Page 236 - DMGT303_BANKING_AND_INSURANCE

Unit 11: Innovations in Banking

4. The risks, if any, involved in insurance agency/referral arrangement should not get Notes
transferred to the business of the bank.

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Caution Banks are required to obtain prior approval of the Insurance Regulatory and
Development Authority (IRDA) for acting as 'composite corporate agent' or referral
arrangement with insurance companies.

11.18 Money Market Mutual Funds

 A special genre of MF that pools savings of small investors for investment in short term
money market instruments like CD, Call Money, Commercial Bills, Treasury Bills, Dated
Government Securities, having an unexpired maturity up to 1 year, Rated Corporate
Bonds/Debentures with a residual maturity up to 1 year, etc., and passes on the benefit of
higher yield on these instruments to the unit holders.
 Can be established by commercial banks/public financial institutions/their existing
mutual funds/subsidiaries/NBFCs etc.
 Can be either as money market deposit account or mutual fund. Individuals/NRI
Individuals can subscribe.
 Minimum lock-in period 30 days.
 Investments are left to the commercial judgment of the fund managers.
 Maximum of 3% of total fund can be invested in CPs/Bonds and Debentures of any single
company.
 MMFs of Commercial Banks would not be considered as part of demand and time liabilities
for reserve requirement.
 Issue of units is subject to stamp duty.
 Prior authorization from RBI is necessary.

Did u know? Maximum of 3% of total mutual fund can be invested in CPs/Bonds and
Debentures of any single company.

Self Assessment

Fill in the blanks:
10. ....................................... helps the banks to build synergies between the insurance business
and bank branch network.

11. .......................................acquires the asset through borrowed funds and leases out.
12. A lending institution called ".................................." identifies the loans in its portfolio that
are to be securitised.

13. A structured process where under loans and other receivables are packaged, underwritten
and sold in the form of ............................ securities by commercial banks/financial
institutions.
14. .......................... pays hiring charges at stipulated intervals and quantum by the hirer.

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