Interest Rate Hedging Products of SBI
-
Upload
kiranbuell -
Category
Documents
-
view
223 -
download
0
Transcript of Interest Rate Hedging Products of SBI
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 1/12
JOFIJOHNKUTTY
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 2/12
` Established in 1806 at Calcutta as Bank of Calcutta and later redesigned as the Bank of Bengal in 1809
` Bank of Madras, Bank of Bombay and bank of Bengal amalgamated to for m Imperial bank of India on
January 27, 1921` It was nationalised on 1955 and was renamed as
State Bank of India
` It is the oldest bank of Indian sub-continent
`
Largest branch network in India with 16000 branches` Over 8500 ATM¶s
` WEBSITE: statebankof india.com
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 3/12
It has the following six Associate Banks
` 1. State Bank of Bikaner and Jaipur (SBBJ)
` 2. State Bank of Hyderabad (SBH)` 3. State Bank of Indore (SBIr )
` 4. State Bank of Mysore (SBM)
` 5. State Bank of Patiala (SBP)
` 6. State Bank of Travancore (SBT)
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 4/12
` Other than basic ser vices SBI pr ovides treasury
ser vices like foreign exchange and risk
management
` 7 RTMU units in the country` It an inter mediary which connects customers with
treasury
` It pr ovides ser vice only to existing customers
` Clients are rated by Credit Department(SB1 toSB16)
` There are about 150 clients currently
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 5/12
` Derivatives and Forex
` It is into forex trading and pr oviding structured
pr oducts
` It tracks the position of the customers and the economy and advise based the prevailing
conditions
` Clients are rated by Credit Department State Bank
Advance Rate (SBAR) (credit rating of sbi range f r om SB1 to SB16)
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 6/12
` An interest rate derivative is a derivative where
the underlying asset is the right to pay or receive a
notional amount of money at a given interest rate.
` The interest rate derivatives market is the largest derivatives market in the world.
` 80% of the world's top 500 companies used
interest rate derivatives to contr ol their cash f lows.
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 7/12
` An interest rate swap is a derivative in which one party
exchanges a stream of interest payments for another
party's stream of cash f lows.
` Interest rate swaps can be used by hedgers to
manage their f ixed or f loating assets and liabilities.
` They can also be used by speculators to replicate
unf unded bond exposures to pr of it f r om changes in
interest rates.
` Interest rate swaps are very popular and highly liquid
instruments.
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 8/12
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 9/12
` ISDA Master Agreement which would contain the µnon-economic¶ ter ms²such as representations and warranties, events of def ault, and ter mination events
` Counter parties are f ree to negotiate only the µeconomic¶ ter ms²that is, rate or price, notional amount, maturity, collateral, and so on.
` ISDA Master Agreement include pr ovisions that
f acilitate payment netting and close-out netting.
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 10/12
` creates a credit relationship between the
counter parties, the ter ms of which need to be
negotiated and documented
` swaps are traded in the market and might involve repeated interaction between two counter parties;
renegotiation of credit ter ms for each transaction
would be costly and would act as a drag on
trading activity
8/8/2019 Interest Rate Hedging Products of SBI
http://slidepdf.com/reader/full/interest-rate-hedging-products-of-sbi 11/12
` SBI discloses all types of risks associated with
derivatives to its customers and get their conf ir mation
regarding the same.
` Customer must acknowledge and accept that there
can be no guarantee of pr of its or no exception f r om
losses while executing contracts
` Customer should therefore caref ully and consider
whether such trading is suitable for him/her in the light
of f inancial condition.
` customer should undertake transactions only if
customer understands the nature of the contractual
relationship into which he/she is entering and the
extent of exposure to risk