and equity-price risk.
Operational risk	Also called legal/administrative/settlement/payment risk. Arises from human or technical errors.

Basel I, II and Capital Ratios

• Under Basel I. Only credit risk was considered. And minimum capital was fixed at 8% of total risk-weighted assets.
• CRAR in India: Banks must maintain a minimum capital-to-risk-weighted-asset ratio of 9% (Basel III adds capital buffers on top - confirm current requirements on official RBI/IIBF sources).

The Three Pillars of Basel II

1. Minimum capital requirements
2. Supervisory review process
3. Market discipline

Tiers of Capital

The capital base consists of Tier 1, Tier 2 and Tier 3 capital. Remember these classic limits (verify against current Basel III norms. Which have reshaped Tier 3):

1. Total Tier 2 (supplementary) elements are limited to a maximum of 100% of Tier 1.
2. Subordinated term debt is limited to a maximum of 50% of Tier 1.
3. Tier 3 capital was limited to 250% of a bank's Tier 1 supporting market risk.
4. Shareholders' equity and retained earnings form Tier 1; supplementary capital is Tier 2.
5. The sum of Tier 2 and Tier 3 should not exceed total Tier 1 capital.

Alliances, Mergers and Consolidation - Quick Notes

• Alliance: A mutual commercial collaboration between two or more organisations that still remain independent.
• Merger / amalgamation: Combination of two or more companies into one; one survives. The other(s) lose existence.
• Consolidation: Two existing companies combine into a brand-new entity. And both old companies cease to exist.
• Acquisition / takeover: Acquiring a controlling stake in another company by buying its share capital.

Credit Information Companies, Fair Practices Code and BCSBI

CIBIL is a composite credit bureau holding the credit history of both commercial. Consumer borrowers. It supplies Credit Information Reports (CIRs) to its members to assist the loan-appraisal process.

Fair Practices Code for Debt Collection

1. Banks. NBFCs must ensure they. Their agents follow the Fair Practice Code for lenders. The IBA Code for collection of dues and repossession of security.
2. If a bank has its own code. It must at minimum incorporate all terms of the IBA Code.
3. Customer confidentiality is essential, especially when third-party recovery agents are used.
4. Every letter from a recovery agent must carry the name. Address of a responsible senior officer the customer can contact.
5. Banks. NBFCs. Their agents must never resort to intimidation or harassment - verbal or physical.

BCSBI Essentials

• The Banking Codes. Standards Board of India (BCSBI) was set up on 18 February 2006 as a collaborative effort of RBI. Banks. Modelled on a similar UK body.
• It was based on the recommendation of the Committee on Procedures. Performance Audit on Public Services (Tarapore Committee).
• The Code applies to savings and current accounts. Card products, loans and overdrafts, and payment services including foreign exchange.
• Member banks set up a grievance-redressal mechanism: a branch help desk. A Code Compliance Officer at each controlling office. And display of contact details for the officer and the Banking Ombudsman.

How to Use These JAIIB PPB Short Notes Effectively

Notes only work if you study them the right way. Here is a simple, proven method:

1. First pass - understand. Read each section slowly and make sure the concept clicks before memorising.
2. Second pass - the tables. The comparison tables above are gold for last-minute revision. Review them daily.
3. Active recall. Cover the answer and try to define IPO vs FPO. Factoring vs forfaiting, or the three Basel pillars from memory.
4. Test yourself. Attempt topic-wise mock tests after every two units to convert reading into retention.
5. Revise smart. In the final week. Revisit only the highlighted terms, tables and the key-takeaways box.

For deeper preparation across all subjects, explore our free guides and previous-year analysis.

Common Mistakes Students Make in PPB

• Confusing similar terms. IPO/FPO. Factoring/forfaiting, alliance/merger/consolidation - mixing these up costs easy marks.
• Memorising outdated figures. Old percentage limits and tenors get revised. Relying on them blindly is risky.
• Skipping the ethics module. Module D (Ethics) is scoring and conceptual - do not ignore it.
• Reading without testing. Passive reading feels productive but fades fast; active recall and mocks win.
• Ignoring tables. Number of parties in a BG vs LC. Tier limits, allocation ratios - tables make these stick.

Frequently Asked Questions (FAQ)

What is the difference between an IPO and an FPO in JAIIB PPB?

An IPO is the first public issue of securities by an unlisted company. While an FPO is a further public offer by an already listed company through an offer document. The listing status is the key difference.

How is factoring different from forfaiting?

Factoring is financing. Collection of account receivables in both domestic and international trade. Forfaiting is export finance against receivables from a forfaiter. Without an obligation to repay, and is used only in international trade.

What are the three pillars of Basel II?

The three pillars are minimum capital requirements. The supervisory review process, and market discipline. In India. Banks maintain a minimum CRAR of 9% - always confirm the latest figure on official sources.

How many times is the JAIIB exam held each year?

IIBF conducts the JAIIB exam twice a year. Generally in May and November. Exact dates. The eligibility window are announced in the official IIBF notification for each cycle.

Are these JAIIB PPB short notes enough to pass the exam?

These notes are excellent for quick revision and concept clarity, but they work best alongside full study material and regular practice. Combine them with mock tests and our free guides for complete preparation.

Final Words: Revise Smart, Score High

You now have a complete. Exam-focused set of JAIIB PPB short notes for the advanced units of Principles &. Practices of Banking.

Capital markets. Mutual funds. Factoring.

Risk management. Basel norms are no longer scary - they are just patterns you can recognise. Recall.

Keep this page bookmarked. Run through the tables every few days. And back your revision with consistent practice. Stay disciplined, trust the process, and walk into your 2026 attempt confident. You have got this - all the best from Team Learning Sessions.

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