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May-July 2013 NISM Update


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  • 1. Volume 4 / Issue 23 May-July 2013 at Patalganga Commencement of construction of New
  • 2. 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 theactivitiesofNISM. NISM has decidedly expanding its operations across the countrytoservealargeraudience.Inthisdirection,itrecently 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)attheAIM`sNewDelhicampus. 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,includingretiredemployees. Foreword Shri Sandip Ghose Director, NISM |01| NISM Update May-July 2013
  • 3. Hon’ble Prime Minister of India Dr. Manmohan Singh unveiled the Commemorative Plaque symbolizing the commencementofconstructionofnewNISMcampusatPatalgangaonFriday,May24,2013. 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&SEBIChairmanShriU.K.Sinhaamongotherdignitaries. 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 newcampus,oncefunctional,willgiveamajorboosttotheactivitiesofNISM. The event also saw the unveiling of the SEBI Coffee Table Book “Banyan tree to e-trading” to mark the silver jubileeanniversaryoftheregulatorybody. Commencement of construction of new NISM campus at Patalganga NISM Update May-July 2013 |02|
  • 4. 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 innovationshavebeeninitiatedandcompleted: 01. WorkshoponIntroductiontoSecuritiesMarkets 02. WorkshoponBusinessCommunicationwithafinanceorientation 03. WorkshoponAnalysisofAnnualReports 04. MentoringandCareer-counseling 05. BookReviews:HowMarketsFail(JohnCassidy)andCurrencyWars(JamesRickards) 06. FilmReviews:TooBigtoFail(AndrewRossSorkin)andAscentofMoney(NiallFerguson) 07. News Analysis (with student groups representing Business Line, Business Standard, Economic Times, FinancialExpressandMint) 08. CountryStudies,coveringMyanmarandSaudiArabia 09. Contemporary and live topics such as RBI's credit and monetary policies are being discussed in the Macro- economicsclass 10. Users' training by CMIE on Prowess Software with incorporation into the Financial Accounting & Reporting course 11. Studentsarebeingprovidedwithexperts/professionalanalysts'reportsonfinancialmarkets 12. One session on Business Engagement has been organized by ICICI (Mr Tadit Kundu, ICICI Treasury Group, on EconomicOutlook) 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 raisingthesecuritiesmarkets. ResearchPapers: Mr. Akhlaque Ahmad’s paper ‘Affecting the Smile and Implied Volatility in the Context of Option Pricing Models’, presentedinFebruary2013,isnowpublishedintheRoyalFlemishAcademy’sJournal forScienceandArts. 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) |03| NISM Update May-July 2013
  • 5. 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 NationalInstituteofSecuritiesMarkets(NISM) AMemorandumofUnderstandinghasbeensignedbetweenNationalInstituteOfSecuritiesMarkets(NISM)and The Institute of Company Secretaries of India (ICSI) on June 16th 2013 at ICSI Centre for Corporate Governance ResearchandTraining,NaviMumbai. 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.ThiswasbasedonaPGPSMsubject,BehaviouralFinance. Designed course at the ICSI 2-day Workshop on Securities Law Documentation at CCGRT Belapur. This was based on a CSL subject. A copyofthecoursematerialisondisplayintheNISMlibrary. 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 thecoursematerialisondisplayintheNISMlibrary. 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,acceptedforpresentationinIndiaFinanceConference. Kavitha Ranganathan’s paper ‘Global Shapes of Preference Scaling Functions’, accepted for publication in the JournalofInterdisciplinaryEconomics. 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 on29.7.2013,atMumbai. NISM Update May-July 2013 |04|
  • 6. 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, CapacityBuilding,CorporateSocialResponsibility,Quality&AssuranceServices. 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 buildcapacityofthemembersofICSIforimplementationofcorporategovernanceinletterandspirit. 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,TrainingandResearchand wouldexchangeJournalsandotherpublications. 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, MergersandTakeovers,NationalStrategyforFinancialEducationetc. SEBIInductionTrainingPrograms 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 (CouncilMember,TheICSI),CSN.L.Bhatia(FormerChairmanWIRC)and CSB.V.Dholakia(PCS). |05| NISM Update May-July 2013
  • 7. SCHOOL FOR CERTIFICATION OF INTERMEDIARIES (SCI) NISM’sstrategicalliancewithSBIMutualFund On May 18, 2013 SBI Mutual Fund announced its strategic alliance with National Institute of Securities Markets (NISM)forconductingmutualfunddistributors’(MFD)certificationexaminations. 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 benefitofStateBankGroup(SBG)employees,includingretiredemployees. 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 amongstbank’scustomers”. Considering the fact that SBI and Associate banks are the largest distributors of SBI Mutual Fund schemes, this alliancewillhelpNISMtowidenitsreachtermsofcreatingcapabilitiesfordistributionofmutualfundproductsin different geographies across the country. It will enhance the quality of sales, distribution and related support servicesinthemutualfundindustry. 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 locatedinthecitiesmentionedbelow: 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 NISM Update May-July 2013 |06|
  • 8. Consolidated Status Report (Period: As on July 28, 2013) NISM Certification Examination Sr No. NISM EXAMINATION Total Candidates Passed Pass Percentage Total Candidates Enrolled Total Candidates 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 (Launched on 01/11/2012) 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 (Launched on 01/11/2012) RTA - Corporate (Launched on 03/08/2009) Mutual Fund Foundation (Launched on 14/01/2013) Depositories Operations (Launched on 21/02/2011) Securities Operations and Risk Management (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% |07| NISM Update May-July 2013
  • 9. NISM Continuing Professional Education Sr No. 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 Candidates Appeared through NISM & 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 InaugurationofNISM’snewofficecumTestCentreatOverseasTowers,Chennai In a move to expand its operations across the country and cater to stakeholders in southern region, it has opened anOfficeandTestCenteratChennai. 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,NISMwasalsopresentattheoccasion. NISM Update May-July 2013 |08|
  • 10. 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 fortheprofessionalsworkinginthesouthernregion. 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.Itisapartofafour-countrygroupingcalledCambodia-Laos-Myanmar-Vietnam(CLMV).Inthisabridged study, classroom discussions are presented in a tabular form. India's hundred-plus years of experience and expertiseincapitalmarketsmaybeappropriateforcatalyzinganddevelopingcapitalmarketsinCLMVgroup. Country Study: Myanmar |09| NISM Update May-July 2013
  • 11. 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- spread Industrialization 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’ Aanlysis PEST = 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. NISM Update May-July 2013 |10|
  • 12. PRIMARY ▪ ▪ ▪ ▪ Agriculture, aided by highly fertile soil-one of the world's biggest exporters of rice Also 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 governmentbondtradingandalsoentrepreneurshiptrainingforbuddingbusinesses. SourceofInformation: 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 FinancialEducationforInclusiveFinance-NeedforCo-OrdinatedApproach K.Sukumaran,Dean-SRSSandSIEFL,NISM |11| NISM Update May-July 2013
  • 13. tocontribute effectively tothe socioeconomicdevelopment. Toachieve financialinclusion,the need forfinancial educationisemphasisedatalllevels. 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. Financialexclusionisasituationwherethoseservicesarenotavailableoraffordable. 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 Foundationandtheothernationalstudy-InclusixbyCrisil. 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,accordingtodatafromtheGlobalFinancialInclusion(GlobalFindex)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 districtsarePathanamthitta(Kerala),Karaikal(Puducherry)andThiruvananthapuram(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 andmaintainingstabilityinthefinancialsystem. 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 confidenceoftheunbankedpopulation. 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 productsalsomakeaconsumerquiteconfusedaboutitsusefulness.Overtheyearstheincomeandsavingslevel have increased, wherein the consumer requires right understanding to channelize the savings to the right – NISM Update May-July 2013 |12|
  • 14. TrendsinthePerformanceoftheCorporateSector Dr.RachappaShette,AssistantProfessor,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 comparedtoJanuary-March2012.AsonJune15,2013,allthe100companiesreportedearnings. 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 reportedanincreaseinPAT,significantly,Energy(55%),Media(37%)andPSE(34%).7sectorshavereportedina declineinPAT,significantly,Pharma(-51%),Realty(-44%),Metal(-22%)andPSUBanks(-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 ofPSUBankswasthelowest(6.72). |13| NISM Update May-July 2013 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 helpsalot. 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,CollegeStudents,MiddleIncomeGroup,HomeMakers,ExecutivesandRetiredPeople.Duringthelast 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 puttinginplaceanationalinitiativeinfinancialeducation.
  • 15. UtilizationperiodforGovernmentDebtLimits FII/QFIinvestmentsinSecurityReceipts RevisedPositionLimitsforExchangetradedCurrencyDerivatives EnhancementinForeignInvestmentlimitsingovernmentdebt (CIR/IMD/FIIC/11/2013dated31-07-2013) 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/9/2013dated09-07-2013) 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 AssetReconstructionCompaniesshouldbewithintheFIIlimitoncorporatebondsprescribedfromtimetotime. 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 termsandconditionsasspecifiesbytheReservebankofIndiafromtimetotime. (CIR/MRD/DP/22/2013dated08-07-2013) 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 contractsinCurrencyDerivatives. ▪ Clientlevelpositionlimits:thegrossopenpositionofaclientacrossallcontractsshallnotexceed6%ofthetotal openinterestor10millionUSD,whicheverislower. ▪ Non-bank trading Member position limits: The gross open position of a Trading Member, who is not a bank, acrossallcontractsshallnotexceed15%ofthetotalopeninterestor50millionUSDwhicheverislower. (CIR/IMD/FIIC/8/2013dated12-06-2013) The Government of India has enhanced the government Debt Limits by USD 5 Billion (equivalent to approximatelyINR29,137croreconvertedattheRBIreferencerateof1USD=INR58.274asonJune12,2013) 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,EndowmentFunds,InsuranceFunds,PensionFundsandForeignCentralBanks. 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 availableforinvestmentontapbytheseinvestorsmentionedinPara2above. INITIATED BY SEBI Regulatory Changes NISM Update May-July 2013 |14|
  • 16. INITIATED BY RBI UnsolicitedCommercialCommunication-NationalDoNotCallRegistry Risk Weights on deposits placed with NABARD/SIDBI/NHB in lieu of shortfall in achievementofprioritysectorlendingtargets/sub-targets (RBI/2013-14/163 DNBS(PD)CCNo.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 registeredintheNationalCustomerPreferenceRegister.Thisisresultinginalotofcustomergrievance. 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 shouldbestrictlycompliedwith. (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 onauctiononJune20,2013.Similarexerciseshallcontinueeverymonth. 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 re0investmentfacility. (CIR/CFD/DIL/9/2013dated05-06-2013) 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 financialpositions. 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 needstobecarriedoutinthesamefinancialyearorinthesubsequentfinancialyearasapriorperioditem. 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 subsequentfinancialyearasapriorperioditemsothatthetaximpacts,ifany,canbetakencareof. Clarification on SEBI’s Circular dated August 13, 2012 providing for the “Manner of DealingwithAuditReportsfiledbyListedCompanies” |15| NISM Update May-July 2013
  • 17. 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,forthepurposeofcapitaladequacy. 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 aresatisfied. 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 copiestheFMR-1reportsinallcasesdetectedatbank'ssubsidiaries/affiliates/jointventures. 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/jointventure. Frauds-ClassificationandReporting INITIATED BY IRDA TransferofAgency/CorporateAgencyLicensefromoneinsurertoanother (IRDA/CAGTS/CIR/142/07/2013dated25-07-2013) 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 NormsmandatedbytherespectiveInsurers. 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. NISM Update May-July 2013 |16|
  • 18. Submission of Insurance Data of IRDA to Insurance Information Bureau of India (IIB) IRDA (Non-Linked Insurance Products) Regulations, 2013 and IRDA (Linked InsuranceProducts)Regulations,2013 (IRDA/ADM/CIR/118/06/2013dated20-06-2013) TheInsuranceInformationBureauofIndia(IIB)hasbeenformedtocater totheneeds ofthevariousstakeholders 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 stakeholdersintheInsuranceIndustry. 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 toIIB,intheexistingdataformatsasisbeingcurrentlydone. (IRDA/ACTL/REG/CIR/123/06/2013datedon28-06-2013) 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,2013shallbemodifiedasbelow: “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 grouppolicieswhichdonotswitchovertothemodifiedversion: 1.Maycontinuetoberenewedunderoldpolicy 2.Closedtonewmembersand 3.Specificwrittenconsentisobtainedbythegrouppolicyholdertocontinueintheoldpolicy.” NPSTrustaccountnumbersandcontactdetailsofNewTrusteeBank (PFRDA/2013/12/CRTB/2dated31-05-2013) 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 formatonly. INITIATED BY PFRDA |17| NISM Update May-July 2013
  • 19. Pleasenotethechangesasmentionedbelow: a.IndianFinancialSystemCode(IFSC)forNPSremittance:UTIB0NPS001 b.New Account Numbers: 7 digit unique registration number allotted by CRA (NSDL) would be the designated accountnumberfortherespectiveremittingoffice. The contact details of NPS Team at Axis bank are available in the circulars section of PFRDA website ( (PFRDA/2013/11/PDEX/7dated22-05-2013) 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 basisoffeedbackreceivedfromvariousentitiesregisteredunderNPS. KYCdocumentsrequirementforNPSandPANcardrequirementforTierIIAccount 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 Counciletc. Theidentitycard/documentwithaddress,issuedbyanyofthefollowing: Central/State Government and its Departments, Statuary/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, PublicFinancialinstitutionfortheiremployees. Address Proof It has also been decided to make submission of PAN Card a mandatory requirement for opening and operation of aTierIIaccountforallsectorsunderNPSwithimmediateeffecttoensurecompliancewithAML/CFTguidelines. 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 suchaccountwouldbesuspendedtilltherequirementiscompliedwith. NISM Update May-July 2013 |18|
  • 20. National Centre for Financial Education (NCFE) has been set up with the support of RBI, SEBI, IRDA, PFRDA, FMC and NISM to further the cause of financial literacy and inclusion in India in a collaborative manner. Our mission is to undertake massive Financial Education campaign to help people manage money more effectively to achieve financial well-being by accessing appropriate financial products and services through regulated entities with fair and transparent machinery for consumer protection and grievance Redressal with the objective of achieving a financially aware & empowered India. Support NCFE by asking questions, discussing issues & sharing your Supported byNCFE NISM Bhavan, Plot No. 82, Sector 17, Vashi, Navi Mumbai - 400 703 Phone: 022 66735100-05 | Fax: 022 66735110 National Institute of Securities Markets (An Educational Initiative by SEBI)