DBC 2344 - Materiality Threshold

 

The Banking Tutor 

Daily Banking Concept -  2344 

Materiality Threshold 

A materiality threshold is a benchmark used in auditing and accounting to decide the significance of errors or omissions in financial statements, determining if they are large enough to influence users' economic decisions, guiding auditors to focus on important discrepancies rather than trivial ones, often calculated as a percentage of metrics like earnings or assets. It acts as a "filter" to ensure transparency and relevance, with amounts exceeding the threshold deemed "material" and requiring correction, while smaller amounts are considered insignificant.

BTL 869 - Resilient Financial System

 

The Banking Tutor’s Lessons

BTL 869                                                                               12-02-2026

Resilient Financial System  

At a broader level, resilience is defined as the ability of a system, community or society exposed to hazards to resist, absorb, accommodate to and recover from the effects of a hazard in a timely and efficient manner, including through the preservation and restoration of its essential basic structures and functions. 

In the context of financial system, a resilient financial system is one which is able to absorb the impact of endogenous shocks it is exposed to, rebound quickly to the original condition or adapt to new environment, and continue to perform its role of providing financial services. This definition of resilient financial system is different from a stable financial system. A stable financial system is one which is able to absorb shocks, whereas a resilient financial system will be able to adapt and reconfigure itself in response to a shock, in addition to absorbing the shocks. 

As such, our efforts should be focussed on building a financial system which is not just stable, but resilient, as the type, source, magnitude and frequency of shocks are turning out to be highly unpredictable and non-measurable to a significant degree. Accordingly, focus of regulation and supervision of financial system should be to make sure that financial system as well as individual financial institutions are not just able to absorb the shocks, but are able to adapt to the changed circumstances. 

The 3As of Resilience are: Anticipatory Capacity, Absorptive Capacity and Adaptive Capacity

Anticipatory Capacity could be thought of the ability of the financial system and its constituents to identify and measure emerging risks as early as possible and mitigate the risks by taking corrective actions. 

Absorptive Capacity is the ability to withstand the losses which may arise due to shocks which cannot be mitigated or avoided. 

Adaptive Capacity helps in adjust to the new realities, be it changed regulatory/economic conditions or a new competitive landscape. 

Sekhar Pariti

+91 9440641014

DBC 2343 - Holacracy

 

The Banking Tutor 

Daily Banking Concept -  2343 

Holacracy 

Holacracy is a system of corporate governance whereby members of a team or business form distinct, autonomous, yet symbiotic, teams to accomplish tasks and company goals. The concept of a corporate hierarchy is discarded in favor of a fluid organizational structure where employees have the ability to make key decisions within their own area of authority.

DBC 2342 - Junior Capital Pool

 

The Banking Tutor 

Daily Banking Concept -  2342 

Junior Capital Pool 

A junior capital pool (JCP) is a corporate capital structure that allows early-stage startups to sell shares in the company before actually establishing a line of business. This form of company financing is a Canadian invention and is permitted only in Canada.

DBC 2341 - Output Gap

 

The Banking Tutor 

Daily Banking Concept -  2341 

Output Gap 

The term output gap refers to the difference between the actual output of an economy and the maximum potential  output of an economy expressed as a percentage of gross domestic product (GDP). A country's output gap may be either positive or negative.

BTL 868 - Interest Subvention for Export Credit 2026

 

The Banking Tutor’s Lessons

BTL 868                                                                               09-02-2026

Interest Subvention for Export Credit 2026

Under the Niryat Protsahan (Financial Enablers) sub-scheme of the Export Promotion Mission (EPM), the Government of India provides specific interest support to reduce credit costs for exporters. This initiative was launched in early January 2026 to replace and refine the previous Interest Equalisation Scheme.

Interest Subvention Rates

Base Rate: A standard interest subvention of 2.75% per annum is available for both pre-shipment and post-shipment rupee export credit.

Additional Incentive: There is a provision for extra incentives for exports directed toward notified under-represented or emerging markets, though these are subject to operational readiness.

Key Features & Eligibility

Target Group: The benefit is exclusively for MSME manufacturer exporters and merchant exporters.

Annual Cap: Each exporter (per Importer-Exporter Code - IEC) is subject to an annual benefit cap of ₹50 lakh for FY 2025–26.

Coverage: Support is restricted to a "Positive List" of approximately 4,139 tariff lines (at the HS 6-digit level), which covers about 75% of India's total tariff lines where MSME participation is high.

Validity: The scheme is part of a broader six-year mission spanning from FY 2025–26 to FY 2030–31.

Exclusions: Prohibited/restricted items, waste, scrap, and products already covered under other incentive schemes (like PLI or RoDTEP) are excluded.

Application Process

To access this benefit, eligible exporters must first file an "Intent to Avail" on the DGFT Portal to generate a Unique Identification Number (UIN). This UIN is then used to approach banks, which pass the interest benefit upfront and later claim reimbursement through the Reserve Bank of India.

Key aspects of this intervention include:

Coverage: Applies to both pre-shipment (packing credit) and post-shipment rupee export credit.

Support Level: A base rate of 2.75% is provided, with additional incentives for exports to specific emerging or under-represented markets.

Eligibility: Targeted at MSME exporters, covering a defined positive list of tariff lines, which constitutes approximately 75% of India's total tariff lines.

Implementation: The benefit is passed on upfront by lending institutions, which are then reimbursed by the RBI.

Goal: To reduce the cost of export finance, making Indian MSME products more competitive in international markets.

The Niryat Protsahan scheme also includes a collateral guarantee component, supporting up to 85% for Micro and Small enterprises and 65% for Medium enterprises, with a maximum guarantee of ₹10 crore per exporter.

Sekhar Pariti

+91 9440641014

DBC 2340 - Horizontal Acquisition

 

The Banking Tutor 

Daily Banking Concept -  2340 

Horizontal Acquisition 

A horizontal acquisition occurs when one company acquires  another company in the same industry and works at the same production stage. The new entity may be well positioned because of its increased market share or scalability than the standalone companies combined to form it. Horizontal acquisitions expand the capacity of the acquirer, but the basic business operations remain the same,  unlike an acquisition that creates a wholly different company.