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BFM IMPORTANT QUESTIONS | CAIIB 2022 EXAMS | IIBF BANK FINANCIAL MANAGEMENT LATEST VIDEOS

BFM IMPORTANT QUESTIONS CAIIB BFM EXAMS

In this post, we will talk about some BFM important questions from Module C of CAIIB 2022 Exams to cover the Syllabus easily.

We will go through the important questions & answers of the Bank Financial Management paper from Module C of the Certified Associate of the Indian Institute of Bankers Syllabus & the BFM classes/ lectures that will help you pass CAIIB in first attempt.

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CAIIB | BANK FINANCIAL MANAGEMENT 2022

As we know, this might be the last chance for the candidates preparing CAIIB Exams due 2022 as per the old syllabus of CAIIB, they must realize that it’s the golden chance to utilize the credit earned over the previous exams of Certified Associate of the Indian Institute of Bankers. So, if you registered for the upcoming attempt, then you must go through the Whole CAIIB – ABM (Advanced Bank Management), BFM & Elective papers Rural Banking, Retail Banking, Human Resources Management, Information Technology, Risk Management & Central Banking – which ever you have taken up with your heart & mind & come winning!

We, Learning Sessions, are here to help you in your journey. We have got CAIIBs’ classes 2022 for all the papers to be chosen from as per the applicable Syllabus of respective exams. You can pick your through our app or website at the most affordable rates in the market of IIBF Banking Materials 2022.

You can access the Indian Institute of Banking and Finance material for CAIIB here:

 

Let us now begin with BFM important questions to clear exam:

 

What do you mean by Treasury Management?

It deals with short-term financial flows (ie securities with a maturity of less than 1 year) except for the SLR part of the requirement. Previously, liquidity management was the main function of the Treasury. However, it now includes all trading and investment activities on the financial markets.

Treasury has become the profit center of all banks & it also plays an important role in ALM (Asset Liability Management)

 

What are the reasons that Treasury is considered as Profit Centre?

The reasons for why treasury is considered as Profit Centre are given following:

  • The interbank market is without credit risk and requires little capital allocation.
  • Treasury activity is highly leveraged & the risk varies from 2% to 5%.
  • Operational costs have become low.

 

What are the Functions of Integrated Treasury?

Integrated Treasury functions to integrate the following:

  1. Money Market
  2. Security Market
  3. Forex Market

 

What is the Role of Treasury?

  • Liquidity Management: Management of short term funds apart from maintaining CRR and SLR
  • Proprietary positions: Trading in currencies, securities and other financial instruments including derivatives.
  • Risk Management: Bridging asset-liability mismatches and risk management using derivative instruments.

 

What is the reason that Treasury has become so important?

The reason for why Treasury has become so important are given below:

  • The rupee is freely convertible to a current account transaction account & more so over more convertible in capital account transactions. Banks are therefore free to operate in FDI, ECB and ODI.
  • Banks raise funds from global markets and invest in domestic currency or vice versa.
  • Banks invest in the stock and debt markets.
  • The use of derivatives with reference to the foreign exchange market according to the requirements of our corporate customers.

 

What is the role of Globalization and Growth?

Rapid Economic growth is not possible without free capital flows i.e. Overseas Companies invest in India and Domestic Companies invest outside India. Exchange of technology and human resources has been made possible only after liberalization after 1990.

Overseas operations of a bank include:

  • Portfolio investment,
  • Direct Investment,
  • ECB
  • Issue of Equity & Debt Capital in Global market
  • Mergers & Acquisitions
  • Payment through technology, and
  • Receipt of Interest, fees and dividend etc.

RBI has also permitted large movement of capital via:

  • Automatic route
  • Approval Route

 

What is the Impact of Globalization?

The globalization has impacted treasury by following ways:

  1. Interest rates are influenced by global trends
  2. Exchange rates become volatile and affect GDP as well as stock and commodity markets.
  3. The institutional structure has changed. SEBI, IRDA, CCIL, NSDL and CIBIL came.
  4. Swaps, forwards and options are widely used.
  5. Derivatives in Rupee are also available in the market.

 

Which books are manages by Treasury?

A treasury manages 3 books:

  1. ALM Book: ALM book deals with Internal Risk Management.
  2. Merchant Book: Merchant Book deals with Client related Derivatives.
  3. Trading Book: Trading Book deals sales and purchase of financial instruments for bank itself

 

From where does the Treasury earns its Profit?

Forex Business

  • Buy low and sell high
  • The position is generally squared on a daily basis.
  • A stock of currency is generally not held.
  • Overbought and oversold is called “Open Position”

Investment in Govt. Securities and Other Securities

Treasury profits are earned by investing in G-sec and other securities on the debt and equity markets.

Money Market

Banks lend surplus funds on the money market and borrow them when needed. Interest is earned.

Trading in market

It is a speculative activity. Banks deal in securities and currencies. Swap transactions are also done to increase the bank’s profit

Interest Arbitrage

If interest rates are favorable, banks borrow from centers with a low interest rate and lend in other centers where the interest rate is high. This is called arbitrage.

 

What is the Organizational structure of Treasury’s Office?

In each bank, the General Manager is the Chief Transaction Officer (CTO), who reports directly to the CEO.

There are four sections in Treasury’s HO:

  1. Dealing Room: The main dealer is the leader. There are separate dealers for Forex operations, money market operations and security operations. A separate dealer is designated for corporates, which trades in securities on both the secondary and primary markets.
  2. Mid-Office: Provides MIS, implements Risk Management system and monitors exposure limits and Stop Loss Limit.
  3. Back Office: This office is responsible for verification and settlement of trades, confirmation of trades with counterparties, accounting of all trades and maintenance of Nostro accounts.
  4. Investment office: This office deals with primary related to issues of shares

We will soon publish questions from the CAIIB’s module D for revision for 2022 Exams.

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