business reading

Upload: adil-khan

Post on 19-Feb-2018

218 views

Category:

Documents


0 download

TRANSCRIPT

  • 7/23/2019 Business Reading

    1/15

    A

    BUSINESS READING

    ON

    ROLE OF FINANCIAL INSTITUTION ON INDIAN ECONOMY

    FOR PARTIAL FULFILMENT OF THE

    REQUIREMENT FOR THE

    DEGREE OF

    POST GRADUATE DIPLOMA IN MANAGEMENT

    (2014-2016)

    SUBMITTED TO:Sunaina Jain

    SUBMITTED BY:Adil Khan

    BM-0!0"

  • 7/23/2019 Business Reading

    2/15

    ACKNOWLEDGEMENT

    It is really a matter of pleasure for me to get an opportunity to thank all the persons who contributed directly or

    indirectly for the successful completion of the project report,

    ROLE OF FI!"I!L I#$I$%$IO O I&I! E"OO'()*

    First of all I am e+tremely thankful to my college IMS #$A%IABAD for proiding me with this opportunity

    and for all its cooperation and contribution*

    I also e+press my gratitude to my -roject guide &'() Sunaina Jain

    I am highly thankful to my respected project guide for giing me the encouragement and freedom to conduct

    my project*

    I would also like to thank my parents and all people that helped in conducting my research *

    !dil .han

    /'0123124

  • 7/23/2019 Business Reading

    3/15

    INTRODUCTION

    In financial economics,a financial institution is an institutionthat proidesfinancial sericesfor its clients or

    members* -robably the greatest important financial serice proided by financial institutions is actingas financial intermediaries* 'ost financial institutions are regulatedby thegoernment*

    /roadly speaking, there are three major types of financial institutions5

    &epositary Institutions 5 &eposit0taking institutions that accept and manage deposits and makeloans,

    includingbanks,building societies, credit unions, trust companies, and mortgage loancompanies

    "ontractual Institutions 5Insurance companiesandpension funds6 and

    Inestment Institutions 5 Inestment /anks, underwriters,brokerage firms*

    #ome e+perts see a tendency of global homogenisation of financial institutions, which means that institutions

    tend to inest in similar areas and hae similar inestment strategies* "onse7uences might be that there will be

    no banks that sere specific target groups and e*g* small scale producers are left behind

    http://en.wikipedia.org/wiki/Financial_economicshttp://en.wikipedia.org/wiki/Financial_economicshttp://en.wikipedia.org/wiki/Institutionhttp://en.wikipedia.org/wiki/Institutionhttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Financial_intermediaryhttp://en.wikipedia.org/wiki/Financial_regulationhttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Deposit_(finance)http://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Trust_companyhttp://en.wikipedia.org/wiki/Mortgage_loanhttp://en.wikipedia.org/wiki/Insurance_companyhttp://en.wikipedia.org/wiki/Insurance_companyhttp://en.wikipedia.org/wiki/Insurance_companyhttp://en.wikipedia.org/wiki/Pension_fundhttp://en.wikipedia.org/wiki/Investment_Bankshttp://en.wikipedia.org/wiki/Underwritinghttp://en.wikipedia.org/wiki/Brokerage_firmhttp://en.wikipedia.org/wiki/Brokerage_firmhttp://en.wikipedia.org/wiki/Institutionhttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Financial_intermediaryhttp://en.wikipedia.org/wiki/Financial_regulationhttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Deposit_(finance)http://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Trust_companyhttp://en.wikipedia.org/wiki/Mortgage_loanhttp://en.wikipedia.org/wiki/Insurance_companyhttp://en.wikipedia.org/wiki/Pension_fundhttp://en.wikipedia.org/wiki/Investment_Bankshttp://en.wikipedia.org/wiki/Underwritinghttp://en.wikipedia.org/wiki/Brokerage_firmhttp://en.wikipedia.org/wiki/Financial_economics
  • 7/23/2019 Business Reading

    4/15

    Finan*ial In+,i,u,i(n+ in India

    $he Financial Institutions in India mainly comprises of the "entral /ank which is better known as the Resere

    /ank of India, the commercial banks, the credit rating agencies, the securities and e+change board of India,

    insurance companies and the speciali8ed financial institutions in India*

    R+'. Ban/ ( India:

    $he Resere /ank of India was established in the year 29:; with a iew to organi8e the financial frame work

    and facilitate fiscal stability in India*

    $he bank acts as the regulatory authority with regard to the functioning of the arious commercial bank and the

    other financial institutions in India*

    $he bank formulates different rates and policies for the oerall improement of the banking sector* It issue

    currency notes and offers aids to the central and institutions goernments*

    C(11'*ial Ban/+ in India:

    $he commercial banks in India are categori8ed into foreign banks, priate banks and the public sector banks*

    $he commercial banks indulge in aried actiities such as acceptance of deposits, acting as trustees, offering

    loans for the different purposes and are een allowed to collect ta+es on behalf of the institutions and central

    goernment*

    "redit Rating !gencies in India5

    $he credit rating agencies in India were mainly formed to assess the condition of the financial sector and to find

    out aenues for more improement* $he credit rating agencies offer arious serices as5

    Operation %p gradation

    $raining to Employees

    #crutini8e ew -rojects and find out the weak sections in it

    Rate different sectors

    $he two most important credit rating agencies in India are5

    "RI#IL

    I"R!

    #ecurities and E+change /oard of India5

    $he securities and e+change board of India, also referred to as #E/I was founded in the year 2994 in order to

    protect the interests of the inestors and to facilitate the functioning of the market intermediaries* $hey

    superise market conditions, register institutions and indulge in risk management*

  • 7/23/2019 Business Reading

    5/15

    Insurance "ompanies in India5

    $he insurance companies offer protection against losses* $hey deal in life insurance, marine insurance, ehicle

    insurance and so on* $he insurance companies collect the little saing of the inestors and then reinest those

    saings in the market* $he insurance companies are collaborating with different foreign insurance companies

    after the liberali8ation process* $his step has been incorporated to e+pand the Indian Insurance market and make

    it competitie*

    #peciali8ed Financial Institutions in India5

    $he speciali8ed financial institutions in India are goernment undertakings that were set up to proide

    assistance to the different sectors and thereby cause oerall deelopment of the Indian economy* $he significant

    institutions falling under this category includes5

    /oard for Industrial < Financial Reconstruction

    E+port0Import /ank Of India

    #mall Industries &eelopment /ank of India

    ational =ousing /ank

    #ebi for protection of all inestors in corporate bond market5 % . #inha

    &TI>an 42, 412;, 14*;9-' I#$

  • 7/23/2019 Business Reading

    6/15

    ?"risil@s managing directorAB

    '%'/!I5 -itching for protection of corporate bond market inestors, #ebi chairman % . #inha today said the

    regulator has written to the goernment asking for access to recoery mechanisms to other inestors beyondbanks and financial institutions*

    C$he !ct with regard to &R$s ?&ebt Recoery $ribunalsB or #arfesi does not proide the same protection ?toother inestorsB as has been proided to banks and financial institutions,C #ebi chairman % . #inha said,addressing an eent organised by ratings agency "risil here*

    =e was referring to current laws which grant powers of recoery in case of a default by a company to onlybanks and financial sector while inesting in corporate bonds*

    C#ebi has taken up this matter with the goernment, we are actiely pursuing it, we hae no clue what they are

    finally going to do but my impression is that our recommendations are being considered faourably,C he added*

    Earlier, "risil@s managing director and chief e+ecutie Roopa .uda also pointed this as a deterrent factor forthe inestor*

    COther inestors in the corporate bond market do not hae access to these recoery and resolution mechanisms,which is an issue,C she said*

    It can be noted that gien the push to deepen the corporate bond market by policymakers, inestment in lower0rated companies is essential*

    .uda also said that regulatory hurdles which preent E-FO companies from trading in the secondary marketfor corporate bonds should also be done away with*

    #he also pointed to data showing that it is only higher rated companies which hae raised the most and stressedon the need to broad0base the same*

    >ust like the e7uities market, where listed companies report credit eents to the e+changes, there is a need tohae a credit eent reporting system in the corporate bond market as well to maintain highest standards oftransparency, .uda said*

    #inha said there is a need to increase the retail inestors@ play in the corporate bond market as well*

    .uda said there is also a need for the goernment to reduce the fiscal deficit to increase the actiity in thecorporate bond market

  • 7/23/2019 Business Reading

    7/15

    Canadian delegation to visit India to boost biz ties

    &TIFeb 24, 412;, 1D*2:-' I#$

    E &EL=I5 ! high0leel delegation led by "anada@s !ssociate &eputy 'inister of Finance $im #argentwillisit India this week to take part in abilateral summitaimed at strengthening trade and economic ties betweenthe two nations*

    $he India0"anada Economic and Financial #ector -olicy &ialogue, which will be held on February 2: in ew&elhi, will see both countries making joint commitment to building strong bilateral relationship and giing fillipto inestments*

    From Indian side, !dditional #ecretary in &epartment of Economic !ffairs &inesh #harma will lead thedelegation, the =igh "ommission of "anada said in a statement*

    #argent will be joined by high leel officials from Finance "anada, the /ank of "anada, the Office of the#uperintendent of Financial Institutions ? O#FIB, the "anada &eposit Insurance "orporation and the Financial"onsumer !gency of "anada, it added*

    $he Economic and Financial #ector -olicy ?EF#-B &ialogues are ehicles to deelop and maintain relations onfinancial sector issues between "anada and India and to promote collaboration between financial institutions of

    both the countries*

    $he EF#-dialogues process demonstrates India and "anada@s joint commitment to building strong bilateral tiesas the trade and inestment relationship between the two countries grows, the statement said*

    Dlhi-2a+d +,a',u3 M4dala in ,al/+ ,( 'ai+ R+ 50 *'('

    http://economictimes.indiatimes.com/topic/Tim%20Sargenthttp://economictimes.indiatimes.com/topic/bilateral%20summithttp://economictimes.indiatimes.com/topic/bilateral%20summithttp://economictimes.indiatimes.com/topic/OSFIhttp://economictimes.indiatimes.com/topic/EFSPhttp://articles.economictimes.indiatimes.com/2014-07-28/news/52139156_1_mydala-info-edge-temasekhttp://economictimes.indiatimes.com/topic/Tim%20Sargenthttp://economictimes.indiatimes.com/topic/bilateral%20summithttp://economictimes.indiatimes.com/topic/OSFIhttp://economictimes.indiatimes.com/topic/EFSPhttp://articles.economictimes.indiatimes.com/2014-07-28/news/52139156_1_mydala-info-edge-temasek
  • 7/23/2019 Business Reading

    8/15

    Development Financial Institutions, Financial Constraints and Growth: Evidence from the

    Indian Corporate Sector

    A2+,'a*,

    In many countries, Development Financial Institutions (DFIs) have been major conduits for channelling fundsto particular firms, industries and sectors during the latter's process of development. In India, DFIs have been

    a more important source of long-term funds (mainly debt) for industry than ban loans or other sources of debt.

    !sing data from the Indian corporate sector, "e evaluate the role of DFIs in India for the period #$%$-$& by

    eamining ho" firms' investment decisions are affected by their ability to access DFIs. e find that firms that

    had prior access to DFIs continue to receive funds from these sources only if they can be classified as a priori

    more financially constrained. ccess to DFIs for funds spurs investment. *hese results suggest that DFI lending

    is not governed by considerations of lobbying, precedence or even to sponsor particular types of projects that

    might be socially desirable but not privately profitable. +ather, the primary role of DFIs has been to reduce

    financial constraints faced by firms. e also find that the drastic contraction of long-term ban lending to

    industry in India in the early nineties had adverse conseuences for firms that "ere particularly ban-

    dependent, but only if these firms could be classified as a priori more financially constrained. *ogether, these

    results support the vie" that in contrast to firms in "ell-developed capital marets, in emerging marets, firms

    "ith gro"th potential are liely to rely significantly on debt financing, especially debt that is channelled

    through financial inter mediaries.

  • 7/23/2019 Business Reading

    9/15

    an!s should e"tend rate cut bene#ts to students and S$Es

    !mbarish &atta 4: february 412;

    R/I has been at the center point, after it announced a surprised rate cut on 2;th >an, 412;* Finan* Mini+,'

    A'un Jai,l4hailed R/I@s decision to cut interest rates as an important turning point for the economy that

    should lift economic growth and inestment*

    !lthough, R/I in its last policy announcement on Feb :, left rates unchanged, it did signal that a good budget

    may pae path for further rate cuts*$here has been a long pending demand by industry to lower interest rates,

    and the corporate sector in India and abroad is keenly obsering unfolding of these eents for further

    inestments in the economy*

    If interest rates will fall, industries can enjoy credit at an affordable rate which in turn can fuel India@s economy

    at much higher speed* $his speed of growth can be further accelerated if base of credit distribution can be

    enlarged*

    =oweer, banks should e+tend the rate cut benefits and focus to ease the loans for SME+, students, rural areas

    etc*

    Interest rate cut benefits needs to reach out to this section for a healthy economy*

    http://businesstoday.intoday.in/search.jsp?searchword=Ambarish%20Datta&searchtype=text&searchphrase=exact&search_type=authorhttp://businesstoday.intoday.in/search.jsp?searchword=Ambarish%20Datta&searchtype=text&searchphrase=exact&search_type=authorhttp://businesstoday.intoday.in/story/budget-fm-may-announce-policy-plans-to-combat-blackmoney/1/216017.htmlhttp://businesstoday.intoday.in/story/budget-fm-may-announce-policy-plans-to-combat-blackmoney/1/216017.htmlhttp://businesstoday.intoday.in/story/sbi-signs-100-million-euro-loan-pact-with-eib-to-support-smes/1/214964.htmlhttp://businesstoday.intoday.in/search.jsp?searchword=Ambarish%20Datta&searchtype=text&searchphrase=exact&search_type=authorhttp://businesstoday.intoday.in/story/budget-fm-may-announce-policy-plans-to-combat-blackmoney/1/216017.htmlhttp://businesstoday.intoday.in/story/budget-fm-may-announce-policy-plans-to-combat-blackmoney/1/216017.htmlhttp://businesstoday.intoday.in/story/sbi-signs-100-million-euro-loan-pact-with-eib-to-support-smes/1/214964.html
  • 7/23/2019 Business Reading

    10/15

    Once financial institutions tap this opportunity, it will increase consumption power in economy and more

    consumption will once again help industries prosper as well as for the economy to grow steadily*

    $he Resere /ank of India, in iew of promoting #'E lending, hae issued a number of guidelines to banks,

    from time to time*

    R/I has recently issued a master circular to enable banks to hae the present instructions standardi8ed, which

    includes the e+isting guidelines with regards to #'E loans in India $hrough this, banks are adised to achiee a

    41 per cent year0on0year growth in credit to micro and small enterprises and a 21 per cent annual growth in the

    number of micro enterprise accounts*

    $he signal from R/I is clear to inole banking institutions in lending to #'E sector* In real terms unlike

    corporate sector, #'Es do not hae many ways to get loan* &ue to small budget, they do not hae financial

    consultants to adice on securing loans* =ence, R/I and oernment hae been propelling to make credit

    aailable for #'E sector*

    If #'E sector can aail benefits of future rate cuts, it will lead to oerall push for a steady economy* $he loan

    aailability to #'E sector will lead to capital formation* $his economic boom, will lead to more employment

    generation 0 both blue collar as well as white collar* In real terms, #'EGsmall scale industries will drie @'ake

    in India@ campaign*

    !nother initiatie for reaching the unbanked,6&'adhan1an,'i Jan dhan Y(7na6has been a huge success in

    number terms* #imply put, when @non inclusie@ are reached or inoled in the banking system, it means more

    business* #o the argument of @risk@ inolement with lending to bottom of pyramid looks weak in current

    scenario* $his theory gets stronger by the e+ample of mad rush for obtaining small bank license*

    R/I has receied as many as H4 applications for small finance banks* $he small finance banks will undertake

    basic banking actiities of accepting deposits and lending to the unbanked sections like micro business units,

    small and marginal farmers, micro and small industries and unorganised sector entities* !t least ;1 of its loan

    portfolio should constitute loans and adances of up to Rs 4; lakh*

    $herefore, the signal is clear that corporate houses interested in opening small banks see good business

    opportunity in this segment* Reaching this segment, also suggests that small ticket loan plays a ital role in

    fueling the economy*

    enerally top of the -yramid comprising of corporate houses, -rofessionals and the likes, who can easily aail

    credits from banks* $he problem remains with the bottom of pyramid6 labourersGworkers find it difficult to aail

    the same benefit from a financial institute* hile the collapse in due to unaailable money in the bottom of the

    pyramid, results in the disturbance of the whole chain and an unstable pyramid base results in loss of

    consumption, which in turn signifies bad economic situation*

    http://businesstoday.intoday.in/story/all-jan-dhan-bank-accounts-to-be-linked-to-aadhaar-pm-narendra-modi/1/215004.htmlhttp://businesstoday.intoday.in/story/all-jan-dhan-bank-accounts-to-be-linked-to-aadhaar-pm-narendra-modi/1/215004.htmlhttp://businesstoday.intoday.in/story/all-jan-dhan-bank-accounts-to-be-linked-to-aadhaar-pm-narendra-modi/1/215004.html
  • 7/23/2019 Business Reading

    11/15

    $herefore, for fueling the economy in real terms, this base has to be taken care into consideration* .eeping this

    base in mind, oernment has now dedicatedly created a new ministry for skill deelopment* ow it is the

    opportunity and responsibility of banking institutions to tap this bottom of the pyramid*

    $he further rate cut scenario has also raised e+pectation of education loan seekers* $here is a good part of the

    population who is still unbanked and cannot aail education loan* #kill deelopment and education loan are two

    sides of the same coin* e may call these credits by different names, but it has to be deliered simultaneously to

    complement each other*

    $he upcoming budget is e+pected to look into these peculiar problems with specific policy tools* $here is a

    strong demand that goernment should create a credit guarantee fund similar to one created for '#'E sector in

    India so that banks can finance education loans without any collateral from students*

    Especially for rural students, banks should offer loans at concessional rate and with 211 guarantee from the

    trust* $he same situation should also be handled by trust in case of default* Last goernment started a goodinitiatie 0 /hartiya 'ahila /ank to reach out to women in a direct manner*

    ith more steps taken by oernment for omen like @/eti /achao, /eti -adhao@, it can use /hartiya 'ahila

    bank in an een more targeted manner* ot may ask 'ahila /ank to finance education loans of girls pursuing

    higher or ocation education, particularly in rural areas, as gender bias in the society keeps them out of

    education ambit due to unaailability of finance for education*

    hile eeryone including R/I is keenly awaiting budget to get a clear picture for the ne+t fiscal year, target

    consumers in the e+pected rate cut scenario should not be confused* .eeping bottom of the pyramid in priority,

    banks need to reach out to the population who really needs these serices* e hae the largest number of young

    population in the world*

    $his youth can be a big asset for the country, if fully deployed* Educational institutes are coming out with

    targeted courses for modern education re7uired for skill deelopment*

    $here are arious institutes in this country who hae launched innoatie courses* =oweer, lack of finance is a

    major obstacle in fully harnessing the potential of young population of the country*

    $his obstacle needs to be tackled in totality by the oernment and financial institutions* (outh in this country

    are full of ideas6 they just need a financial backing to support their aspirations* /anksGoernment needs to

    inest at the grassroots leel, for a progressie and healthy economy*

    (mbarish Datta is the D /01, 230 Institute)

  • 7/23/2019 Business Reading

    12/15

    %anala!shmi Financial raises &s '() cr through *CDs

    NE8 DEL$I9 FEB ":

    >analakshmi Financial #erices -t Ltd has raised Rs 24; crore through listed, non0conertible bond issue* $hisis the first tranche of a total of Rs 4;1 crore that the micro finance institution intends to raise by the end of thismonth*

    $he bonds are rated !0 by I"R! and are placed on a priate placement basis with domestic institutionalinestors in India, a press release said* >analakshmi intends to use the proceeds of the offering for its business

    purposes of financing the urban poor*

    $his is one of the largest syndicated local currency bond issues by a micro0finance institution in India targetingnon0bank inestors* $he bond issue is part of a larger e+ercise to broad base inestors, the company said* $heissuances are being structured in arious tranches from 2J months to three year tenors oer coming months to

    be widely distributed to a number of long term institutional inestors* &eutsche /ank is acting as sole arrangerand bookrunner for the offering*

    >analakshmi also closed an "& from F'O, $he etherlands &eelopment Finance "ompany for Rs 411 crorelast month* >analakshmi has entered into an agreement to borrow %#K21 mn from a %#0based company before'arch 412;, fulfilling all the regulatory re7uirements of the R/I* !ll these initiaties demonstrate>analakshmis intention to diersify their sources of funding, to further e+pand their business of financing theunbanked urban poor in the country*

  • 7/23/2019 Business Reading

    13/15

    ?$his article was published on February 4:, 412;B

  • 7/23/2019 Business Reading

    14/15

  • 7/23/2019 Business Reading

    15/15

    Obama for higher share for India in I'F, other institutions

    &'(3(+d ;u(,a '('1