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AdjustedNetBankCredit(ANBC)

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Adjusted Net Bank Credit (ANBC)

By Shubhra - January 15, 2016

TechnicaldefinitionofAdjustedNetBankCredit(ANBC)is:Itisthenetbankcredit
plusinvestmentsmadebybanksinnonSLRbondsheldintheheldtomaturitycategory
orcreditequivalentamountofoffbalancesheetexposure,whicheverishigher.

NowwhatisnetbankcreditandwhatarenonSLRbonds?Thesewillbediscussedlater
below.
Firstletussee,howthisANBCiscalculated.Thefollowingtableprovidesthecalculations
involvedingettingANBCofabank:
ComputationofAdjustedNetBankCredit

BankCreditinIndia(AsprescribedinitemNo.VIofFormA
(SpecialReturnasonMarch31st)underSection42(2)oftheRBI

Act,1934.
BillsRediscountedwithRBIandotherapprovedFinancialInstitutions

NetBankCredit(NBC)
InvestmentsinNonSLRcategoriesunderHTMcategory+other

II

III(III)

IV

investmentseligibletobetreatedasprioritysector.
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AdjustedNetBankCredit(ANBC)

ANBC

III+IV

Thetermsusedinthecalculationsare:
1)BankCredit
BankCreditofabankistheloans,cashpayments,overdraftsprovidedbythebankto
customers.Italsocontainsthebillspurchasedandbillsdiscounted.
Billspurchasedarethebillswhichhavebeenpurchasedasasecurityfortheadvances
given.Forexample:ABCCompanygoestobankfortakingaloan.Nowithastoprovide
anysecurityagainstthatloan,sothatbankcanrecoverthemoneyifcompanyisnotable
topaythemoneybackinstipulatedtime.Insteadofkeepinganyassetassecurity,it
givesabilltothebanksayingthatitwillgivetheamountofmoneyplusinterestaftera
stipulatedtime.Sointhiswaythebankhaspurchasedabillagainstgivingtheamount
writteninbilltothecompany.
Billsdiscountedarethebillswhicharepurchasedafterdiscountingmoney.Forexample:A
personbuysaproductfromthemarket,andpromisestopaythemoneyatsomelater
time.Theshopkeeperwillgiveabilltothecustomer.Nowiftheshopkeeperwantsthe
moneybeforethattime,hecangotobankwiththebill.Nowbankwillnotgivetheentire
moneywrittenonthebilltotheshopkeeper,butitwilldeductsomemoney(knownasbill
discounting)fromthebillandlenttheremainingtotheshopkeeper.Nowwhenthe
shopkeeperreceivesthemoneyfromhiscustomer,hecanpaybacktobank.Thebank
deductsthemoneyordiscountsthebillinordertokeepthediscountedmoneywithitas
interest.
2)BillsRediscountedwithRBIandotherapprovedFinancialInstitutions
Banksalsodotherediscountingofbills.Wehavereadinthelastparagraphaboutbill
discounting.Exampleofbillrediscountingcontinuesfromthere.
Nowifthebankwantsthatmoneybeforestipulatedtimeperiod,itcanpresentthatbillto
RBIorotherFinancialInstitutionsandgetthatbillrediscounted.Sothebankwillpaythe
amounttoRBIorotherFinancialInstitutionafteritgetsthemoneybackfromthe
shopkeeper.
3)NetBankCredit(NBC)
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ThethirdtermisNetBankCreditwhichiscalculatedasBankCreditminusBills
Rediscounted.
TheamountfromBillsrediscountedgetsminusfromTotalBankCreditsbecause,whena
bankrediscountsabill,itgetssomeamountfromRBIorotherFinancialInstitutionto
whichthebankpresentedthebillforrediscounting.Soitisnotthecreditedamountbut
thedebitedamounttothebank.
4)InvestmentsinNonSLRcategoriesunderHTM(HeldToMaturity)category
+otherinvestmentseligibletobetreatedasprioritysector.
Weknowthatbankshavetomaintaintheirdepositsinliquidassetswithitselfbefore
grantingcreditsorloanstocustomersinordertomeetthefuturecontingencies.The
liquidassetsaresuchasgovernmentsecurities,bondsandpreciousmetalslikegoldare
theassetswhichcanbeconvertedtocashanytime.Andtheratioofprescribedliquid
investmentstodepositsistermedasStatutoryLiquidityRatio(SLR).
NowotherthantheSLRinvestments,investinginvariouscapitalmarketinstrumentssuch
asstocksandbondsissuedbypublicandprivatesectorcompaniesandcommercial
papers,investmentinmutualfundschemes,etc.comeundertheNonSLRinvestments.
HeldToMaturitymeanstheinvestmentswhichremainforaspecifiedtimeperiodi.e.till
thematurityandalsotheinvestmentswhichhavefixedordeterminablepayments.
5)AdjustedNetBankCredit(ANBC)
ForcalculatingANBC,NetBankCreditandInvestmentsinNonSLRcategoriesareadded.
ThetargetsandsubtargetsunderprioritysectorlendingarelinkedtoANBC.
Domesticcommercialbankshavetosetatargetof40%oftheANBCfortheadvancesto
prioritysectorlendingwhileforeignbankshavetosetatargetof32%forthesame.

ImportantBooksforBankExams&CompetitiveExams

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