may-july 2013 nism update

Volume 4 / Issue 23

May-July 2013

at Patalganga

Commencement of construction of

New

I take great pride to announce that the construction of NISM’s

new campus has kick-started and the event itself was

formally inaugurated by Hon’ble Prime Minister Dr.

Manmohan Singh. The campus is expected to become

operational from the year 2015 and provide a major boost to

the activities of NISM.

NISM has decidedly expanding its operations across the

country to serve a larger audience. In this direction, it recently

opened an Office cum Test Centre at Chennai to meet the

needs of southern region. The test centre would conduct

mandatory certification examinations, non-mandatory

certification examinations and CPE programmes. NISM also

intends to provide niche short duration and part-time courses

that are currently not available for the professionals working

in the southern region. Additionally, NISM recently entered

into an MOU with Asia-Pacific Institute of Management

(AIM), New Delhi to offer one of NISM’s flagship

programmes, Certificate in Financial Engineering and Risk

Management (CFERM) at the AIM`s New Delhi campus.

As part of its commitment to assist SEBI in augmenting its

quality of human resource, NISM conducted two Induction

programmes for the employees of SEBI. A total of 67 officers

from SEBI attended the program conducted in two batches.

The program covered technical inputs on securities markets

as well as behavioural sessions to enhance the soft skills of

the participants. NISM also entered into a strategic alliance

with SBI Mutual Fund for conducting mutual fund

distributors' (MFD) certification examinations. Under

the strategic alliance, SBI Mutual Fund has enabled

select Learning Centres of State Bank of India

(SBLCs), including four SBLCs of associate banks,

to conduct the MFD certification examination for

the benefit of State Bank Group (SBG)

employees, including retired employees.

Foreword

Shri Sandip GhoseDirector, NISM

|01| NISM Update May-July 2013

Hon’ble Prime Minister of India Dr. Manmohan Singh unveiled the Commemorative Plaque symbolizing the

commencement of construction of new NISM campus at Patalganga on Friday, May 24, 2013.

The Prime minister was attending the silver jubilee function of SEBI held in Mumbai. The event was graced with

the presence of Hon’ble Minister of Communications and Information Technology and Law and Justice Shri Kapil

Sibal, Hon’ble Finance Minister Shri P. Chidambaram, Hon`ble Chief Minister of Maharashtra Shri Prithviraj

Chavan & SEBI Chairman Shri U. K. Sinha among other dignitaries.

Dr. Singh said “I am happy that SEBI has over the years nurtured and supported under its auspices the National

Institute of Securities Markets (NISM) to promote securities market education and research. It is also heartening

to note that the Government of Maharashtra has allotted 70 acre of land for the new campus of NISM at

Pathalganga, Navi Mumbai. The NISM will have, a state-of the art residential campus catering to 1,000 students

at a time. The Institute is expected to play a pivotal role in implementing the National Strategy for Financial

Education (NSFE)”.

The new state-of-the-art campus of NISM will be situated on the Mumbai-Pune Expressway at Patalganga. The

new campus, once functional, will give a major boost to the activities of NISM.

The event also saw the unveiling of the SEBI Coffee Table Book “Banyan tree to e-trading” to mark the silver

jubilee anniversary of the regulatory body.

Commencement of construction of new NISM campus at Patalganga

NISM Update May-July 2013 |02|

Activities at NISM

SCHOOL FOR SECURITIES EDUCATION (SSE)

PGPSM & PGCSM programmes were launched with 37 and 21 students respectively. Mr Ranadeep Mookerjee, Head-Markets Group of ICICI, was present at the inaugural on June 25, 2013. All inductees from NISM`s first two batches have performed very well on the job at ICICI Treasury. For the Orientation programme, we had a galaxy of speakers from industry, viz. Sundar Sankaran (formerly Kotak), Mr Sudipto Roy (Principal), Mr. Dhruva Chatterjee (Morningstar), Mr. B. Renganathan (Edelweiss) and Mr Sameer Chinchanikar (KBC Bank Belgium, Chief India Representative). Term I of PGPSM and PGCSM commenced on July 1, 2013. A number of teaching innovations have been initiated and completed:

01. Workshop on Introduction to Securities Markets02. Workshop on Business Communication with a finance orientation03. Workshop on Analysis of Annual Reports 04. Mentoring and Career-counseling05. Book Reviews: How Markets Fail (John Cassidy) and Currency Wars (James Rickards)06. Film Reviews: Too Big to Fail (Andrew Ross Sorkin) and Ascent of Money (Niall Ferguson)07. News Analysis (with student groups representing Business Line, Business Standard, Economic Times,

Financial Express and Mint)08. Country Studies, covering Myanmar and Saudi Arabia09. Contemporary and live topics such as RBI's credit and monetary policies are being discussed in the Macro-

economics class 10. Users' training by CMIE on Prowess Software with incorporation into the Financial Accounting & Reporting

course11. Students are being provided with experts/professional analysts' reports on financial markets12. One session on Business Engagement has been organized by ICICI (Mr Tadit Kundu, ICICI Treasury Group, on

Economic Outlook)

NISM achieved another milestone by entering into an MOU with Asia-Pacific Institute of Management (AIM) to offer the CFERM programme at AIM`s New Delhi campus. At NISM Bhavan, Navi Mumbai, classes for CFERM commenced (Formats A and B). The Basic Module in Format B has been completed to the satisfaction of students.

Efforts have kick-started to launch a formal alumni association for all the programmes of NISM. Over 140 students have completed the PGPSM, PGCSM, CFERM and CSL programmes and are playing a vital role in raising the securities markets.

Research Papers:

Mr. Akhlaque Ahmad’s paper ‘Affecting the Smile and Implied Volatility in the Context of Option Pricing Models’, presented in February 2013, is now published in the Royal Flemish Academy’s Journal for Science and Arts.

Dr. Rachappa’s paper ‘Rounding Up in Reported Income Numbers: Evidence from Indian Companies’, with Sudershan Kuntluru, submitted with minor revisions to the publication Review of Accounting and Finance on 17.6.2013.

SCHOOL FOR SECURITIES INFORMATION & RESEARCH (SSIR)


Other Institution-Building Activities By SSE and SSIR

SCHOOL FOR REGULATORY STUDIES AND SUPERVISION (SRSS)

MOU signed between The Institute of Company Secretaries of India (ICSI) and National Institute of Securities Markets (NISM)

A Memorandum of Understanding has been signed between National Institute Of Securities Markets (NISM) and The Institute of Company Secretaries of India (ICSI) on June 16th 2013 at ICSI Centre for Corporate Governance Research and Training, Navi Mumbai.

3.6.13 and

4.6.2013

Conducted a 2-day training programme on Investment Advice - A Holistic Approach for Principal Retirement Solutions Pvt. Ltd. Prof Sunder Ram Korivi and Ms. Kavitha R. designed, delivered and anchored the programme. This was based on a PGPSM subject, Behavioural Finance.

Designed course at the ICSI 2-day Workshop on Securities Law Documentation at CCGRT Belapur. This was based on a CSL subject. A copy of the course material is on display in the NISM library.

Designed course at the ICSI 2-day Workshop on Compliance of Listing

Agreement at CCGRT Belapur. This was based on a CSL subject. A copy of

the course material is on display in the NISM library.

MOU with ICSI which was signed on 16.6.2013

8.6.2013 and

9.6.2013

29.6.2013 and

30.6.2013

16.6.2013

Dr. Poonam Singh's paper, ‘Convergence in Emerging Markets: The Case of Abuse of Dominant Position in Competition Policy’, accepted for publication in Journal of Interdisciplinary Economics. A paper ‘Can business groups survive with institutional development? Theory and Evidence’, with Narahari Hansoge and Vijay Marisetty, accepted for presentation in India Finance Conference.

Kavitha Ranganathan’s paper ‘Global Shapes of Preference Scaling Functions’, accepted for publication in the Journal of Interdisciplinary Economics.

Kiran Kumar’s paper 'Economic Shocks, Fund Flows and Market Returns’, with Viral Acharya (presenter), NYU Stern School of Business; Ravi Anshuman, IIM-B; presented at the NYU-NSE Indian Capital Market Conference on 29.7.2013, at Mumbai.


The objective of the MOU is to achieve a common goal in promoting Corporate Governance & Public Policy, Financial Reporting & Disclosures, Inclusive Growth & Sustainable development, Business Environment, Capacity Building, Corporate Social Responsibility, Quality & Assurance Services.

The Institutes would jointly organize seminars, conferences, workshops, certificate programs for corporate and securities market professionals and executives, as well as students' exchange programmes. They would also jointly endeavour to develop appreciation by the companies for corporate governance in securities market and build capacity of the members of ICSI for implementation of corporate governance in letter and spirit. Both Institutes will undertake joint research projects, surveys and publish monographs, papers, reports, studies, cases etc. on corporate governance, corporate finance, financial markets, corporate social responsibility, sustainability & sustainability reporting and other areas as identified and would also jointly design and conduct certification modules, conduct development programmes for Director's/top management in areas of Corporate Governance, Corporate Laws, Accounting, Finance, Management etc. The Institutes would also collaborate in Education, Training and Research and would exchange Journals and other publications.

NISM has organised two induction training programs for the newly joined officers of Grade A and Grade B in Securities & Exchange Board of India. The two weeks programmes were held in Navi Mumbai during the period May 06-17, 2013 and June 03-14, 2013. A total of 67 officers from SEBI attended the program conducted in two batches. The program covered technical inputs on securities markets as well as behavioural sessions to enhance the soft skills of the participants. The technical inputs include Primary market and secondary market operations, Equity Market and Pricing of instruments, Trading & Settlement Processes, Custodians and RTAs, Role of Depositories, Portfolio Management Services, Legal and Regulatory Framework, Regulation and Supervision of Market Intermediaries, Mutual Funds, Venture Capital and Private Equity Investments, FIIs and Regulatory Framework, Risk Management, Investigations and Market Manipulations, History of Scams, Mergers and Takeovers, National Strategy for Financial Education etc.

SEBI Induction Training Programs

Seen in the photograph : CS S. N. Ananthasubramanian (President, Council of the ICSI), Shri Gopal Chalam, Dean ICSI-CCGRT, Shri Sandip Ghose, Director NISM (Signing the MOU on the behalf of The ICSI and NISM respectively), CS M.S. Sahoo (Secretary, ICSI), CS Keyoor Bakshi (Past President ICSI), CS Sudhir Babu (Council Member,The ICSI),CS Umesh Ved (Council Member, The ICSI & Chairman ICSI-CCGRT Managing Committee), CS Vikas Y. Khare (Council Member, The ICSI), CS N.L.Bhatia (Former Chairman WIRC) and CS B. V. Dholakia (PCS).


SCHOOL FOR CERTIFICATION OF INTERMEDIARIES (SCI)

NISM’s strategic alliance with SBI Mutual Fund

On May 18, 2013 SBI Mutual Fund announced its strategic alliance with National Institute of Securities Markets (NISM) for conducting mutual fund distributors’ (MFD) certification examinations.

As per SEBI Notification on NISM Series-V-A: Mutual Fund Distributors dated May 31, 2010, NISM Mutual Fund Distributors Certification is mandatory for the following category of associated persons, i.e., distributors, agents or any persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products. Under the strategic alliance, SBI Mutual Fund has enabled select Learning Centres of State Bank of India (SBLCs), including four SBLCs of associate banks, to conduct the MFD certification examination for the benefit of State Bank Group (SBG) employees, including retired employees.

On the occasion of this strategic alliance, SBI Funds Management Managing Director & CEO, Deepak Chatterjee said, “Through this initiative, we aim to achieve the objective of increased acceptance of mutual fund schemes amongst bank’s customers”.

Considering the fact that SBI and Associate banks are the largest distributors of SBI Mutual Fund schemes, this alliance will help NISM to widen its reach terms of creating capabilities for distribution of mutual fund products in different geographies across the country. It will enhance the quality of sales, distribution and related support services in the mutual fund industry.

This alliance will also give impetus to the Securities and Exchange Board of India (SEBI) objective to encourage the mutual fund industry to increase its reach beyond the large cities. As per the alliance till date NISM has successfully conducted Mutual fund distributors' (MFD) certification examination at SBI Learning Centers located in the cities mentioned below:

Participants of the Induction Training Program for Batch-II conducted during June 03-14, 2013

Sr. No LocationDate of Exam No. of Candidates Enrolled

01

02

03

04

05

06

07

March 09,2013 Ahmedabad

Panchkula

Indore

Ranchi

Kochi

Patna

Lucknow

64

57

61

50

66

54

50

May 18,2013

June 01,2013

June 08,2013

June 22,2013

July 06,2013

July 13,2013

08

09

10

Patiala

Panchkula

Guwahati

55

53

51

July 13,2013

July 20,2013

July 27,2013


Consolidated Status Report (Period: As on July 28, 2013)

NISM Certification Examination

SrNo.

NISM EXAMINATION

TotalCandidates

Passed

PassPercentage

TotalCandidates

Enrolled

TotalCandidates Appeared

Mutual Fund Distributors (Launched on 01/06/2010)

RTA - Mutual Fund(Launched on 03/08/2009)

Currency Derivatives

(Launched on 15/05/2009)

Currency Derivatives - Gujarati


Securities Intermediaries Compliance(Non-Fund)(Launched on 28/01/2013)

Interest Rate Derivatives(Launched on 17/05/2010)

Mutual Fund Distributors - Gujarati(Launched on 01/06/2010)

Mutual Fund Distributors - Hindi(Launched on 01/06/2010)

Currency Derivatives - Hindi


RTA - Corporate


Mutual Fund Foundation(Launched on 14/01/2013)

Depositories Operations(Launched on 21/02/2011)

Securities Operations and RiskManagement(Launched on 22/11/2010)

Equity Derivatives(Launched on 08/10/2012)

Merchant Banking(Launched on 21/03/2013)

Equity Sales Certification Examination(Launched on 07/03/2013)

Securities Markets Foundation(Launched on 21/03/2013)

Mutual Fund Distributors (Level 2)(Launched on 16/04/2013)

Total

01

02

03

04

05

06

07

08

09

10

11

13

14

15

16

18

19

12

Investment Adviser (Level 1)Certification Examination (Launched on 03/06/2013)

17

145522

6041

57329

17

74

2298

172

692

747

1098

213

32820

17781

14315

40

32

76

279432

124

41

27

29

134004

5632

52856

16

71

2089

141

492

633

918

155

29087

16627

13418

61

256378

95

27

23

57093

3364

4

11

1480

113

90

109

143

137

15276

12687

22175

12

7262

22

120073

49

23

42%

25%

15%

71%

60%

80%

18%

43%

17%

16%

88%

53%

76%

20%

54%

81%

79%

52%

85%


NISM Continuing Professional Education

SrNo.

NISM Continuing Professional Education

NISM Mutual Fund Distributors CPE (1 Day Programme)(Launched on 01/06/2010 and upto 31/05/2012)

NISM Mutual Fund Distributors CPE (Day 1)(Launched on 01/06/2012)

NISM Mutual Fund Distributors CPE (Day 2)(Launched on 01/06/2012)

NISM RTA Corporate CPE (Day 1)(Launched on 02/05/2012)

NISM RTA Corporate CPE (Day 2)(Launched on 02/05/2012)

NISM Currency Derivatives CPE (Day 1)(Launched on 05/05/2012)

NISM Currency Derivatives CPE (Day 2)(Launched on 05/05/2012)

NISM RTA Mutual Fund CPE (Day 1)(Launched on 02/05/2012)

NISM RTA Mutual Fund CPE (Day 2)(Launched on 02/05/2012)

NISM Depository Operations Certification Examination CPE (Day 1)(Launched on 13/07/2012)

NISM Depository Operations Certification Examination CPE (Day 2)(Launched on 13/07/2012)

NISM Mutual Fund Foundation CPE (Day 1)(Launched on 14/01/2013)

Total CandidatesAppeared throughNISM & CPE Providers

16039

14276

14268

4592

162

2623

2617

162

21

230

230

964

01

02

03

04

05

06

07

08

09

10

11

12

OTHER DEVELOPMENTS

Inauguration of NISM’s new office cum Test Centre at Overseas Towers, Chennai

In a move to expand its operations across the country and cater to stakeholders in southern region, it has opened an Office and Test Center at Chennai.

The Chennai Office cum Test Center situated at Overseas Towers, 756-L, 9th Floor, Mount Road, Anna Salai, Chennai – 600 002, was inaugurated by Shri. Sandip Ghose, Director, NISM in the presence of representatives of Capital Market Intermediaries, SEBI officials and dignitaries from Banking and Financial Services Industry. Shri. G.P.Garg, Registrar, NISM was also present at the occasion.


While addressing the gathering at inauguration of NISM Chennai Office and Test Center, Mr.Ghose mentioned the importance of financial education across country and was of the strong view that this center would meet the needs of southern region. At Chennai Office and Test Center, NISM has plans to conduct mandatory certification examinations for functioning in the areas of Currency Derivatives, Basic & Advanced module for Mutual Fund Distributors / Employees, Equity Derivatives & Interest Rate Derivative Segment, Securities Operations and Risk Management, Depository Operations and many alike. Non-mandatory certification examination include module on Certified Personnel Financial Advisor Examination. It will also conduct Continuing Professional Education Programmes (CPE) besides certification examinations mandated by SEBI. This will provide skill enhancement to existing professionals working in the Securities Markets and also provide an opportunity to the students seeking a career in the Financial Services Industry in general and Securities Markets in particular. He further added that the NISM, would also like to provide niche short duration and part-time courses that are currently not available for the professionals working in the southern region.

Articles

Prof. Sunder Ram Korivi, Dean - SSE and SSIR, NISM

NISM's vision is “to be a hub of knowledge initiatives for playing a strategic role in quality enhancement and

capacity building, for transforming the securities markets in India and the Asia-Pacific Region.” In line with the

vision statement, classroom discussions include analyses of countries that can be categorized as Frontier

Markets. Myanmar provides exciting investment opportunities for Indian companies in oil & gas as well as

banking. It is a part of a four-country grouping called Cambodia-Laos-Myanmar-Vietnam (CLMV). In this abridged

study, classroom discussions are presented in a tabular form. India's hundred-plus years of experience and

expertise in capital markets may be appropriate for catalyzing and developing capital markets in CLMV group.

Country Study: Myanmar


POLITICAL

▪ Centuries-old ties with

India, both cultural and

commercial▪ Erstwhile British

colony▪ Was under military

rule since almost 4

decades▪ Was close to China

during military rule▪ Recent transition into

Democracy. Formal

handover of power is

pending▪ Wants to reduce

Chinese influence

ECONOMIC SOCIAL TECHNOLOGICAL

▪ Rich in minerals and

gemstones.▪ Recent discoveries in

Oil and Gas▪ Was the world's

largest rice exporter▪ Is one of the world's

largest exporter of

pulses▪ Member of ASEAN

and BIMSTEC (Bay of

Bengal Initiative for

Multi-Sectoral

Technical and

Economic Cooperation)▪ USA, Australia and

Japan have granted aid

▪ Historically, a

pluralistic society

▪ Myanmar is

comprised of different

ethnic groups: Kachin,

Karen, Chin and Mon ▪ Recent tensions

surfacing between the

Buddhist majority and

the Muslim minority▪ Also, tensions

between the receding

military-men and the

new democratic party▪ Poverty is wide-

spreadIndustrialization and

development effort may

further enrich the

entrenched military-

men-turned-

businessmen

▪

▪

▪

Technologically

backward

Telecom may lead

transformation

Oil and gas,

Transportation and

Logistics (including

pipe-lines) may lead

economic

transformation

‘PEST’ AanlysisPEST = Political, Economic, Social and Technological Factors]

STRENGTHS

Resource rich in agriculture, teak-wood, minerals, oil & natural gas, abundant and economical labour supply, opening up to the world, ending four decades of economic and political isolation. Political and economic reforms initiated.

WEAKNESSES OPPORTUNITIES THREATS

The political peace is viewed by some as fragile. Transition to democracy will be completed in 2014. Ethnic tensions simmer.

Four decades of political and economic isolation unleash a whole world of opportunity. Development of ports and infrastructure and also the financial sector present opportunities

SWOT Analysis[SWOT = Strengths, Weaknesses, Opportunities & Threats]

Myanmar has attempted to wean itself away from Chinese influence and broad-base its engagement with the rest of the world.


PRIMARY

▪

▪

▪

▪

Agriculture, aided by highly

fertile soil-one of the world's

biggest exporters of riceAlso exporter of pulses

Largest exporter of timber

(the world-famous Burma-teak).

This may reduce to fears of

depletion of forest cover.

Rich deposits of minerals,

including gemstones

Recently discovered huge

amounts of oil and natural gas,

attracting large Chinese and

Indian petrochemical giants

Sectors

SECONDARY TERTIARY

▪ Wood-based and paper

industries have good scope

Textiles and garments

manufactured by low-cost

labour

▪

▪

▪

▪

▪

▪

▪

▪

Export-oriented economy will

need travel, transportation and

hotels for business travelers.

Attraction for tourists since it

is a famed centre for Buddhist

learning

Two new ports are likely to be

expanded (Sittwe and Dawei)

Print media has been

liberalized after decades of

censorship

Due to the early stage of its

developments, large swathes of

population are likely to be un-

banked or under-banked

Commercial enterprises may

need banks for trade finance

and international trade

Myanmar has announced a

unified exchange rate for its

currency 'kyat' and plans to set

up a stock exchange, with

feasibility study by Japanese

Recently called for tenders for

offering telecom services.

Business tourists are likely to

also create demand for hotels

As regards capital market development, the Japanese are in the process of drafting a stock-market law. This will

need to be accompanied by a corporate law incorporating the issue and transferability of shares, a securities

market regulator, establishment of stock exchanges, clearing houses, depositories and settlement processes

and a payment system. On the soft side, this also calls for educational and training initiatives at the basic,

vocational and professional levels. Concurrent with this, the capital markets could catalyze investment in

government bond trading and also entrepreneurship training for budding businesses.

Source of Information:

The Economist, dated: 31.3.2012, 21.4.2012, 28.4.2012, 2.6.2012, 7.7.2012, 16.6.2012, 25.8.2012, 30.3.2013,

27.4.2013

Financial inclusion has been the topic of discussion since the last one decade in India among the policy makers,

planners, practitioners and civil society and all round efforts have been taken to achieve financial inclusion so as

Financial Education for Inclusive Finance - Need for Co-Ordinated Approach

K. Sukumaran , Dean - SRSS and SIEFL, NISM


to contribute effectively to the socio economic development. To achieve financial inclusion, the need for financial

education is emphasised at all levels.

Financial inclusion or inclusive finance is the delivery of financial services at affordable costs to the vast sections

of society. Provision of financial services like savings, credit, insurance, pension services etc. from formal

financial institutions helps people to manage their personal finance prudently and achieve financial wellbeing.

Financial exclusion is a situation where those services are not available or affordable.

Two important literature that give insights into the incidence of financial inclusion are the Global Financial

Inclusion Index Database (Global Findex), a study sponsored jointly by World Bank and Bill & Melinda Gates

Foundation and the other national study - Inclusix by Crisil.

The Global Findex database provides such indicators, measuring how people in 148 economies around the world

save, borrow, make payments, and manage risk. According to the Global Findex data, 47 percent of women and

55 percent of men worldwide have an account at a formal financial institution-a bank, credit union, cooperative,

post office, or microfinance institution. In India 35 percent of adults have a formal account and 8 percent a formal

loan, according to data from the Global Financial Inclusion (Global Findex) database.

CRISIL, India's leading credit rating and research company launched an index on 25th June 2013 to measure the

status of financial inclusion in India. CRISIL Inclusix is a one-of-its-kind tool to measure the extent of inclusion in

India. CRISIL Inclusix is a relative index on a scale of 0 to 100, and combines three critical parameters of basic

banking services branch penetration, deposit penetration and credit penetration into one metric. The study

reveals that all India financial inclusion score is 40.1 in 2011, improved from 35.4 in 2009. Regarding the

coverage of districts, 618 out of 632 districts reported an improvement in their scores during 2009-11. The top

three states/union territories in coverage of inclusion are Puducherry, Chandigarh and Kerala. The top three

districts are Pathanamthitta (Kerala), Karaikal (Puducherry) and Thiruvananthapuram (Kerala).

Financial education is the process by which investors improve their understanding of financial markets,

products, concepts and risks. Through information and objective advice, they develop the skills and confidence

to become more aware of financial risks and opportunities and make informed choices to improve their financial

position.

Financial education fosters financial stability for individuals, families, and entire communities. The more people

know about credit and banking services, the more likely they are to increase savings, buy homes, and improve

their financial health and well-being. Financial literacy involves imparting knowledge about the risk and return of

financial products to the users and providers of these products. It is this knowledge that helps in containing risks

and maintaining stability in the financial system.

Financial literacy is an essential pre-requisite for ensuring consumer protection. The low levels of transparency

and the consequent inability of consumers in identifying and understanding the fine-print from a large volume of

information leads to an information asymmetry between the financial intermediary and the consumer. In this

context, financial education can greatly help the consumers to narrow this information divide. Besides,

knowledge about the existence of an effective grievance redress mechanism is essential for gaining the

confidence of the unbanked population.

The life span of an individual has increased over years and the lack of social security measures makes an

individual to think of retirement planning. The proliferation of numerous products and complexity of these

products also make a consumer quite confused about its usefulness. Over the years the income and savings level

have increased, wherein the consumer requires right understanding to channelize the savings to the right

–


Trends in the Performance of the Corporate Sector

Dr. Rachappa Shette, Assistant Professor, NISM

Quarterly Corporate Results are one of the indicators of economic activity in the country. A study on Quarterly

Earnings of 100 companies (Nifty 50 companies and Nifty Junior 50 companies) is carried out with a view to

obtain broad trends in the performance of companies and various sectors for Quarter January-March 2013 as

compared to January-March 2012. As on June 15, 2013, all the 100 companies reported earnings.

Across all 100 companies, PAT (Profit after Tax) has grown 9.06% over the corresponding Quarter in the previous

year. This is achieved with the help of 6.47% growth in Sales, 3.76% growth in Operating Profit and 16.53%

growth in Other Income. These 100 companies are classified into 13 sectors. Out of 13 sectors, 6 sectors have

reported an increase in PAT, significantly, Energy (55%), Media (37%) and PSE (34%). 7 sectors have reported in a

decline in PAT, significantly, Pharma (-51%), Realty (-44%), Metal (-22%) and PSU Banks (-20%).

Nifty P/E ratio decreased to 17.57 from 18.71 a year back (Table C). This could imply that Nifty companies have

become more attractive. As against the Nifty P/E of 17.57, the P/E of Media was the highest (38.65) and the P/E

of PSU Banks was the lowest (6.72).


financial products balancing with risks and rewards. Today's generation relies on borrowings to accumulate the

consumer durables resulting in increased borrowings in the economy. Financial education on borrowings

empowers the individual to reduce the incidence of interest/cost of capital. Understanding about time value of

money and the need for an inflation adjusted return requires financial education to be imparted. The shift from

joint families to nuclear families requires more expenditure to settle for a household for which financial planning

helps a lot.

Understanding the significance of financial education, all the regulators, practitioners and civil society are

engaged in spreading financial education. SEBI through its Financial Education Resource Persons programme

reaches to the wide sections of society. The SEBI Financial Education is open to six target segments viz. School

Students, College Students, Middle Income Group, Home Makers, Executives and Retired People. During the last

three years of implementation, SEBI has reached more than five lakhs people on financial education through

11,000 workshops held in various districts. SEBI is engaged in empanelling Financial Education Resource

Persons in every district of the country so that these resource persons can act as ambassadors in spreading

financial education to benefit the public. Reserve Bank of India through its campaign “Project Financial Literacy”

disseminate information regarding the central and general banking concepts to various target groups including

school and college going children, women, rural and urban poor, defence and senior citizens. Insurance

Regulatory Development Authority (IRDA), and Pension Fund Regulatory Development Authority (PFRDA) are

engaged in popularising insurance education and pension literacy respectively. Besides, various commercial

banks are engaged in organising financial literacy campaigns through Financial Literacy Counselling Centres

(FLCCs).

Recognising the need for a co-ordinated approach in spreading financial education, Govt of India through the

Financial Sector Legislative Reforms Commission (FLRC) has suggested framing out a national strategy for

financial education and National Institute of Securities Markets (NISM) is coordinating with various agencies to

putting in place a national initiative in financial education.

Utilization period for Government Debt Limits

FII/QFI investments in Security Receipts

Revised Position Limits for Exchange traded Currency Derivatives

Enhancement in Foreign Investment limits in government debt

(CIR/IMD/FIIC/11/2013 dated 31-07-2013)

In partial modification to para 2 of CIR/IMD/FIIC/22/2012 dated November 07, 2012, it is proposed that FIIs/QFIs may be permitted to utilize the debt limits allocated to them in each monthly auction till the 17th day of the succeeding month. Any unutilized limit as on the 18th of each month would get auctioned on the 20th of each month.

(CIR/IMD/FIIC/9/2013 dated 09- 07-2013)

The consolidated FDI policy circular issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, effective from April 05, 2013, states that FII investments in Security Receipts issued by Asset Reconstruction Companies should be within the FII limit on corporate bonds prescribed from time to time.

Accordingly, the investments in Security receipts issued by Asset Reconstruction Companies by FII`s shall be reckoned against the extant Corporate Debt Limits. The investment of FIIs in Security Receipts shall be subject to terms and conditions as specifies by the Reserve bank of India from time to time.

(CIR/MRD/DP/22/2013 dated 08-07-2013)

In consultation with RBI and in view of the recent turbulent phase of extreme volatility in USD-INR exchange rate, it has been decided to curtail position limits and increase margin requirements for Currency Derivatives as follows:▪ Margins: Initial and extreme loss margins shall be increased by 100% of the present rates for USD-INR

contracts in Currency Derivatives.▪ Client level position limits: the gross open position of a client across all contracts shall not exceed 6% of the total

open interest or 10 million USD, whichever is lower.▪ Non-bank trading Member position limits: The gross open position of a Trading Member, who is not a bank,

across all contracts shall not exceed 15% of the total open interest or 50 million USD whichever is lower.

(CIR/IMD/FIIC/8/2013 dated 12-06-2013)

The Government of India has enhanced the government Debt Limits by USD 5 Billion (equivalent to approximately INR 29,137 crore converted at the RBI reference rate of 1USD = INR 58.274 as on June 12, 2013)It has been decided that the aforesaid enhanced limit of USD 5 Billion shall be available for investments only to those FIIs which are registered with SEBI under the categories of Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks.

To begin with, the amount of USD 5 Billion together with the unutilized limit of INR 29,812 crore (equivalent to approximately USD 6.2 Billion) as on May 31, 2013 (due for auction on June 20, 2013) will be made immediately available for investment on tap by these investors mentioned in Para 2 above.

INITIATED BY SEBI

Regulatory Changes


INITIATED BY RBI

Unsolicited Commercial Communication- National Do Not Call Registry

Risk Weights on deposits placed with NABARD/SIDBI/NHB in lieu of shortfall in achievement of priority sector lending targets/sub-targets

(RBI/2013-14/163 DNBS (PD) CC No. 353/ 03.10.042/2013-14)

NBFCs were earlier advised to employ only those DMAs/DSAs/call centers who are registered as telemarketers with DoT, Govt. of India, as per Telecom Regulatory Authority of India (TRAI) Regulations, 2007 for the purpose of soliciting or promoting any commercial transaction. However, many financial institutions as also their franchisees are engaging telemarketers who are not registered with TRAI, for marketing their services and these unregistered telemarketers use their normal telephone connections for making commercial calls to customers registered in the National Customer Preference Register. This is resulting in a lot of customer grievance.

It is, therefore, reiterated that NBFCs should engage only those telemarketers who are registered in terms of the guidelines issued by TRAI, from time to time, for all their promotional/ telemarketing activities. These guidelines should be strictly complied with.

(RBI/2012-13/536 DBOD.BP.BC. No.103/21.06.001/2012-13)

The amount not utilized as on June 18, 2013 (out of the presently unutilized limit of INR 29,812 crore) will be put on auction on June 20, 2013. Similar exercise shall continue every month.

With regard to those FIIs which have exhausted their reinvestment limits, as a one time measure, as special window of upto USD 250 million per FII shall be available till the date of the next auction i.e. June 20, 2013 subject to the aggregate investments in Government debt by all FIIs / QFIs being limited to USD 25 Billion (i.e. the limit other than the limit of USD 5 Billion earmarked for investors in para 2 above) Such investments made by FIIs using special window shall be subject to a lock-in of 90 days. Moreover, these investments will not be eligible for re0investment facility.

(CIR/CFD/DIL/9/2013 dated 05 - 06-2013)

SEBI has mandated listed companies to submit either Form A (Unqualified / Matter of Emphasis Report) or Form B (Qualifies / Subject To / Except For Audit Report) along with the Annual Report to the Stock Exchanges. It is also envisaged that the qualifies audit reports will be scrutinized by Qualifies Audit Review Committee (QARC) and if necessary the company will be required to restate its books of accounts to provide true and fair view of its financial positions.

SEBI is in receipt of various queries with regard to restatement of books of accounts of listed companies envisaged in the captioned circular. The primary concern raised is whether the restatement of books of accounts needs to be carried out in the same financial year or in the subsequent financial year as a prior period item.

In order to address the aforesaid concern, it is clarifies that the restatement of books of accounts indicated in para 5 of the said circular shall mean that the company is required to disclose the effect of revised financial accounts by way of revised pro-forma financial results immediately to the shareholders through Stock Exchange(s). However the financial effects of the revision may be carries out in the annual accounts of the subsequent financial year as a prior period item so that the tax impacts, if any, can be taken care of.

Clarification on SEBI’s Circular dated August 13, 2012 providing for the “Manner of Dealing with Audit Reports filed by Listed Companies”


It has been observed that there is a lack of uniformity among banks in application of risk weights on claims on deposits placed with NABARD/SIDBI/NHB, in lieu of shortfall in achievement of priority sector lending targets/sub-targets, for the purpose of capital adequacy.

In terms of extant instructions [paras 5.4.1 and 5.8.1 of the Master Circular dated July 2, 2012 on Prudential Guidelines on Capital Adequacy and Market Discipline-New Capital Adequacy Framework (NCAF)], claims on public sector entities (including NABARD, SIDBI, NHB, etc.) are required to be risk weighted in a manner similar to claims on corporates as per the ratings assigned by the rating agencies registered with the SEBI and accredited by the Reserve Bank of India. Where the borrower has a specific assessment for an issued debt, but the bank's claim is not an investment in this particular debt, the rating applicable to this specific debt can be applied to the bank's unassessed claim provided the conditions indicated in para 6.8 of the Master Circular ibid are satisfied.

It is clarified that if the conditions indicated in para 6.8 are not satisfied, the rating applicable to the specific debt cannot be used and the claims on NABARD/SIDBI/NHB on account of deposits placed in lieu of shortfall in achievement of priority sector lending targets/sub-targets shall be risk weighted as applicable for unrated claims, i.e. 100%.

(RBI/2012-13/505 DBS.FrMC.BC.No. 6/23.04.001/2012-13)

Please refer to Para 3.1.3 of circular DBS. FrMC. BC. No. 1/23.04.001/2012-13 dated July 02, 2012 i.e. the Master Circular on ‘Frauds - Classification and Reporting’ which requires commercial banks to furnish in hard copies the FMR-1 reports in all cases detected at bank's subsidiaries/affiliates/joint ventures.

It has since been decided to partially amend Para 3.1.3 of Master Circular DBS. FrMC. BC. No. 1/23.04.001/2012-13 dated July 02, 2012 on ‘Frauds - Classification and Reporting' by providing that in case the subsidiary of the bank is an entity which is regulated by Reserve Bank of India and is independently required to report the cases of fraud to RBI in terms of guidelines applicable to that subsidiary/affiliate/joint venture, the parent bank need not furnish the hard copy of the FMR-1 statement in respect of fraud cases detected at such subsidiary/affiliate/joint venture.

Frauds - Classification and Reporting

INITIATED BY IRDA

Transfer of Agency/Corporate Agency License from one insurer to another(IRDA/CAGTS/CIR/142/07/2013 dated 25-07-2013)

Agents/Corporate Agents will not be allowed to seek transfer of License within One Year from the date of grant of their License. Further, no agent/Corporate Agent shall seek transfer without achieving the Minimum Business Norms mandated by the respective Insurers.

The Insurers shall grant No Objection Certificate within One week of receipt of the request subject to compliance with provisions of Circular referred above. In case No Objection certificate cannot be granted within stipulated time frame, the Insurer shall record the reasons for non-issuance of NOC in portal and shall ensure compliance by the agent of the provisions of the above Circular within one month of request except in case of fraud or serious compliant. In case no pertinent reason is recorded within one week and one month time period is elapsed from the date of request, those requests will be deemed to have been granted NOC and transfer will be effected in portal.


Submission of Insurance Data of IRDA to Insurance Information Bureau of India (IIB)

IRDA (Non-Linked Insurance Products) Regulations, 2013 and IRDA (Linked Insurance Products) Regulations, 2013

(IRDA/ADM/CIR/118/06/2013 dated 20-06-2013)

The Insurance Information Bureau of India (IIB) has been formed to cater to the needs of the various stake holders in the Insurance sector such as Insurance Companies, TPAs, policy holders etc. Under a mandate of the Authority to the Insurers and TPAs, vide circular no. IRDA/DC/CIR/19/July09 dated 13/07/2009; Insurance companies and TPAs are required to submit data to IIB for processing and dissemination of the data. Based on this circular, IIB has been collecting transactional data from the market (Insurance Companies, TPAs etc.) for different lines of business, analyzing the same and producing periodical and ad-hoc reports for the benefit of stake holders in the Insurance Industry.

IIB which was formed as an Advisory body of the IRDA in the year 2009 is now transformed into a society as an independent body. Accordingly, it is reiterated that the Insurance Companies and TPAs continue to submit data to IIB, in the existing data formats as is being currently done.

(IRDA/ACTL/REG/CIR/123/06/2013 dated on 28-06-2013)

In response to the representations received from the industry to extend the time period for the implementation

with respect to group products, and after detailed examination of such representations, the Regulation 47(e) of

IRDA (Non-Linked Insurance Products) Regulations, 2013 and 64(e) of IRDA (Linked Insurance Products)

Regulations, 2013 shall be modified as below:

“All existing group products and all the existing individual products not in conformity with the provisions of this

regulation shall be withdrawn from 1st August, 2013 and 1st October, 2013 respectively. Once the product is

withdrawn, no new members shall be enrolled into the existing group policies after the immediate policy st

anniversary falling due after 31 July, 2013. However, all group policies at the time of renewal of such policy shall

be given an option to switch over to the modified version of the group product, if any, once introduced. Those

group policies which do not switch over to the modified version:

1. May continue to be renewed under old policy

2. Closed to new members and

3. Specific written consent is obtained by the group policyholder to continue in the old policy.”

NPS Trust account numbers and contact details of New Trustee Bank(PFRDA/2013/12/CRTB/2 dated 31-05-2013)

From 1st July, 2013 onwards, all NPS contributions are to be remitted to the designated accounts of Axis Banks. The overall procedure for remittance of funds to the Trustee Bank, the matching & booking of Subscriber Contribution Files (SCF) and the receipt of funds returned from Trustee Bank shall remain unchanged. While remitting the funds electronically to Axis Bank, the accredited banks shall still be required to mention the 26 character string 'PAOFIN <7 Digit PAO registration number><13 digit transaction id>' in the 7002 field for NEFT and 7495 field for RTGS as per the current process. The RTGS remittances should be through R-41 RTGS format only.

INITIATED BY PFRDA


Please note the changes as mentioned below:a.Indian Financial System Code (IFSC) for NPS remittance: UTIB0NPS001b.New Account Numbers: 7 digit unique registration number allotted by CRA (NSDL) would be the designated

account number for the respective remitting office.

The contact details of NPS Team at Axis bank are available in the circulars section of PFRDA website (www.pfrda. org.in).

(PFRDA/2013/11/PDEX/7 dated 22-05-2013)

Pursuant to PFRDA’s earlier circular no PFRDA/2013/1/PDEX/25 dated 11-01-2013 with respect to revised list of Know Your Customer (KYC) documents required for both entry and exit under National Pension System, it has been decided to include below mentioned documents in addition to the acceptable KYC documentation, on the basis of feedback received from various entities registered under NPS.

KYC documents requirement for NPS and PAN card requirement for Tier II Account

Identification Proof

Identity card issued by Central/State government and its Departments, Statuary/Regulatory Authorities, Public Sector Undertakings, Schedules Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities and Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc.

The identity card/document with address, issued by any of the following: Central/State Government and its Departments, Statuary/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial institution for their employees.

Address Proof

It has also been decided to make submission of PAN Card a mandatory requirement for opening and operation of

a Tier II account for all sectors under NPS with immediate effect to ensure compliance with AML/CFT guidelines.

In pursuance of this, all existing Tier II accounts under NPS need to be made PAN compliant. The subscribers

would be given a time period of 3 months from the date of issuance of this circular, after which the operation of

such account would be suspended till the requirement is complied with.


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