Top 5 Important topics of PPB JAIIB

Important topics of PPB: Principles and Practices of Banking is the first paper of IIBF JAIIB. As the name suggests, this paper deals with the practices of banking along with its principles. This paper in overall can be considered as moderate. Learn the top 5 important topics of PPB paper of JAIIB here. 

Important Topics of PPB 

  1. Priority sector advances
  2. Non Performing Assets 
  3. KYC norms
  4. Factoring & Forfeiting
  5. Risk Management

Priority sector advances – Important Topic of PPB

National Credit Council – In July 1968, the Government of India emphasized that commercial banks should increase their involvement in the financing of priority sectors, viz., agriculture and small scale industries. 

The description of the priority sectors was later formalized in 1972 on the basis of the report submitted by the informal study group on statistics relating to advances to the priority sectors constituted by the Reserve Bank in May 1971. 

Based on the recommendations of the working group on the modalities of implementation of priority sector lending and the twenty point economic programme by banks, all commercial banks were advised to achieve the target of priority sector lending at 40 percent of the aggregate bank advances by 1985 

Sub-targets were also specified for lending to agriculture and the weaker sections within the priority sector. Since then, there have been several changes in the scope of priority sector lending and the targets and sub-targets applicable to various bank groups. You can start your preparation for PPB with Priority sector advances as it is one of the Important topics of PPB. 

Non Performing Assets 

By definition, Non Performing Assets(NPA) is a loan for which the principal amount as well as the interest amount remains overdue for a period of 90 days. While 90 days of nonpayment is the standard, the amount of elapsed time may be shorter or longer depending on the terms and conditions of each loan. The conditions that are kept for the loan to become an NPA are mentioned on the signed agreement at the time of agreement signing. 

You can include NPA under top 5 important topics of PPB. For every banker knowing NPA is really essential as it has a direct effect on the Indian Economy. 

Impact of NPA’s

There are many adverse effects of the NPA’s on the Indian Economy. NPA’s are basically the fund that was to be put in use for other projects that just vanished in a blink of an eye. Few impacts are as follows:

  1. Banks have to improvise their interest rates in order to generate more funds that are needed for balancing the market capital. Their profit margins also suffer because of this.
  2. Depreciation in funds causes the banks to stress their feasibility and there is less money available for funding of other major projects.
  3. This scenario often results in unemployment as well.
  4. NPAs related cases add more pressure to already pending cases with the judiciary.
  5. This NPA also hampers the need of genuine borrowers and borrowers with good credit scores. They cannot fulfill their requirements due to non-availability of the funds.
  6. Shareholders also pull off their hands when there is high NPA against the firm.

Read More About NPA here

KYC Norms 

What is KYC? 

KYC stands for “Know your Customer” and refers to the identification of customers. It entails making sensible efforts to ascertain the true identity and beneficial ownership of accounts, the source of cash, the type of the customer’s business, and the rationality of account transactions about the customer’s business, etc. All of these allow banks to handle their risks prudently. The KYC criteria were designed to prevent criminals from using banks for money laundering, whether on purpose or unintentionally.

Definition of Customer

KYC policy defines a Customer as:

  • a person who maintains an account or/and a commercial relationship with the bank
  • someone who keeps an account for someone else’s benefit (i.e. the beneficial owner)
  • a person who benefits from the transactions carried out by financial intermediaries, like CAs, Stock Brokers, Solicitors etc. as permitted by law
  • a person or entity who is directly or indirectly involved in a financial transaction that poses significant reputational or other risks to a bank, like making a wire transfer or issuing a large-value demand draft, etc.

KYC Policy

Banks should design their Know Your Customer (KYC) policies by incorporating the following four elements:

  • Customer Acceptance Policy (CAP)
  • Customer Identification Procedures (CIP)
  • Monitoring of Transactions
  • Risk Management

Read More about KYC norms here

Factoring & Forfeiting

Factoring and Forfeiting is a topic that never fails to appear in the JAIIB exam. Hence Important topics of PPB include Factoring and Forfeiting. Factoring is a service that is concerned with the financing and collection of account receivables in domestic and international trade. It is an ongoing arrangement between the client and factor (usually a bank or a financial institution), where invoices raised on open account sales of goods and services are regularly assigned to ‘the factor’ for financing, collection and sales ledger administration. 

The buyer and the seller usually have long-term relationships. The client sells invoiced receivables at a discount to the factor to raise finance for working capital requirement. The factor may or may not accept the incumbent credit risk. Factoring enables companies to sell their outstanding book debts for cash.

Forfeiting is a means of finance (credit) an exporter of goods avails from an intermediary called the forfaiter against the export receivables but without the obligation to repay the credit. 

Forfeiting is used for international trade transactions. In fact, it is the discounting of trade receivables such as drafts drawn under letters of credit, bills of exchange, promissory notes, or other freely negotiable instruments on a ‘no recourse’ basis, (i.e. without recourse The exporter in case the importer fails to pay on the due date). 

Some bankers define forfaiting as medium-term capital goods financing, by means of selling a bill of exchange, at a discount, to a third party who is the forfaiter. This third party collects the payment from an essentially overseas customer, through a collateral bank(s), thus, assuming the underlying responsibility of exporters and simultaneously providing trade finance for importers by converting a short-term loan to a medium-term one

Risk Management 

Under top 5 important topics for JAIIB you can include Risk Management for sure! Risk management is a topic that appears consistently in each JAIIB exam. 

What is Risk Identification? – Risk and Basic Risk Management Framework JAIIB

The process of detecting and analyzing hazards to an organization’s operations and employees is known as risk identification. For example, identifying IT security risks such as malware and ransomware, accidents, natural catastrophes, and other potentially detrimental occurrences that might interrupt corporate operations are all examples of risk identification. Companies that have strong risk management plans are more likely to be able to mitigate the effect of risks when and if they materialize.

What are risk measures?

Risk measurements are statistical predictors of investment risk and volatility in the past, and they are also important components of current portfolio theory (MPT). MPT is a typical financial and academic tool for evaluating a company’s or a stock fund’s performance in relation to its benchmark index.

Read More About Risk Management Here

Conclusion

These are top 5 important topics of PPB paper in JAIIB. Knowing these topics may help you in your exams. You can read whole priority list of JAIIB AFB and PPB paper here. JAIIB November exam is to be held from 12th November. We hope you started your preparation! Happy Learning and Happy Preparation.

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FAQs

Q. How many papers are there in JAIIB exam?

A. There are three papers in the JAIIB exam which are Principles and Practices of Banking, Accounting and Finance for Bankers, and Legal and Regulatory Aspects of Banking. But anyhow the papers are going to change from year 2023.

Q. How many attempts are there for JAIIB?

A. JAIIB can be attempted by the candidates within 2 years or 4 consecutive attempts.

Q. What is the Eligibility Criteria for JAIIB?

A. A candidate who wishes to appear for the JAIIB exam must be registered as an ordinary member of the IIBF, He/She must have passed their 10+2 Boards or any other equivalent exams and must be working in any Bank or financial institute.

Q. How many times is JAIIB conducted in a year?

A. JAIIB Exam is conducted two times in a year, once in the month of May and another in November.

JAIIB Study Material Compilation

Principles And Practices Of Banking Principles And Practices Of Banking | Study Notes For JAIIB (oliveboard.in)
Reserve Bank of IndiaReserve Bank of India: Organisation & Functions – Oliveboard
Types Of Shares And Their IssueTypes Of Shares And Their Issue- Types, Classification, Bonus Shares (oliveboard.in)
Understanding The Balance Sheet And Its FormatUnderstanding The Balance Sheets And It’s Format (oliveboard.in)
Accounting And Finance For BankersAccounting And Finance For Bankers | Study Notes For JAIIB (oliveboard.in)
Assets & Liabilities Assets & Liabilities – Meaning, Legal Requirements and more (oliveboard.in)
Public Sector Banks And Cooperative BanksPublic Sector Banks And Cooperative Banks | JAIIB Study Notes (oliveboard.in)
Calculation of Interest and AnnuitiesCalculation of Interest and Annuities-Business Mathematics For JAIIB (oliveboard.in)
Calculation of YTMCalculation of YTM(Yield to Maturity)-Basics of Business Mathematics (oliveboard.in)
Consumer Protection ActConsumer Protection Act COPRA- Free Pdf Notes for JAIIB 2022 (oliveboard.in)
Risk and Basic Risk Management FrameworkRisk and Basic Risk Management Framework JAIIB | Oliveboard
Risks in Banking BusinessRisk in Banking Business
Functions of BankFunctions of Bank – Short Notes for JAIIB Exam | Oliveboard
Consumer Protection Act– COPRAConsumer Protection Act– COPRA for JAIIB I Oliveboard
Banking Ombudsman Scheme Banking Ombudsman Scheme for JAIIB I Oliveboard
Essentials of Bank ComputerizationEssentials of Bank Computerization for JAIIB I Oliveboard
Payments and Collecting ChequesPayment and Collection of Cheques and Other Negotiable Instruments for JAIIB I Oliveboard
Data Communication NetworkData Communication Network and EFT Systems for JAIIB I Oliveboard
Technology Upgradation and its impactRole of Technology Upgradation and its impact on Banks JAIIB I Oliveboard
Foreign Exchange ArithmeticForeign Exchange Arithmetic Free Ebook for JAIIB I Oliveboard
Indian Financial System- OverviewIndian Financial System- Overview for JAIIB I Oliveboard
Security Considerations Security Considerations: IT Security & IT Audit for JAIIB I Oliveboard  
Capital Budgeting Capital Budgeting: Features, Methods and Process For JAIIB I Oliveboard
Depreciation and its accountingDepreciation and Its Accounting for JAIIB I Oliveboard
Functions of Bank Functions of Bank- Relationships, Norms & Others
SARFAESI Act 2002SARFAESI Act, 2002: Facts and Method of Working for JAIIB I Oliveboard
Bankers’ Special RelationshipBankers’ Special Relationship for JAIIB I Oliveboard

Also Read:

  1. JAIIB Exam Analysis 2022 I Paper 2 – AFB I Feb 2022
  2. JAIIB Exam Analysis 2022 I Paper 1 – PPB I Feb 2022
  3. Preparation Tips for JAIIB Exam- Last Minute Strategy
  4. JAIIB Revision Plan- Last 10 Days Plan
  5. JAIIB Frequently Asked Questions- 2022| Check Here (oliveboard.in)
  6. JAIIB Genius | JAIIB Weekly Quiz PDF – JAIIB Questions PDF (oliveboard.in)
  7. JAIIB Full Form – Junior Associate of the Indian Institute of Bankers (oliveboard.in)
  8. JAIIB and CAIIB Books- Exams Syllabus, Books, and more (oliveboard.in)

Also Check:

  1. JAIIB 2022 Exam -Notification Released (oliveboard.in)
  2. JAIIB Notification 2022 – Notification PDF, Eligibility, (oliveboard.in)
  3. JAIIB Apply Online – Application Form 2022, Fees, Instru (oliveboard.in)
  4. JAIIB Eligibility – Age, Degree, Nationality, Members (oliveboard.in)
  5. JAIIB Syllabus – Complete List of Papers, Modules (oliveboard.in)
  6. JAIIB Exam Pattern 2022 – Details of Pattern, Marking (oliveboard.in)
  7. JAIIB Admit Card November 2022 – Steps and Direct Download (oliveboard.in)
  8. JAIIB 2022 Cut Offs – Check JAIIB Minimum Cut Off (oliveboard.in)