Para Banking & Financial Services Proved By Banks
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Indian Economy and Indian Financial System — JAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is the meaning of 'para banking' activities?
Para banking refers to financial services offered by banks that go beyond traditional banking activities such as accepting deposits and lending, including services like insurance, mutual funds, and merchant banking.
What is the definition of non-fund-based para banking services?
Services not involving direct lending, like guarantees and letters of credit.
Which RBI guideline governs banks' entry into insurance business?
RBI guidelines permit banks to undertake insurance business either as corporate agents, brokers, or through joint ventures, subject to conditions laid down in the Banking Regulation Act and RBI circulars.
What is a letter of credit (LC) and under which category of banking does it fall?
A payment guarantee instrument classified under non-fund-based para banking.
What is a merchant banking service provided by banks?
Merchant banking involves services like underwriting of securities, project counselling, portfolio management, and advising corporates on mergers and acquisitions, offered by banks through separate divisions or subsidiaries.
What is a bank guarantee and how does it function as a para banking service?
A promise by the bank to pay if the customer defaults on an obligation.
What is the role of banks as corporate agents in insurance?
Banks acting as corporate agents distribute insurance products of one life and one non-life insurer on a referral or agency basis, earning commission without taking on underwriting risk.
What is the difference between a performance guarantee and a financial guarantee?
Performance guarantees cover task completion; financial guarantees cover monetary obligations.
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