These type of headlines were there in almost all main newspapers of India, on the occasion of valentine day. What was the fraud? What is this LOU, SWIFT, and Buyers’ credit? And who is Nirav Modi? Read further to get the answers, and to understand the modus operandi of the fraud.

Nirav Modi is one of the richest Indians, a jewel businessman. He has opened stores on the prime locations such as the Old Bond Street in London, Hong Kong, and Macau.  Nirav Modi store in New York shares space with legendary brands such as Chanel, Hermes, Prada, and Gucci. The brand ambassadors include some eminent personality such as Kangana Ranaut, Priyanka Chopra.

Let’s understand LOU first.

Letter of Undertaking is a bank guarantee and is issued for overseas import payments. A bank, while issuing LoUs for a client (here Nirav Modi), agrees to repay the principal and interest on the client’s loan unconditionally. When an LOU is issued, it involves an issuing bank, a receiving bank, an importer and a beneficiary entity overseas. According to norms, the term of an LOU is 180 day and can be rolled over once for six months. Since LoUs are a form of lending, they are typically backed by security.

It began with diamond firms of Nirav Modi ( Diamonds R US, Solar Exports, and Stellar Diamonds) approaching PNB for seeking LoU for import of rough stones. It is a promise that PNB gives to foreign lender saying that it’s a good borrower if it defaults we’ll pay you back.

Once they receive the LoU the foreign bank approves buyers’ credit. Buyer credit is a short-term credit available to an importer (buyer) from overseas lenders such as banks and other financial institution for goods they are importing, rough diamonds in this case. Buyer’s credit helps local importers gain access to cheaper foreign funds as against local sources of funding which are more costly.

Through the buyers’ credit amount gets credited to PNBs nostro account (an account that a bank holds in a foreign currency in another bank). The money doesn’t reach to any of these borrowers, it remains in nostro account and eventually gets paid to the supplier.

The fraud is that when they received these LoUs they didn’t have required documents or sanction of credit. The company did not have any sanction limit from the bank neither any kind of deposit or long-term relationship with the bank which is required to sanction LoU.

But then how did the LoUs get sanctioned?

An internal probe by the bank then found that a few of its employees had fraudulently issued LoUs for Hong Kong branches of two Indian banks for and on behalf of Modi’s firms.

In January, when a couple of LoUs matured but the banks did not receive their payments, they approached PNB for repayment of the loans. Also, one fraudulent LoU was issued on January 16, 2018, for and on behalf of Modi’s firms, which allegedly presented a set of import documents to the branch, with a request to allow buyers’ credit for making payments to suppliers overseas. When bank officials requested the firms to furnish 100% cash margin for the LoU, the firms argued that they had availed this facility in the past as well, without paying any cash margin.

However, branch records did not have the details of any such facility having been granted to the firms. Why?

This was because these transactions were never recorded in the PNB’s Core Banking Services (CBS) software (the finnacle software used by banks).

When an LoU is issued, the message of credit transfer is conveyed to overseas banks through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system. This is a significant information as it gives the bank’s consent and guarantees. To issue SWIFT, an official has to log in and fill up confidential information such as the account number and SWIFT code. It generally has three layers of security – a maker, a checker and a verifier within the core banking system before it is issued.

The alleged bank employees, somehow, bypassed the CBS and transmitted the transaction through SWIFT. The transactions were initially routed through the CBS system but subsequently, changes were made in the LoUs by substantially increasing the amount and transmitted through SWIFT without reporting this to CBS.

According to PNB’s complaint to CBI, the LoUs were issued for the Hong Kong branches of Allahabad Bank and Axis Bank which have given money to the beneficiary entity on behalf of Modi’s firms. As a result, PNB will have to settle the LoUs with these branches according to the norms of the Hong Kong Monetary Authority.

The PNB is going to suffer from a very big loss, both in monetary and non-monetary terms. The market sentiments are already down. The PNB stock fell 9.81% on Wednesday to close at Rs 145.80 per share, and investors lost over Rs 3,000 crore in a single day.

The bank may have to set aside higher provisioning in the next few quarters if it unable to recover the money from the accused firms. Also, RBI has ordered the bank to pay for the deeds committed by its employees; to settle the transactions with other banks whose loans are maturing.

The post What Is PNB Scam? appeared first on Kailasha Foundation.

What is Actuarial Science?

Actuarial Science is the discipline that assesses financial risks in the insurance and finance fields using Mathematical and statistical methods.

Actuarial science includes a number of interrelated subjects including mathematics, probability theory, statistics, finance, economics, and computer science. Actuaries are professionals who are qualified in this field through intense education and experience. Actuaries have a detailed knowledge about financial, economic, demographic and insurance risks. They are an expert developing and using financial and statistical methods to inform financial decisions.

Actuaries are the true seers of the and finance industry. They carefully analyze the probability of financial risks and develop creative solutions to mitigate these risks. In short, they predict the future and protect the people and companies from potential harms. The actuaries have great career opportunities as their judgement forms the basis of decision making for many business and enterprises. A study by Georgetown University’s Center on Education and the Workforce discovered that actuarial science graduates had a near-zero unemployment rate in 2010. Along with that, the career in actuarial science is expected to grow 26% in the next 8 years. The work of an actuary involves a lot of number crunching and the nature of work is quite tedious, nevertheless, it offers rewards in terms of intellectual challenge, status, job satisfaction and earnings.

Career Prospects

An actuary in India typically works in the fields of Life Insurance, General Insurance, Health Insurance, Pension Funds, Government and Risk Management.

The role that an actuary can perform in each of these sectors can be quite varied, such as product pricing, financial modeling, valuations, risk management, carrying out peer reviews, designing social security schemes, advice on the premium to be charged etc. Actuaries are seriously smart. Actuaries go through rigorous undergraduate training and while they can be employed immediately, they must undergo an additional 5 to 10 years of training and complete 7-9 exams to achieve full actuarial status, called fellowship.

In order to become an actuary in India, one has to enroll with the Institute of Actuaries of  India (IAI) which regulator the training and education of actuaries in India.Then by passing  the ACET (Actuarial Common Entrance Test) and then clearing the requisite 15 papers. However, one do not have to clear all the 15 papers to secure an entry level job. After clearing 5–6 CT Papers, one can start applying for jobs that pay at max. 6–7 L per annum.

Following are the eligibility criteria to become an actuary:

• 10+2 (H.S.C) or equivalent
• Or Post Graduate in Mathematics, Statistics, Economics, Computer Science, Engineering, MBA (Finance) and other similar qualifications.

Fully qualified members of professional bodies such as:

◆The Institute of Chartered Accountants of India

◆Institute of Cost and Works Accountants of India

◆Certified Institute of Financial Analysts of India

◆Fellow of Insurance Institute of India

◆Proficient in mathematics & statistics

There is a huge demand for actuaries in both developing and developed countries such as India, Indonesia, Thailand, Vietnam, Cambodia, US, UK. Some of the companies that hire actuaries in India include Max Bupa Health Insurance, WNS, Towers Watson, PwC Actuarial Services India, Mercer, Directorate of Postal Life Insurance, McKinsey Advanced Healthcare Analytics, IDBI etc. There is a never-ending demand for actuaries all over the world.

If there is one field where career prospects are abundant because the demand exceeds supply, it is Actuarial Science. If you have interest in this field then go for it as success awaits for you.

Kailasha Foundation – Bringing Solutions To You

Follow us on Facebook, Twitter, Instagram, LinkedIn for regular updates.

The post ACTUARIAL SCIENCE – SCIENCE OF BUSINESS WORLD appeared first on Kailasha Foundation.

Sorry, This mock test is for logged in users only. You can easily login here. Facebook, Google+ login are also enabled for your convenience.

The post CAT QUANTITATIVE APTITUDE LEVEL 1 MOCK 1 appeared first on Kailasha Foundation.

Some points to be noted on simplex method are

For maximization problem all the constraints should have < (less than or less than equal to) sign. If this is not the case then convert the inequality into less than equal to form.

Various Steps to Solve the problem are

1. Check whether the maximization problem is in standard form. If no then convert the problem to standard form and after that move ahead to second step.
2. Introduce slack variables.
3. Prepare initial simplex table.
4. Perform calculation.
5. Check if optimality condition is satisfied? If yes then this is the final table else proceed further.
6. Prepare simplex table II by determining entering and departing variables.
7. Derive new values for new table.
8. Proceed steps 4 and 5.
9. Check for optimality again.

For more doubts WhatsApp us on 8294600829/9680887559

Connect with us on Facebook, Twitter, Instagram, LinkedIn.

Kailasha Foundation –  Bringing Solutions To You

The post Simplex Table Method for LPP Problem appeared first on Kailasha Foundation.