Home/monetary policy
- Recent Questions
- Most Answered
- Answers
- No Answers
- Most Visited
- Most Voted
- Random
- Bump Question
- New Questions
- Sticky Questions
- Polls
- Followed Questions
- Favorite Questions
- Recent Questions With Time
- Most Answered With Time
- Answers With Time
- No Answers With Time
- Most Visited With Time
- Most Voted With Time
- Random With Time
- Bump Question With Time
- New Questions With Time
- Sticky Questions With Time
- Polls With Time
- Followed Questions With Time
- Favorite Questions With Time
How do digital banking and mobile payments contribute to financial inclusion, and what are the risks associated with these technologies?
Digital banking and mobile payments can have an important role in terms of achieving financial inclusion by: Accessibility: First, digital payments can be reached anywhere, so long as penetration of mobile phones is present, which is still very strong even in low-income areas. Reduced cost: Usually,Read more
Digital banking and mobile payments can have an important role in terms of achieving financial inclusion by:
Accessibility: First, digital payments can be reached anywhere, so long as penetration of mobile phones is present, which is still very strong even in low-income areas.
Reduced cost: Usually, digital transactions cost less than bank transactions services, since there are not tangible financial products involved in the exchange. With this in mind, financial institutions can open the doors to providing the ultra-low-cost accounts to the needed populations.
Security: Paying with the money online is a lot safer than carrying money around in terms of theft or being defrauded.
Financial power: Online payment solutions empower people to get wages, government entitlements, and remittances through an electronic channel.
Economic growth: Financial services can be enhanced through digital means by bringing in more people into the economy.
However, there are also disadvantages of digital banking and mobile payments when it comes to some of the following risks:
Privacy or security breaches: The risks of data breach can be reduced by installing encrypted mechanisms and proper data privacy policies.
Money laundering: There is a possibility of money laundering with mobile banking, which may increase its frequency.
Novelty risks: There are lots of risks associated with novelty of the digital technologies.
Agent-related risks: There are risks associated with agents.
See lessLiquidity Management Strategies in Banks: Balancing Obligations and Profitability
1. Maintaining Adequate Reserves: Banks are supposed to maintain an absolute amount of cash reserves under the respective regulation-such as Cash Reserve Ratio or CRR. The reserves offer capacity for any cash claims that may occur in an unusual way from their depositors. Despite the fact that maintaRead more
1. Maintaining Adequate Reserves: Banks are supposed to maintain an absolute amount of cash reserves under the respective regulation-such as Cash Reserve Ratio or CRR. The reserves offer capacity for any cash claims that may occur in an unusual way from their depositors. Despite the fact that maintaining such reserves generates no interest, they provide liquidity for money at the bank’s end.
2. Asset/Liability Mismatch Management: They control their asset (loans and investments) and liability maturity profile to storage the inflow from the maturity of asset liability outflow thus minimizing the factor of liquidity risk.
3.Lending and Interbank Market: Also, banks can borrow from other banks in the interbank market or rely on short term funding instruments like repos if funds are immediately required. It would thus enable the servicing of their short term liabilities without compelling the sale of long term assets that would fetch high prices in the market.
4. Liquidity Pool: They possess a pool of HQLAs that can be sold easily at any time, amongst which are government bonds ,inter alia to allow the generation of cash in case of a thick of liquidity.
5. Diversification of funding source: The use of funding by banks reduces on distinct sources of funding for instance retail deposits, wholesale funding, bonds and yet reduces the risk of a short supply of liquidity.
6. Profitability through Lending and Investments: The liquidity that banks establish with regard to income earning activities for loans and securities would guarantee that liquid assets are properly utilized to generate profits without compromising on the capacity to meet its obligations.
This strategic management ensures availability of liquidity and profitability with reduction of the probability of high liquidity.
See lessHow do digital banking and mobile payments contribute to financial inclusion, and what are the risks associated with these technologies?
Digital banking and mobile payments can have an important role in terms of achieving financial inclusion by: Accessibility: First, digital payments can be reached anywhere, so long as penetration of mobile phones is present, which is still very strong even in low-income areas. Reduced cost: Usually,Read more
Digital banking and mobile payments can have an important role in terms of achieving financial inclusion by:
Accessibility: First, digital payments can be reached anywhere, so long as penetration of mobile phones is present, which is still very strong even in low-income areas.
Reduced cost: Usually, digital transactions cost less than bank transactions services, since there are not tangible financial products involved in the exchange. With this in mind, financial institutions can open the doors to providing the ultra-low-cost accounts to the needed populations.
Security: Paying with the money online is a lot safer than carrying money around in terms of theft or being defrauded.
Financial power: Online payment solutions empower people to get wages, government entitlements, and remittances through an electronic channel.
Economic growth: Financial services can be enhanced through digital means by bringing in more people into the economy.
However, there are also disadvantages of digital banking and mobile payments when it comes to some of the following risks:
Privacy or security breaches: The risks of data breach can be reduced by installing encrypted mechanisms and proper data privacy policies.
Money laundering: There is a possibility of money laundering with mobile banking, which may increase its frequency.
Novelty risks: There are lots of risks associated with novelty of the digital technologies.
Agent-related risks: There are risks associated with agents.
See lessLiquidity Management Strategies in Banks: Balancing Obligations and Profitability
1. Maintaining Adequate Reserves: Banks are supposed to maintain an absolute amount of cash reserves under the respective regulation-such as Cash Reserve Ratio or CRR. The reserves offer capacity for any cash claims that may occur in an unusual way from their depositors. Despite the fact that maintaRead more
1. Maintaining Adequate Reserves: Banks are supposed to maintain an absolute amount of cash reserves under the respective regulation-such as Cash Reserve Ratio or CRR. The reserves offer capacity for any cash claims that may occur in an unusual way from their depositors. Despite the fact that maintaining such reserves generates no interest, they provide liquidity for money at the bank’s end.
2. Asset/Liability Mismatch Management: They control their asset (loans and investments) and liability maturity profile to storage the inflow from the maturity of asset liability outflow thus minimizing the factor of liquidity risk.
3.Lending and Interbank Market: Also, banks can borrow from other banks in the interbank market or rely on short term funding instruments like repos if funds are immediately required. It would thus enable the servicing of their short term liabilities without compelling the sale of long term assets that would fetch high prices in the market.
4. Liquidity Pool: They possess a pool of HQLAs that can be sold easily at any time, amongst which are government bonds ,inter alia to allow the generation of cash in case of a thick of liquidity.
5. Diversification of funding source: The use of funding by banks reduces on distinct sources of funding for instance retail deposits, wholesale funding, bonds and yet reduces the risk of a short supply of liquidity.
6. Profitability through Lending and Investments: The liquidity that banks establish with regard to income earning activities for loans and securities would guarantee that liquid assets are properly utilized to generate profits without compromising on the capacity to meet its obligations.
This strategic management ensures availability of liquidity and profitability with reduction of the probability of high liquidity.
See lessBanking & Monetary Policy
Monetary policy assists to solve the problems associated with banking crises in many ways. Here are the following:- 1. Provide liquidity in banking sector: the liquidity in the banks means that banking system refers to cash on demand which is the liquidity that banks require to meet the working of bRead more
Monetary policy assists to solve the problems associated with banking crises in many ways. Here are the following:-
1. Provide liquidity in banking sector: the liquidity in the banks means that banking system refers to cash on demand which is the liquidity that banks require to meet the working of business and financial requirements. Markets in banking normally supply the funds necessary to sustain the circulation of credit.
2. Decreasing interest rate: lowering interest rates on credit helps banks reduce their costs and continue investing to boost the economy.
3. Lending to solvent banks: Central banks are often lending the money to solvent banks to prevent bankruptcies. So that local people don’t have to face problems.
4. Asset-liability management (ALM) means balancing assets and liabilities. Banks balance their assets (loans) and liabilities (deposits) to ensure that they have enough liquid assets to meet short-term obligations while increasing earnings.
5. Funding sources: Nowadays, banks are trying to diversify their funding sources, such as supporting many pvt. or govt. schemes, helping the consumer to safe investment in stocks, bonds. Banks provide consumer options like debt fund, equity fund or hybrid fund etc. because of this banks maintains trust of consumers.
Banks used to compare metric (LDR) Loan-to-Deposit Ratio (LDR) to assess the bank’s loans and total depositing and investing. These measures can help to manage the financial health of banks.
See less