Indian business environment ch 3
Upcoming SlideShare
Loading in...5
×
 

Indian business environment ch 3

on

  • 2,464 views

 

Statistics

Views

Total Views
2,464
Views on SlideShare
2,464
Embed Views
0

Actions

Likes
1
Downloads
91
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Indian business environment ch 3 Indian business environment ch 3 Presentation Transcript

    • INDIAN BUSINESS ENVIRONMENT UNIT III Pankaj Kumar RBS
    • Trend Of Indian Banking Sector
      • Based on the recommendations of the Narasimham Committee (II) on banking sector reforms, the Reserve Bank announced a number of decisions as part of its Mid-term Review of the monetary and credit policy released on October 30,1998.
    •  
    • Trend Of Indian Banking Sector
      • Pension fund industry in India grew at a CAGR of 122.44% from 1999-00 to 2006-07.
      • Rural and semi-urban India is expected to account for 58.33% of the insurance sector by 2010.
    • Trend Of Indian Banking Sector
      • In terms of ownership, debit cards are more in number than credit cards but in terms of transactions, credit cards are used more than debit cards.
      • The ATM outlets in India increased at a CAGR of 28.09% from March 2006 to March 2007.
      • Compound Annual Growth Rate ( CAGR )
    • Trend Of Indian Banking Sector
      • Rural and semi-urban centers account for 66% of total bank branches.
      • Indian Mutual Fund industry witnessed a growth of 49.88% from May 2006 to May 2007, and higher growth is recorded in closed ended schemes at 215.61%.
    • Trend Of Indian Banking Sector
      • Increasing number of millionaires in India is increasing the scope of Wealth Management Services.
      • Bankable households in India are anticipated to grow at a CAGR of 28.10% during 2007-2011.
      • Investment by banking sector in Information Technology is expected to increase at 18% in 2007 from last year.
    • IDBI
    • IFCI
    • IFCI
      • GENESIS OF IFCI
      • At the time of independence in 1947, India’s capital market was relatively under-developed. Although there was significant demand for new capital, there was a dearth of providers. Merchant bankers and underwriting firms were almost non-existent. And commercial banks were not equipped to provide long-term industrial finance in any significant manner
    • IFCI
      • It is against this backdrop that the government established The Industrial Finance Corporation of India (IFCI) on July 1, 1948, as the first Development Financial Institution in the country to cater to the long-term finance needs of the industrial sector.
    • IFCI
      • The early 1990s when it was recognized that there was need for greater flexibility to respond to the changing financial system.
      • It was also felt that IFCI should directly access the capital markets for its funds needs.
      • It is with this objective that the constitution of IFCI was changed in 1993 from a statutory corporation to a company under the Indian Companies Act, 1956.
    • IFCI
      • IFCI remained solely responsible for implementation of the government’s industrial policy initiatives.
      • Its contribution to the modernization of Indian industry, export promotion, import substitution, entrepreneurship development, pollution control, energy conservation and generation of both direct and indirect employment is noteworthy.
    • IFCI
      •  Some sectors that have directly benefited from IFCI’s disbursals include:
      • Consumer goods industry (textiles, paper, sugar);
      • Service industries (hotels, hospitals);
      • Basic industries (iron & steel, fertilizers, basic chemicals, cement);
      • Capital & intermediate goods industries (electronics, synthetic fibers, synthetic plastics, miscellaneous chemicals); and
      • Infrastructure (power generation, telecom services).
    • BSE
      • Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875.
      • It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956
    • NSE
      • The National Stock Exchange (NSE), located in Bombay, is India's first debt market. It was set up in 1993 to encourage stock exchange reform through system modernization and competition.
    • SEBI - Introduction
      • In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution, and was subsequently upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992.
    • SEBI
      • The basic objectives of the Board were identified as:
      • To protect the interests of investors in securities;
      • To promote the development of Securities Market;
      • To regulate the securities market and
      • For matters connected therewith or incidental thereto
    • Role of SEBI
      • SEBI appointed the L. C. Gupta Committee in 1998 to recommend the regulatory framework for derivatives trading and suggest bye-laws for Regulation and Control of Trading and Settlement of Derivatives Contracts.
    • Role of SEBI
      • Role of SEBI
      • Cash and Futures Market Relationship The Committee felt that the operations of the cash market, on which the derivatives market will be based, needed improvement in many respects. It therefore suggested improvements to the Cash Market.
      • Regulatory framework Regulatory control should envisage modern systems for fool-proof and fail-proof regulation. Regulatory framework for derivatives trading envisaged two-level regulation i.e. exchange-level and SEBI-level, with considerable emphasis on self-regulatory competence of derivative exchanges under the overall supervision and guidance of SEBI.
    • Role of SEBI
      • Regulatory Role of SEBI SEBI will approve rules, bye-laws and regulations. New derivative contracts to be approved by SEBI. Derivative exchanges to provide full details of proposed contract, like - economic purposes of the contract;likely contribution to the market's development; safeguards incorporated for investor protection and fair trading.
      • 4. Specifications Regarding Trading Stock Exchanges to stipulate in advance trading days and hours. Each contract to have pre-determined expiration date and time.
    • Role of SEBI
      • Membership Eligibility Criteria The trading and clearing member will have stringent eligibility conditions. The Committee recommended for separate clearing and non-clearing members.
      • 6. Mark to Market and Settlement There should the system of daily settlement of futures contracts. Similarly the closing price of futures to be settled on daily basis. The final settlement price to be as per the closing price of underlying security.
    • Role of SEBI
      • 7. Risk disclosure document with each client mandatory
      • 8. Sales personnel to pass certification exam
      • 9. Specific authorization from client's board of directors/trustees
    • Role of SEBI
      • 10. Prices on the system shall be exclusive of brokerage
      • 11. Maximum brokerage rates shall be prescribed by the exchange
      • 12. Brokerage to be separately indicated in the contract note
    • Banking Sector Reforms In India
      • The last decade witnessed the maturity of India's financial markets. Since 1991, every governments of India took major steps in reforming the financial sector of the country.
    • Banking Sector Reforms In India
      • The important achievements in the following fields is discussed under separate heads:
      • Financial markets
      • Regulators
      • The banking system
      • Non-banking finance companies
      • The capital market
      • Mutual funds
      • Overall approach to reforms
      • Deregulation of banking system
      • Capital market developments
      • Consolidation imperative
    • Banking Sector Reforms In India
      • Financial Markets
      • In the last decade, Private Sector Institutions played an important role. They grew rapidly in commercial banking and asset management business.
      • 2. Regulators The Finance Ministry continuously formulated major policies in the field of financial sector of the country. The Government accepted the important role of regulators. The Reserve Bank of India (RBI) has become more independant. Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) became important institutions
    • Banking Sector Reforms In India
      • 3. The banking system Almost 80% of the business are still controlled by Public Sector Banks (PSBs). PSBs are still dominating the commercial banking system. Shares of the leading PSBs are already listed on the stock exchanges.
      • 4. The capital market The number of shareholders in India is estimated at 25 million. However, only an estimated two lakh persons actively trade in stocks. There has been a dramatic improvement in the country's stock market trading infrastructure during the last few years
    • Banking Sector Reforms In India
      • Mutual funds The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996 and amendments thereto. With the issuance of SEBI guidelines, the industry had a framework for the establishment of many more players, both Indian and foreign players.
      • Overall approach to reforms The last ten years have seen major improvements in the working of various financial market participants. The government and the regulatory authorities have followed a step-by-step approach, not a big bang one. The entry of foreign players has assisted in the introduction of international practices and systems.
    • Banking Sector Reforms In India
      • 7. Capital market developments The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues were abolished and the initial share pricing were decontrolled. SEBI, the capital market regulator was established in 1992. Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after registration with the SEBI. Indian companies were permitted to access international capital markets through euro issues.
    • Banking Sector Reforms In India
      • 8. Buy back of shares allowed The SEBI started insisting on greater corporate disclosures. Steps were taken to improve corporate governance based on the report of a committee. SEBI issued detailed employee stock option scheme and employee stock purchase scheme for listed companies. Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies given the freedom to issue dematerialised shares in any denomination. Derivatives trading starts with index options and futures. A system of rolling settlements introduced. SEBI empowered to register and regulate venture capital funds. The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating agencies as well as introducing a code of conduct for all credit rating agencies operating in India.
    • Challenges in Banking Industry
      • Financial System is the most important institutional and functional vehicle for economic transformation of any country. Banking sector is reckoned as a hub and barometer of the financial system. As a pillar of the economy, this sector plays a predominant role in the economic development of the country.
    • Challenges in Banking Industry
      • The changing paradigm of Banking
      • Financial intermediation
      • Till recently the role of banks in the economy was perceived to be 'catalysts' of mobilizing resource requirement for growth. This view has undergone a change and banks are no longer viewed as passive mobilizer of funds, Efficiency in the financial intermediation is the ability of the financial institution to intermediate between savers and investors
    • Challenges in Banking Industry
      • Market discipline Transparency and disclosure norms are assuming greater importance in the emerging environment. Banks are now required to be more responsive and accountable to the investors.
      • Adopting International Standards The fallout of Asian crisis and the impetus given to the strengthening of domestic financial systems has resulted in a more by the regulators to set up universally acceptable standards and codes for benchmarking financial systems
    • Challenges in Banking Industry
      • 5. Technology Banking Innovation in technology and world-wide revolution in information and communication technology are perceived to be the catalyst of productivity growth.
      • 6. Rural banking Having committed 75% of their branches network to serving rural and semi-urban population, public sector banks have to adopt a financial emerging approach to rural banking
    • Challenges in Banking Industry
      • Human resource development in banks The core function of HRD in the banking industry is to facilitate performance improvement, measured not only in terms of certain financial indicators of operational efficiency but also in terms of quality of financial services provided. The skill level, attitude and knowledge of the personnel play an important role in determining the competitiveness of a bank.
    • Non-Performing Assets in Indian Banks
      • In liberalizing economy banking and financial sector get high priority. Indian banking sector of having a serious problem due non performing. The financial reforms have helped largely to clean NPA was around Rs. 52,000 crores in the year 2004. The earning capacity and profitability of the bank are highly affected due to this
    • Non-Performing Assets in Indian Banks
      • Reasons:
      • Various studies have been conducted to analysis the reasons for NPA. What ever may be complete elimination of NPA is impossible. The reasons may be widely classified in two: (1) Over hang component (2) Incremental component Over hang component is due to the environment reasons, business cycle etc. Incremental component may be due to internal bank management, credit policy, terms of credit etc.
    • Asset Classification :
      • The RBI has issued guidelines to banks for classification of assets into four categories. 1 . Standard assets: These are loans which do not have any problem are less risk. 2. Substandard assets: These are assets which come under the category of NPA for a period of less then 12 months. 3. Doubtful assets: These are NPA exceeding 12 months 4. Loss assets : These NPA which are identified as unreliable by internal inspector of bank or auditors or by RBI.