Banking > IBA Aug Issue 1 File

M. Balachandran

Strategic Modelsfor Re-Positioning of PSBs

Dr. K.C. ChakrabartyRole of Banks inEntrepreneurial Development& Micro Finance

Featuring• Channelising

Retail Credit

Y2K38 : Problemand a PossibleWay out

Banking CashTransaction Tax

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A Mon th l y J ou r na l pub l i s h ed b y t h e I n d i an Bank s ' A s s o c i a t i onAugust 2005- Volume XXVII-No 8- Rs.30

CEO

’s

PERSPECTIVE

CEO

’s PERSPECTIVE

“To work proactively for the growth ofa healthy, professional and forward

looking, banking and financialservices industry, in a mannerconsistent with public good.”

Shri K Cherian VargheseShri S C GuptaShri M S KapurShri O N SinghShri M B N RaoDr. A K KhandelwalShri Parkash SinghShri T S NarayanasamiShri V K ChopraShri N Kanta KumarShri V SridarShri K N PrithvirajShri Amitabha GuhaShri A G KalmankarShri Frederic AmoudruShri Gunit ChadhaShri Sanjay NayarShri Bart HellemansShri Rana KapoorShri S K BanerjiShri Deepak S PatilShri Vere J CarneiroShri Aditya PuriShri K V Kamath

Indian Banks’ Association

MEMBERSMEMBERSMEMBERSMEMBERSMEMBERS

OFFICE BEARERSOFFICE BEARERSOFFICE BEARERSOFFICE BEARERSOFFICE BEARERSC H A I R M A NC H A I R M A NC H A I R M A NC H A I R M A NC H A I R M A NShri A K PurwarD E P U T Y C H A I R M E ND E P U T Y C H A I R M E ND E P U T Y C H A I R M E ND E P U T Y C H A I R M E ND E P U T Y C H A I R M E NShri Niall S K BookerShri V P ShettyShri S C BasuH O N O R A RH O N O R A RH O N O R A RH O N O R A RH O N O R A R Y S E C R E TY S E C R E TY S E C R E TY S E C R E TY S E C R E T A RA RA RA RA R YYYYYShri Ananthakrishna

CHIEF EXECUTIVE & EDITOR

Shri H.N. Sinor

Editorial CommitteeDr. Jayantilal Jain

Dr. T.K. Chakraborty

Shri V.S.R. Murthy

Shri T.R.S. Trivedi

Editorial TeamPrabhuta VyasVice President (Communications)

K. Ganesan - ManagerLira Alphonso - OfficerTushar A. Shah - OfficerDharmraj Mishra - Officer

INDIAN BANKS’ ASSOCIATION

Head Office :Blocks 2 & 3, Stadium House,6th Floor, 81-83, Veer Nariman Road,Mumbai - 400 020 (India).☎ : + 91 (22) 2289 4500

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Edited & Published by :Shri H.N. SinorFor Indian Banks’ Association, Blocks 2 & 3, StadiumHouse, 6th Floor, 81-83, Veer Nariman Road, Mumbai- 400 020 (India). The views expressed in this Bulletinare not necessarily the views of the Indian Banks’Association or the bank institution to which theauthor belongs.

Designed, Processed & Printed by :Repro India Limited

EDITORIAL BOARD

Dear Readers,Micro finance is now seen as a holistic concept of not only lending, but also providingsaving and other services to the unorganized sector. Bankers now consider microfinance a viable business. Dr. K.C. Chakrabarty, Chairman and Managing Director,Indian Bank in his article ‘‘Role of Banks in Entrepreneurial Development and MicroFinance’’ traces out the role of banks in India for the development of micro enterprisesas credit providers, as intermediaries in the supply chain and providers of groupinsurance to mitigate market/interest risks.

The Financial Sector Reforms ushered in 1991 have changed the profile of IndianBanking Industry, more particularly the Public Sector Banks. Liberalisation andGlobalisation have thrown greater challenges ahead for our banks. Mr. M.Balachandran, Chairman and Managing Director, Bank of India in his article‘‘Strategic Models for Re-positioning of PSBs’’ highlights on key issues such asorganizations’ structural re-design, use of technology, marketing strategy,differentiated services, skill upgradation, tapping rural opportunities andconsolidation of banks for greater synergies.

This issue also carries host of other informative articles on issues of topical interestbesides regular features. We are overwhelmed by your appreciative response tothe changes introduced from last issue of the Bulletin. We assure you that we shallcontinue our endeavours to make the content of the Bulletin more relevant andreadable and its format visually more pleasing. Feedback from you would facilitateour achieving this objective.

Happy Reading,

H N Sinor

ED

ITO

RIA

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H N S I N O R

contributorsco

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nts Strategic Model for Re-positioning of PSBs

M. Balachandran

Dr. K. C. Chakrabarty is Chairman &Managing Director, Indian Bank.

Role of Banks in EntrepreneurialDevelopment and MicrofinanceDr. K. C. Chakrabarty

CEO’s PERSPECTIVE

EXPERTS VIEWS

Shri T. M. Bhasin is General Manager,Oriental Bank of Commerce, New Delhi

Channelising Retail CreditT. M. Bhasin

Y2K38: Problem and a Possible Way OutDr. Ashutosh Saxena

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FEATURES

Editorial

Major Developments in Bankingand Finance during June, 2005

Performance Highlights of Public SectorBanks 2004-05

Banking Scene – Indian

Banking Scene – Global

Book Reviews

IBA Seminar

Back Cover

Banking Statistics

Subscription Rates (for 3 years) with effect from 20th September, 2003Bank Employees & Students* Rs. 600Institutions Rs. 1000Other Individuals Rs. 1000Overseas Subscriptions (US$) 200

* A certificate from appropriate authority confirming the status should be enclosed.

2 IBA BULLETINAUGUST 2005

Shri P. K. Barman, is a Chartered Accountant,Jamshedpur.

Banking Cash Transcation Tax - A Newstep in Indian BudgetP. K. Barman

Balancing Quality and Quantity in SHGs in IndiaR. DevaprakashShri Devaprakash is an Agro Economist .

Regional Office.

Dr. Ashutosh Saxena is Faculty, Institute forDevelopment and Research in BankingTechnology, Hyderabad.

Shri Balachandran is Chairman & ManagingDirector, Bank of India.

Change, Competition, Leadership & Rethinking Future

K. M. Gopinath

Shri Gopinath is General Manager (IIS),Indian Bank, Head office, Chennai.

Shri Pradeep Naidu is Manager, ING VysyaBank, Davangere.

Counter – The Best Marketing JointS. Pradeep Naidu

Whether Amendement to CPC – A Boon or MythK. ShivaramakrishnanShri Shivaramakrishnan is Manager &Faculty , Canara Bank, Regional StaffTraining Centre, Hyderabad.

Legal Decision Affecting BankersAjit Singh CheemaContributed by Shri Ajit Singh Cheema, Senior Manager,Punjab & Sind Bank, Amritsar.

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in Banking & Finance during June, 2005Major Developments

3IBA BULLETINAUGUST 2005

Major Policy Announcements

◗ The Government has

permitted housing finance

companies and non-

banking finance companies

to access the foreign debt

market through FCCBs and ECBs

subject to RBI approval.

( ET 4/6)

◗ The Government raised the External

Commercial Borrowings (ECBs) from $9

billion to $ 12 billion for 2005-06.

However the ceiling on cumulative

investment in government securities

by foreign institutional investors (FIIs)

has been left unchanged at $1.75

billion. ( ET 13/6)

◗ The Cabinet permitted a

comprehensive economic co-

operation agreement (CECA) between

India and Singapore. The pact is

designed to offer an integrated

package governing trade in goods and

services, an agreement on investment,

mutual recognition agreements in

services and co-operation agreements

in areas such as education, e-

commerce, the media and intellectual

property. ( BL 21/6)

◗ The Special purpose

vehicle (SPV ) to fund

infrastructure projects, to

be named as Indian

Infrastructure Finance

Company (IIFC) as a wholly owned

government company under the

Companies Act. It will have an initial

capital of Rs. 10 crore. ( FE 24/6)

◗ 3 Banks namely Allahabad Bank,UTI

Bank and UCO bank have got RBI

permission for opening representative

offices in China and are waiting for

approval from the monetary authority

in China. (BL 24/6)

Major Events

◗ The Government plans to borrow less

than estimated in the financial year

2006. The country’s fiscal deficit stood

at 4.1 per cent of GDP, against the

government’s 4.5 per cent. ( ET 3/6)

◗ The proposal to issue inflation-linked

bonds to help investors hedge against

the risk of inflation has been cancelled.

( ET 10/6)

◗ The Mid Term Appraisal of the Tenth

Five Year Plan showed that the

performance of the economy was well

below the target averaging 6.5% in the

last three years. (ET 28/6)

Banking Developments & Policies

◗ Current account withdrawals of over

Rs. 25,000 will attract Banking Cash

Transaction Tax. The tax will be

applicable on withdrawals from

current accounts on a single day from

scheduled banks. ( ET 1/6)

◗ In the meeting held by the Finance

Minister with the Chief Executives of

PSBs on 3rd June, 2005,the Finance

Minister had ruled out reduction in

government’s equity in public sector

banks below 51%.Further, the issue of

merger of regional rural banks would

be considered by August-end and the

process of consolidation among public

sector banks will be considered later.

Target for agricultural lending was

fixed at Rs.1,41,000 crore.

(ET 4/6)

◗ Reserve Bank has allowed banks to

lend money to Indian companies for

acquisition of equity in overseas joint

ventures, wholly owned subsidiaries, or

in other overseas companies, as

strategic investment. Bank board

would have to approve a policy for

such lending and incorporate it in their

loan policy. ( BL 8/6)

◗ The Centre has

constituted a seven-

member expert group to

review the functioning of

nidhi companies.. The

review will cover the role of nidhi

companies, their regulatory

framework and steps to safeguard

depositors. ( BL 8/6)

◗ The RBI has directed banks to simplify

the procedure to facilitate speedy and

easy settlement of claims following the

death of depositors. The RBI has also

requested Indian Banks’ Association to

formulate a model operational

procedure for the settlement of such

claims. The RBI notification also said

that banks have to settle the claims and

release the payments of the deceased

depositor’s account (s) within 15 days

of receiving the claim and on

production of proof of death of the

depositor and satisfactory

identification of the claimant.

(BL 10/6)


Banking Developments (Rs. in Crore)

Financial Yearso far

Outstanding Actual %As on 24/6/05 (Variations)

Aggregate Deposits 17,89,864 89,665 5.3Investments 7,40,078 925 0.1

Bank Credit 11,61,387 60,958 5.5

Non-Food Credit 11,16,583 57,275 5.4

Funds to CommercialSector 11,53,373 54,142 4.5

◗ The RBI directed banks to closely track

the spends of international debit card

(IDC) holders and report to it if the

aggregate spend exceeds $ 1,00,000 in

a calendar year. ( BS 15/6)

◗ State Bank of India has set up new

strategic business unit (SBU) for

personal banking , small and medium

enterprises and agriculture. ( FE 18/6)

◗ Reserve Bank of India allows UCBs

even the non scheduled UCBs to

participate in the repos as long as they

have a constituent SGL account.

(ET 24/6)

◗ The RBI panel

suggested reforms in the

foreign exchange market

for liberalizing some capital

account transactions like foreign

currency derivatives. (ET 25/6)

◗ The RBI and the

Andhra Pradeshgovernment have signed

an MOU to strengthen

and work out ways andmeans to revive the 40 urban co-

operative banks (UCBs) in the state.

RBI would be assessing the trainingand computerization needs of urban

co-operative banks, upgrade skills of

employees and improve operationalefficiency through technological

upgradation. (ET 28/6)

Market Developments & New Policies

◗ The Government will allow three

largest Singapore based banks free

access to the Indian market, with

operational freedom at par with other

domestic banks. Development Bank of

Singapore, United Overseas Bank and

OCBC Bank will have far more

operational freedom than other big

foreign banks operating in the country.

( ET 17/6)

◗ HDFC Bank and ICICI Bank have

increased their lending rates by half-

a-percentage point in housing loans.

(ET 17/6)

◗ The Boards of Centurion Bank and

Bank of Punjab are planning to meet

on June 29th to discuss the merger

between these two banks.Valuation of

shares would be done by KPMG & NM

Raiji & Co ( ET 21/6)

◗ Federal Bank is planning an equity

issue of Rs.300-350 crore by

September, 05. ( ET 21/6)

◗ Lord Krishna Bank reported a net loss

of Rs. 24 crore during the financial year

2005 as against the net profit of Rs. 23

crores. ( ET 28/6)

Market Developments

BSE Sensex : 6729.90 -7193.85 (6.9%)

Re/$ : Rs.43.78- Rs. 43.51 (0.62%)

Call Money : 5.70% to 5.90% as on 30/6/05

Govt: Borrowing Programme

◗ The Central Government has

borrowed Rs. 37,000 crore from the

market till June 10 this fiscal. ( ET 17/6)

❑

Prepared by Smt. Jayasree Menon

www.iba.org.in

Strategic Model forRe-positioning of PSBs

CEO’s Perspective

M. Balachandran


If the PSBs have topositionthemselves asrelevant players inthe emergingbusinessopportunities, skillupgrade in newand profitableareas of banking isa must. This willrequire multi-pronged approachincluding campusrecruitment ofpersonnel skilledin management,finance, etc. andalso lateralrecruitment atmiddle and seniorlevels ofprofessionalsexperienced inrelevant lines ofbusiness andgradual buildingup of skills withinthe bank.

Since nationalization in 1969 and

till the year 1991, when financial

sector reforms were undertaken,

the public sector banks have

virtually ruled the market place.

They performed a well-defined

role in a planned economy set up.

They were primarily responsible

to channelise household savings towards directed

priorities of state. Due to high statutory pre-emptions

and relatively low availability of credit in the system,

the mindset of bankers that developed was one of

credit allocation and not competition. The products

set on offer was limited and not present on the retail

asset side at all. High quality customer service was

not essential to survive in the market place.

Post 1991, the entry of new generation private sector

banks has redefined competition on the banking

landscape. These banks brought with them a new

era with latest technology, autonomy in respect of

business areas, management teams, and incentive

structure and quickly created a strong niche for

themselves particularly among the rich and

preferred classes. They are rapidly capturing

market share away from both PSBs and foreign

banks alike, having garnered as much as 13%

of the business share by March, 2004 from

nothing in 1991. They are increasingly

entering all the business areas

including Government business,

SME, export finance,

agriculture apart from

their strength

areas of technology related banking, wealth

management and other ancillary products. This

competition is here to stay.

The further opening up of the Indian banking market

to foreign banks, for which RBI has released the road

map will intensify competition from more efficient

foreign banks particularly after 2009. India is today

the world’s 10th largest economy and also the second

fastest growing large economy. As per BRICS report

we will be the 3rd largest economy in the world in

about 30 years’ time. With positive demographics in

favour of the country, the attractiveness of Indian

economy to the invasion by foreign financial sector

giants is only inevitable. They will challenge the local

banks with their global reach, skills, wide range of

products and international scales of capital. The

Banking sector in India, particularly the PSBs, will thus

soon face the full force of global winds of

competition.

The introduction of prudential norms in early

nineties in line with international best practices

further exposed the PSBs and suddenly brought into

focus several deficiencies particularly in the area of

quality of asset portfolio. Gross NPA levels shot up to

more than 20% in certain cases. Capital adequacy

norms made capital a pre-requisite for growth. With

partial disinvestment of equity to the public by the

Government, Investors have emerged as important

stakeholders, whose expectations and aspirations

have to be met by the banks if they want to be

assured of adequate investment support for fresh

equity.

Operational efficiency is another area that shows

yawning gaps from international standards in the


”

”

Shri Balachandran is presently Chairman & Managing Directorof Bank of India. He joined Bank of Baroda as a Specialist DirectRecruit Officer in 1970 after completing his Masters degree inScience and rose to the position of General Manager in Bank ofBaroda. In February, 2004, he was appointed as the ExecutiveDirector of Bank of India and elevated as Chairman & ManagingDirector on 9th June, 2005.He has a rich knowledge of various aspects of Banking, coveringPriority Sector Finance, Commercial Credit and InternationalBanking. In addition to various linguistic territorial exposures,he has vast experience of managing different categories ofbranches, as a Regional Head and Zonal Head besides in theCorporate Office of the Bank. He is also credited with evolvingPolicies and Guidelines for enhancing the flow of timely creditto activities identified as national priority, particularlyAgriculture, Rural Finance & SSI Lending and associated withthe Committees of NABARD and IBA. He also served as the ChiefExecutive of Bank of Baroda’s USA operations at New York andgained valuable International Banking perspective.Mr. Balachandran is an astute administrator and a professionalBanker with keen interest to make the Bank more competitive andpreferred one, providing best financial solutions by technologicalcapabilities and management of Human Resources.

working of our PSBs. This is so since

intermediation costs are very high,

accentuated by the small size of banking

transactions and portfolio in the Indian

banking.

The introduction of Basel II norms is set to

put even more pressure on the banks for

capital adequacy, risk management and

attaining international standards of

operational efficiency if they have to maintain

the faith of the shareholders and customers.

Basel II lays down benchmark ratios of

operational efficiency in terms of ROA (> 1%),

Gross NPA (< 3%), Net NPA (below 1%), net

interest margin (> 3.5%), CAR (> 12.5%), etc.

In the face of increasing competition and

more demanding customers requiring total

financial solutions, universalisation or

convergence in banking has assumed

increasing importance and urgency. Banks

are emerging as multi-capability one stop

financial superstores. This has implications

on business issues viz. retention of

discerning clients and operational issues

including HR capabilities for PSBs.

Last but not the least, technology has been

the major driver of all change and

determines the delivery and product

capabilities, as well as efficiency and risk

management of the banks. Technology has

transitioned beyond a transaction-

processing tool. It today sets the new

paradigms in product creation and delivery

capabilities, across geographic boundaries

and as per customer’s choice.

With all these changes in the market

environment, the need for PSBs to reposition

themselves hardly needs over-emphasis.

These banks many of which have a trail of

success of a century or more need to

restrategise to remain relevant even for the

next quarter century. The impending changes

on the horizon further emphasize the need

and urgency of this strategic re-positioning.

Objectives of re-positioning

The objectives, to my mind would

encompass the following:

a) To emerge as efficient and competitive

entities in line with international

efficiency parameters, product

capabilities and size so that they

continue to remain not only relevant

but also command respect in the

increasingly globalizing world.

b) To achieve and sustain high levels of

profitability through stable and

diversified revenue streams so as to

give superior value to all stakeholders.

c) To retain and increase the market share

via planned strategic organic or

inorganic growth.

d) To develop as universal banks.

e) To acquire the trust of the customer

based on their capability alone and to

reinforce it continuously by delivering

world-class banking services.

f ) To shed the slow moving, bureaucratic

image and position themselves as tech

savvy, efficient organizations, which

care for the customer and provide

financial solutions in a professional

way. Only then they can become the

preferred choice of the best of the

customers, investors and staff talent.

Elements in the quest for re-

positioning

In the past few years Indian

banks have taken

important steps to

emerge strong. They

have attained

substantial clean-up

of their balance

sheets and the NPA

ratios today are

inching towards

world class

standards. Most

banks have

brought net NPA

below 3% and are

fast moving to 1% or

below. Induction of

technology in the banks

has seen a paradigm

Banks also need to leap

frog into next level of IT

initiatives viz. CRM,

HRM, and Decision

Support Systems.


change with most banks now on the trail of

achieving networked and multi delivery

capabilities from the earlier stand-alone

computing. Various banks have also

diversified their revenue streams and today

offer multiplicity of products across the

financial sector. A round of VRS has brought

a scale-up in their producti-vity parameters.

Most PSBs have also partially invited public

shareholding, and the resultant market

discipline is ensuring better levels of

operational efficiency and corporate

governance. While all these have been

important ingredients in the Indian public

sector banks’ quest for attaining an

important place in the new order, the time

has come for the banks to undertake the

next level of transformation to emerge as

really world-class and contemporarily

relevant organizations. Some of the

elements for this strategic change would

cover the following :

Organisation Structure Re-design

Reflecting the realities and demands of the

protected and expansionary business model

post 1969, the basic structure of the public

sector banks has developed along

geographic lines. The needs of business were

well served by this structure all these years. In

the absence of IT, there was no real alternative

method to organize the banks with sufficient

ability to control the operations. Thus, a

structure was born that had zones and

regions controlling the numerous bank

branches. The premise was that

undifferentiated bank branches could each

serve every customer’s basic banking needs.

With the changes in the landscape and

advent of IT, it is appropriate to review the

current structure under three different

lenses. Does it allow the bank to address the

needs of its customers efficiently and

effectively (in particular providing

differentiated services to different classes

of customers)? Can it compete with its

competitors and respond quickly to market

demands in specified business areas? and

Does it take full advantage of the technology

that it has acquired to reduce cost, improve

revenues and serve the customer effectively?

The Indian customers have changed. They

are now more assertive and seek global class

services. Corporates require this to stay

competitive in an increasingly aggressive

market place. Retail customers are working

harder and have less time and so are not

willing to be charitable to service providers

who do not serve them well. The banks’

current geographic and branch centric

operating model is not suited to

differentially serve the needs of different

segments. For example large corporate

customers are looking at turnaround time

and quality of advice including in areas of

treasury and risk management. This is viewed

as a key parameter of service, which does

not get delivered from generalist branch

officials in undifferentiated branches.

Likewise, retail asset customers need to be

served at the point of sale through an

independent direct sales channel. Different

segments require different skills, focus and

dedicated resources. An organization

structure based on Strategic Business Units

(SBU) Model is required to serve these

different business segments by employees

with a clear focus on that segment with

accountability in improving penetration and

profitability.

The organization structure has to be agile

to respond to the customers’ needs. The

combination of IT and communication

technology permits taking of higher quality

decisions remotely. It also allows for

consolidation and centralization of back

office activity away from the branches to

cheaper locations with much greater scale

and allowing for substantial efficiency. This

can also free up the time at the branches for

the front end personnel to devote more on

customer facing activities and doing more

cross sell and change the face of the branches

as customer servicing and selling units.

Present geographic organization structure

with undifferentiated branches doing most

of the back office work and being the sole

delivery channel needs to undergo a quick

change to be able to compete effectively

for the share of wallet of the new age

customer. A suitable organization structure

is after all the sine-qua-non for delivering

the identified competitive and efficient

business model.

Intelligent use of Technology

As stated earlier, the Indian banks have

moved beyond branch level automation to

varying degrees of networking across

branches. The network capability has got

tremendous potential to augment service

delivery and efficient use of resources of

the banks. The important point however is

to use technology intelligently. Time has

come where the banks need to undertake

Business Process Re-engineering initiatives

to leverage the technological resources to

the full. These initiatives in the efficiency area

would centre around questions like - does

the activity need to be done the same way,

does it need to be done at every office or at

the front end and so on. Almost 50 to 60%

of branch operations are amenable to

shifting to BackOffice, and typically efficiency

gains of 30 to 40% are achievable by doing

centralization. Add to that the possibility of

moving the origination of the transaction

to the customer’s office. It is possible with

today’s secured technology channels

(including SFMS of RBI or web based

banking channels of the banks) to ask the

customers to transmit an application for LC

or other banking requirements

electronically to the bank. Bank can upload

this into its system and transfer/transmit to

the recipient bank terminals. The customer

would thus be able to control its transactions

and derive better satisfaction while the Bank

will be able to achieve cost reduction and

efficiency. Banks also need to leap frog into

next level of IT initiatives viz. CRM, HRM, and

Decision Support Systems.

Marketing Set-up

The Bank branches, which the PSBs have so

far almost solely used, as units for

dispensation of services are no longer

sufficient in the changed environment. While

IT enabled channels like ATMs, internet

banking, etc. provide one alternate channel,

increasing reliance will have to be placed

on developing direct sales force as an


independent channel for business growth

and service delivery. As stated earlier, for

example retail assets have to be catered to

at the point of sale or at the customer’s

premises. Corporate business, which is

becoming very competitive on the interest

margin front, can be made profitable only

by garnering larger share of fee business.

This would accrue only through better

relationship management under the sales

channel. No longer would business

opportunities accrue to banks which stand

and wait for customers to walk in, at least

not of the preferred variety. The marketing

culture would also have to pervade to

become a mind set issue with the bank

personnel. Upsell and cross sell of products

has to become part of culture with the staff.

It has been recognized that the more

number of products the customer uses, the

profitability and customer retention is much

better.

Differentiated services

In the present day of shrinking spreads and

increasing costs and faced with more

demanding customers, it is imperative that

the banks reorganize themselves to be able

to provide differentiated services to

customers. While public sector banks would

need to continue to serve the mass

customers with basic banking services, they

increasingly need to provide higher value

added personalized services to the higher

end customers in line with their profitability

and value for the bank.

Capability Upgrade

In service industry like banks, it is the quality

of human resources, which determines the

capability of the bank to deliver superior

quality services and compete effectively. It is

a paradox that in Indian public sector banks,

which have been doing mostly traditional

banking of deposit and lending, the

availability of credit skills across the bank

particularly in the areas of large credits, project

finance, etc. is deficient. The skills in regard to

ancillary services of merchant banking, refined

risk management and treasury products for

the corporates, personal finance advice,

wealth management solutions and capital

market related services for the personal

banking segment are in severe short supply.

At a stage when India is rapidly globalising

and Indian corporates are making large forays

abroad including the acquisition of overseas

companies, non-Indian banks manage most

of these deals. This is both a loss of good

business opportunity, loss of relationship

with the clients and set back to the status

and respect of Indian banks in global markets.

Skill upgrade in these new and profitable

areas of banking is a must, if the PSBs have

to position themselves as relevant players

in the emerging business opportunities. This

will require multi-pronged approach

including campus recruitment of personnel

skilled in management, finance, etc. and also

lateral recruitment at middle and senior

levels of professionals experienced in

relevant lines of business and gradual

building up of skills within the bank. The

present pay and incentive structure in public

sector banks is however deterrent to

developing this model. The recent autonomy

package given by the government does

open up possibility of unshackling the banks

in this regard. However much more needs

to be put in place, for the banks to be really

able to attract, retain and nurture talent.

Tapping Rural Opportunities

The rural landscape has changed. Increasing

use of technology in farming, usage of

genetically modified seeds aided by

scientific irrigation techniques has brought

about stability in agricultural production.

The agricultural sector is acquiring

commercial hue, adding to the prosperity of

the rural communities. Growing trend of

consumerism is being seen among the rural

populace. This is creating opportunities for

banks to market not only traditional

agricultural lending but also loans for

consumer products and a plethora of other

financial services. Public sector banks, which

have extensive network in rural areas and

also the experience, feel, understanding and

relationships in the rural segment are well-

positioned to tap this increasing business

opportunity. Two issues in rural lending, risk

management and high transaction cost

however, need to be tackled. Experience has

shown that agricultural loans are no more

susceptible to NPA generation than other

loans. Further, technology today provides

the facility for better risk management by

developing risk models for individual

segments. High transaction cost can be

tackled through use of partnerships with

NGOs, MFIs, Farmer Clubs, etc. Rural segment

is the next big growth story and PSBs with

their established niche need to get their act

together for making full use of the

opportunity.

Consolidation

It is an acknowledged fact that the Indian

banks are very small in size by international

reckoning. The biggest Bank of this country

is the only bank to rank among the top 100

global banks. The largest bank in China is

eight times bigger than the biggest Bank of

India. Mergers and acquisitions happening

in the west as also in our neighbourhood

are further increasing this gap.

Size of the bank is important as it gives

global reach, ability to develop and offer

comprehensive set of products, enjoy

economies of scale, derive optimum benefit

out of the huge investment in IT, roll out

next generation of IT initiatives, and ward

off predatory acquisition moves.

Consolidation in Indian banking is therefore

perhaps an idea, which needs to be pursued

with due seriousness by the banks,

regulators and the Government. However

consolidation of public sector banks should

not be a forced merger of strong and weak

banks but driven by synergies and resultant

benefits.

It is clear that public sector banks, which have

developed in a protected environment in

limited areas of banking services have to

take major initiatives for positioning

themselves in the global competition which

is knocking at their doors. Any procrasti-

nation in taking the required steps will

simply marginalize these banks with serious

loss of business, market share and customer

patronage. ❑

Role of Banks in EntrepreneurialDevelopment and Microfinance

Dr. K. C. Chakrabarty

Introduction

In most of the developingcountries poverty is a major factorhaunting the socio-economicdevelopment. This promptedUnited Nations to include povertyand hunger eradication as one ofthe objectives in their MillenniumDevelopment Goals. Poverty is

reflected in the society as a vicious circle which iscreated due to people having limited access to credit,leading to restriction in productivity, inhibited income,low savings and thus low capacity to invest. This isfurther fuelled by low risk taking capacity of thepeople. Microfinance serves as a means to empowerthe poor, and provides a valuable tool to assist theeconomic development process. But it would bemeaningful only if the poor are empowered withcrucial skills to run micro enterprises successfully.

In recent times, lot of thrust has been given to themicro enterprise sector after the realisation of itsconsiderable contribution to economic growth andvitality. Over 500 million poor people around theworld are running profitable micro-enterprises. Bypromoting and developing micro enterprises theentrepreneurial quality of people can also be

developed. It has been understood that withoutdeveloping an enterprise at micro level, true

development will only be a dream.

Microenterprise and microfinance

In countries, which are undergoing theprocess of economic development, self-

employment throughmicroenterprise is often the only

means for people toprovide for their

f a m i l i e s .

These micro enterprises, or “the world’s smallestbusinesses,” represent an estimated 80 percent oftotal enterprises. According to the Economic Censusof 1990, India had 24 million microenterprises,constituting 97 percent of all enterprises, providingemployment to at least 45 million people andemploying 63 percent of all non-agriculture workers.Larger proportions of rural non-agriculture workersare employed in microenterprises (75 percent) thanin the urban areas (52 percent).1 Yet, only about 5%of the world’s entrepreneurs have access to financialservices. Currently, the Microfinance Sector globallyis reaching approximately 4% of that potentialmarket.

Microfinance generally refers to the provision ofsmall-scale savings, credit, insurance, and any otherfinancial services to those who cannot access themfrom formal financial institutions. Due to issues ofrisk and cost associated with servicing the largernumbers of small low capital input businesses, theformal sector lending to micro enterprises is low.The late 1970s and early 1980s saw the emergence of“microenterprise lending” programs, with focus oncredit for income generating activities and targetingvery poor (often women) borrowers. The early focusof most microenterprise lending programs was toprove that the poor were creditworthy.

In the mid-1990s the term micro-enterprise lendingbegan to be replaced by a new term “microfinance”that included not only credit, but also savings andother financial services. The 1990s saw growingenthusiasm for promoting microfinance as a strategyfor poverty alleviation. For providing more thrust tomicro-credit the year 2005 has been recognised asthe “International Year of micro Credit”.

Through microfinance, by making loans available andproviding job training, the poor are given theopportunity to engage in promising microenterprises.Microfinance acts as the lever to push the process.


Banks have amajor role to playin thedevelopment ofmicro-enterpriseand microfinance.Their first role isthat of creditprovider, but apartfrom that theyhave to act aschange agents. Aschange agentsthey have to helpthe people inacquiring the basicknowledge ofbusiness. Byproviding trainingatleast basicnuances ofbusiness can beinstilled in them.Training shouldcomprise ofknowledge aboutbusiness, aboutthe product, policyenvironment, etc.

CEO’s Perspective


Dr. Chakrabarty has assumed charge as Chairman & ManagingDirector of Indian Bank, on 9th June, 2005. He started his career as aPlanning Officer with Bank of Baroda in 1978 and prior to joiningIndian Bank, he was with Punjab National Bank as its ExecutiveDirector.With a Ph.D in Statistical Techniques and Demographic Studies,Dr. Chakrabarty brings with him rich and varied experience ofworking in various capacities for more than 26 years at Bank of Baroda.At Bank of Baroda, he was looking after lead bank responsibilities,Corporate Planning, MIS, Economic Research, InformationTechnology at various times and headed the Integrated treasuryfunctions. The Bank’s Corporate Risk Management function wasvested with him and he was in charge of the UK Operations of Bankof Baroda for more than four years from May, 2001 to July, 2004 with‘approved person’ status from Financial Services Authorities in U.K.(U.K. Regulator).Dr. Chakrabarty’s varied expertise includes preparation of CorporateStrategic Plans, establishing Asset-Liability Management system,setting up Resource Management functions, Marketing of newproducts, establishing Modern Enterprise-wise Risk ManagementSystem, Electronic Payment Systems, diversifying into Insurancebusiness and e-banking at Bank of Baroda.

”

”

But the philosophy of microfinanceprogrammes go beyond mere access anddistribution of money. It helps in fosteringand developing an environment whereexisting networks and interlinks arestrengthened. It is a necessary but not asufficient condition for microenterprisepromotion. Other inputs required areidentification of livelihood opportunities,capacity building, establishing of marketlinkages for inputs and outputs, activityanalysis and policy reforms.

Need for developing micro-enterprise andmicro-finance

The promotion of self-employment is a basiccomponent of economic development andsocial policy in most countries. It isrecognised as one means of bringing aperson into the mainstream of society as aproductive and contributing individual. Theeconomics of microenterprise make it acompelling anti-poverty strategy. With a loanof Rs 5,000 in a poor country one can start asmall business, repay the loan in a year, whilestill owning the productive assets. Over time,one can earn enough to escape frompoverty.2

Microenterprise development refers to thepackage of services, policies, programs, andinstitutions intended to develop micro-enterprises. Microenterprise developmentcontributes to widening the pool ofentrepreneurship available to society and itbroadens the base of the private sector. Thereare many good reasons to supportmicroenterprises as they

➢ Provide sustainable employment andincome for many people by protectingexisting livelihood opportunities andcreating other potential jobs.

➢ Have strong economic linkages withother sectors of the economy.

➢ Meet the needs of low-income peoplefor goods and services at the prices, inthe amount and in the locations thatare accessible to them.

➢ Increases the circulation of money.

➢ Cause minimal impact on theenvironment due to low powerconsumption. Many micro-enterprisesalso directly improve the environmentbecause they are based on recyclingand locally available materials andresources.

➢ Have the potential to improve socialand political stability and cohesion incommunities by reducing incomeinequalities, encouraging self-reliance,self-pride and increased local control,thus building social capital.

➢ Successful microentrepreneurs incommunities can serve as role modelsfor young people.

Challenges being faced by microenterprise

A large proportion of micro entrepreneurshas cited credit as the primary constraint tobusiness growth. Another major challengefacing this sector is the compulsion tobecome self reliant and self-supportivegiven the phased dismantling of protectivebusiness. The enterprises suffer not onlyfrom domestic and internationalcompetition but also from the normalbusiness cycle.

The major problem is, for running anyenterprise business acumen is requiredwhich normally all do not have. Training canhelp in getting to know the nuances ofbusiness but for being successful,understanding of the whole scenario andits integration is very much required, whichany training can only stimulate in one’smind. The other problem is of indiscriminategrowth of microenterprises, which leads toincreased supply of material in themarket. In market the twin forces ofdemand and supply play anactive role. Excess supplywithout increasing demandfor labour intensiveproducts leads toreduction in priceultimately leading toloss for the poormicroentrepreneur.

Role of banks inentrepreneurialdevelopment andmicrofinance

India hassupported socialbanking for a longtime. Policydirections to rapidlyexpand ruralbranches, mandatecredit allocations forpriority sectors (includingagriculture), deliver large

Microfinance generally

refers to the provision

of small-scale savings,

credit, insurance, and

any other financial

services to those who

cannot access them

from formal financial

institutions.


subsidy oriented credit programmes to servemarginal communities and poor householdsand regulated interest rates have been triedfor over 35 years. But this objective remaineda long cherished dream. With microfinanceintervention, however this situation ischanging. Now all the banks believe that poorare also bankable, they can also save and thusrepay. Robinson (2002), notes that “The formalsector has begun to realise that financingthe poor can be both economically andsocially profitable.”

Indian Bank was the pioneer in India in thisfield, who in 1989 thought of the project offinancing Self Help Groups (SHGs) directlyalongwith IFAD. United Nations Office forProject Service (UNOPS) in the year 1994 inits report, appreciated involvement and roleof Indian Bank in the implementation of theproject. Based on those lines, what NABARDhad started off in 1992 as a modest pilottesting of linking around 500 SHGs withbranches of half a dozen banks across Indiawith the help of a few NGOs, today involvesabout 35,294 rural outlets of more than 560banks, with an advance portfolio of morethan Rs. 39 bn in micro Finance lending toSHGs. Financial services have reached thedoorsteps of over 83.5 million very poorpeople through 1,079,091 SHGs hand-heldby over 3024 development partners.3 IndianBank continues to be the leader among thecommercial banks in credit linking highestnumber of SHGs in the state of Tamil Nadu.It has sustained its position throughaggressive strategies and continuedinnovation. It has introduced microfinancederivative products like Vidhya SobhaEducation Loan Scheme, Junior SHGs, GrihaLakhshmi, (Housing Loan Scheme) etc. It hasalso relaxed the norm for maximum lendingto 10 times of the savings which was earlier4 times only.

Banks offer a variety of potential advantagesfor financing of micro-enterprises andmicrofinance, including a commercialoutlook and relatively sophisticated skills.As profit-making institutions, they arealready dedicated to the goal of financialsustainability. The greatest potentialadvantage of banks is that they are goingconcerns and are in a position to mobilizedeposits. Banks have been at the forefrontof some of the following innovations :

➢ Lending wholesale loan funds.➢ Assessing and buying out micro-

finance debt (securitisation).

➢ Innovating specific retail products suchas the Kisan (Farmer) Credit Card,Swarozgar credit card.

➢ Engaging microfinance institutions asagents for disbursement and recoveryof loans.

➢ Equity investments.

Thus banks have a major role to play in thedevelopment of micro-enterprise andmicrofinance. Their first role is that of creditprovider, but apart from that they have toact as change agents. As change agents theyhave to help the people in acquiring thebasic knowledge of business. By providingtraining atleast basic nuances of businesscan be instilled in them. Training shouldcomprise of knowledge about business,about the product, policy environment, etc.Indian Bank alongwith Indian Overseas Bankand NABARD has set up rural training centreat Karaikudi which has microentrepreneurialdevelopment as one of the objectives.

Bank has to act as an intermediary at allstages in the supply chain. Its main activityshould be to strengthen the whole supplychain so that there is win-win situation forall. Microenterprises need strong forward aswell as backward linkages, which meansavailability of produce, in right quantity, ofright quality, and at right time. Banks canestablish the large volume of business bymaintaining a database of all thesebusinesses and providing for the possibilityfor outsourcing. The recent advancement ofleveraged leasing/sub-contractingsupported by banks can help the micro-entrepreneurs get the required business andalso the inputs needed for it. All the bankstogether or individually can think of forminga venture capital fund especially forpromoting micro enterprises. From this fund,starting of the enterprises as well as thetraining required and other aspects relatedto it can be financed like finance requiredfor market research.

Loans provided to micro-enterprises areinherently very risky but this risk can bereduced for the poor micro-entrepreneur bygiving credit assistance in the form of equityassistance. Small start-up businessesgenerally have weak or poor cash flowsituations for a period of time, often for morethan a year. The difficulties and pressureswhich a new entrepreneur has to face isalways very formidable, and an obligatoryand totally structured loan repaymentschedule can often be a fatal factor. There is

no mechanism to insulate the entrepreneurfrom the normal business failures. So thebanks role is to properly identify thebusiness according to the demand supplysituation and make the repayment scheduleaccordingly. To mitigate the market risk andinterest risk, insurance of the business ataffordable premium could be thought ofon the lines of group insurance. Banks canprovide the enterprises group loans at lesserinterest rates without any intermediary inbetween to keep the interest rates low. Banks’can also think of re-engineering themicrocredit programs to target some non-poor micro- or meso-entrepreneurs whogenerate much needed wage employmentopportunities for the poor and the poorest.There is no harm in supporting the poorestfirst with wage employment before theybecome self-employed.

Apart from all this bank has a major role toplay in policy formulation, programme andproject implementation, support and co-ordination etc. Bank as a larger entity andhaving presence at all the levels of supplychain, can influence the policies and proceedin such a way so that it is implementableand also beneficial for the micro-entrepreneur.

Challenges being faced by bank

Micro-enterprises are influenced more by anychange in the macro environment. They areso vulnerable that normal business cycle canalso influence them. So care has to be takento identify more of growth orientedmicro enterprises than livelihood enterprises.Livelihood enterprises are more prone tosuch risks. Besides they just augment thehousehold income but cannot giveemployment to others.

Those who have some business acumentake up the growth orientedmicroenterprises. But the challenge is toidentify such talents. For this, banks can takehelp of the SHG members or village levelorganisations. Another challenge is to buildbanking products and develop microenterprises in such a way that the burden ison the individual and not on the wholegroup. Many a times banks give loans toSHGs for starting up of microenterprise. Thisloan is for the whole group and everybodyis responsible for the profit and loss,including them who do not know anythingabout business and or are not interested.This increases the non-financial cost and


leads to failure of the business. Instead ofthis, the banks should insist on giving loansto individuals with group guarantee. Forkeeping the social security system of SHGsintact banks can take some extra interestrate (as decided by the SHG members) whichwill be given to the SHG in the event of theirstanding as guarantor for any individual ofthe group.

For starting up of any business the firstrequirement is market research.Indiscriminate increase in themicroenterprises can lead to glut in themarket thus lowering the price of theproduce. So banks have to look into theeconomical and financial viability of thebusiness before promoting it.

Conclusion

Micro enterprise sector contributesconsiderably to economic growth. Limitedaccess to credit, low risk taking capacity ofthe people, poor skill, lack of forward andbackward linkages, demand and supplymismatch are some of the bottlenecks thatinhibit microenterprise promotion. The

bankers have a major role to play in thedevelopment of microenterprise andmicrofinance by combating thesebottlenecks. Microfinance is an emergingsolution to the problems of entrepreneurialdevelopment. The core of microfinanceprogrammes go beyond mere providing ofcredit to deeper issues of how money isutilised and invested and also other issuessuch as business opportunity identification,rural talent search, business and productiontraining, establishment of market linkagesfor inputs and outputs, policy reform, marketresearch, etc. Banks can partner with otheragencies that can facilitate above raisedissues. Banks, besides playing the major role,as Credit Provider will have to act as achange agent, facilitator for providingnecessary infrastructure and hedgingmechanism to mitigate market risks etc. Theywill have to strengthen the supply chain bybuilding the capacity of all the peopleinvolved in the supply chain to create a win-win situation for all. Through thedevelopment of microenterprises theentrepreneurial qualities of people can alsobe developed.

References

1. “Microenterprise Development : Not ByCredit Alone”, Asian Development Bank, 1997.

2. Seibel, Dr. Hans Dieter & Harishkumar R. Dave(2002), “Commercial Aspects Of SHGBanking In India”, Paper Presented At TheSeminar On SHG-Bank Linkage ProgrammeAt New Delhi.

3. Albu, Mike (2004), “Leveraging Leases forSmall Businesses : a working analysis ofopportunities, with special reference tosituation in Kenya”.

Jhunjhunwala, Bharat (2005), “Turning SHGsinto sustainable business enterprises”,Business Line, Page 8, dated July 12, 2005.

Vincent, Guy, “SustainableMicroentrepreneurship: The Roles ofMicrofinance, Entrepreneurship andSustainability in Reducing Poverty inDeveloping Countries”.

Robinson, Marguerite S., 2002, “TheMicrofinance Revolution: SustainableFinance for the Poor”.

NABARD, 2003-04, “Progress of SHG – BankLinkage in India. ❑

Dear Readers,U have in hand the August 2005 issue ofrevamped ‘avatar’ of IBA Bulletin. Please take afew minutes from your ‘here and now’ concernsto let us have your valuable feedback ......... Yourfeedback .......... will be highly appreciated .............It will help us serve U better ........ U r at libertyto criticize us .......... correct us .......... and ofcourse even praise us. Needless to say that yourcomments are the perfect source ofimprovement in its content to make your Bulletinmore interesting and informative. ❑

ChannelisingRetail Credit

Experts Views

T.M. Bhasin

During thepast five years,there hasbeenadequateliquidity in thebankingsystem andthe bankshave,therefore,been devisingvariousschemes toattract thecorporate andlargeborrowerswhere themajor chunkof credit flowsout ensuringconstantrevenue to thebank in theshape ofinterest, withlesseroverheads.

Introduction

The banking industry earns its

major portion of income from

interest on advances and

investments. The interest spread

takes care of operational

overheads, technological

upgradation and provisions

against NPAs, etc. However, the spread has

continuously been shrinking over a period of time

from around 8% in the early 90s to around 3% now

in the Indian Banking Industry. Internationally, the

spread hovers between 1% and 1.5%. With

globalisation and emerging competition from the

private and international players, it is very likely that

the interest spread will go on shrinking in the times

to come. To augment the income from other sources,

the banking industry has been looking for new

ancillary business activities such as CMS,

Bancassurance, Credit/Debit Card, etc. In view of the

fixed mindset of public sector bank employees, it is

taking longer than the required time to encash the

opportunities available in the ancillary business

and it remains a matter of fact that the “interest

income remains a single major source of

revenue for the banking industry”.

During the past five years, there has

been adequate liquidity in the

banking system and the banks

have, therefore, been

devising various

schemes to

attract the corporate and large borrowers where the

major chunk of credit flows out ensuring constant

revenue to the bank in the shape of interest, with

lesser overheads. However, unfortunately even if a

single corporate/large borrowal account becomes

defaulter, there is a sudden jump in the NPAs, thereby

affecting the bottom line of the concerned bank.

Gradually therefore, the trend has shifted towards

addressing the credit needs of medium and small

borrowers who are in need of finance, not only for

their business requirements but also for their own

personal needs as that of their employees for vehicle,

consumer, housing loans, etc. These retail credit

avenues offer a diversified portfolio to the bank,

thereby optimizing the risk and maximising the

return.

Trend towards retail credit

As per industry estimates, the overall Retail Credit

disbursements have grown by 30% during the Financial

Year 2005, as against a growth of 12.6% in the last fiscal.

The segments-wise break up of these disbursements,

over a period of last three years is as under :

(Rupees in crores)

Loan Category Financial Financial Financial

Year 2005 Year 2004 Year 2003

Home 60,000 47,000 42,000

Auto 29,000 20,000 19,200

Commercial 24,000 19,000 13,800

Personal/Commercial 10,500 10,500 10,200

Two-wheeler 6,500 3,500 3,600

Total 1,30,000 1,00,000 88,800



Shri Bhasin is presently General

Manager, Oriental Bank of Commerce,

New Delhi Regional Office. His

qualification is M.Sc. with an MBA

(Finance), FMS, LLB and CAIIB. He has

also done Diploma in Criminology and

Forensic Science and Diploma in Office

Organisation and procedures.

”

”

Home loans account for a whopping 46% of

retail loans. There may be varied reasons e.g.

Rising Property Prices, Higher Income Levels,

Low Interest Rates Regime, continuous

availability of Tax Benefits, etc. Nevertheless

home loans is one sector which gives the

financing banker a security satisfaction, which

appreciates in due course and thus the

default in repayment can be recovered by

invoking the provisions under Securitisation

& Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002.

As per Society of Indian Automobile

Manufacturers, domestic passenger car sales

grew by 17.8% to nearly 8.2 lakh units in

financial year 2005 against 7 lakh units last

year. The used car sales market is also

estimated at 70 to 90% of new car sales and

the car buying appetite is also going up, in

view of easy financing options available from

the organised and unorganised financial

sector and also in view of higher disposable

income and increased family comfort criteria.

In the last two years, auto and two wheeler

loans showed higher growth than home

and personal loans. Both in fact accounted

for 70% of overall retail loan growth. Thus

the demand in Retail Segment Loans has

been tremendous and keeping in view the

future potential, various banks have been

launching a number of retail lending

schemes for which plethora of necessary

guidelines are being issued. “However, it has

been observed that more often than not,

these circulars merely go as a routine

instructions and in view of the lack of

marketing drive, substantial chunk of

business is not mobilised under otherwise

very competitive schemes”. It is felt expedient

that all these retail credit schemes should

be made customer friendly by simplification

of procedures and ready availability of entire

information/documents required to be

submitted by the prospective borrower at a

single nodal point. As far as the staff aspect

is concerned, the policy, documentation,

processing and appraisal need to be codified

in such a way that delays at the appraisal,

documentation and sanction level can be

obviated.

With the experience of the banking sector

in disbursing retail loans, it is observed that

the marketing, submission of application,

appraisal, disbursement and post

disbursement follow-up has a set pattern

of definite and defined set of activities. This

set of defined activities can be translated

into finite action points in which the

technology can be deployed, thereby

helping the bank to reduce the operational

overheads. The disposal can also be made

time bound so as to eliminate probability

of complaints arising out of delays.

However, as a first step the concerned Bank

must reformulate the entire gambit of retail

credit schemes under a single umbrella of

“Retail Schemes”. The existing schemes

should be further fine tuned with certain

changed procedures so that at least

one scheme out of the entire

bouquet of Retail Schemes

meets the requirement and

taste of every customer. In

the present day

competitive scenario,

the customer centric

schemes need to be

developed which

means under

housing loan

scheme, there

could be a dozen

subsets/types of

schemes with

different tastes and

flavours. These

schemes may be

developed for NRIs,

We need to be more

customer centric and

computer savvy for

augmenting the Retail

Credit Portfolio.


professionals, builders, hospitals, schools,

societies and even for repair and

refurnishing purposes.

It is in this context that banks may consider

setting up a helpline for retail products. The

helpline can be set-up in three ways – (i)

Interactive/Integrated Voice Response

Helpline, (ii) Use of Web Technology & (iii)

Setting up of Retail Marts.

Interactive/Integrated Voice Response

System

This type of response system will need to

be outsourced leading to delegation of an

intensive business process to an outside

service provider who owns, administers and

manages according to the defined set of

matrics. This in turn means delegating back

end functions which are necessary to run a

business but do not form a part of the core

business. It will involve transfer of direct

managerial responsibility but not

accountability to a 3rd party service provider

who performs services previously delivered

by internal staff and management within

agreed service level agreements.

The distinct advantages of this service for

retail lending are as under :

1. In a highly competitive and IT driven

banking industry, the deployment of the

technology and its continuous

upgradation is extremely expensive and

complex activity.

2. The technology needs to be fine-tuned

at regular intervals by deploying latest

tools for which the skilled and

contemporary manpower is required. It

is a major constraint to retain technical

and skilled manpower especially in the

public sector banks.

3. The bank can focus on their core

activities including marketing and

recovery thereby leaving mundane

tasks to specialised vendors who can

handle such activities more efficiently

with lesser cost.

4. As the cost of retention of the employees

in the organisation is becoming a major

expense, the outsourcing would reduce

the operational overheads by ensuring

optimum utilisation of limited manpower.

5. The bank would be transparent to any

technological upgradation or in other

activities thereby reducing their

involvements in such activities.

The Interactive/IVRS can be set up in two ways

• Setting up of Call Centres

• Setting up of Direct Selling Agents

(DSAs)

Call Centres

A Call Centre is the room or rooms where

telemarketers sit at phone banks talking with

customers or prospective customers. There

are two kinds of call centres : (i) Inbound and

(ii) Outbound. An inbound call centre receives

calls as and when a customer calls a toll free

(1-800) number with a question about a retail

credit product. In an outbound call centre,

the telemarketers call the customers or the

prospective customers. Outbound call centres

often use an automatic dialer, a setup in which

a computer dials random phone numbers

from a given file and then transfers any

answered call to an available telemarketer.

Call centres have been aided by a range of

telecommunications and computer

technologies, including automatic call

distribution (ACD), interactive voice response

(IVR), computer telephony integration (CTI),

which allows the action of the computer to

be synchronised with what is happening on

the phone.

Direct Selling Agents (DSAs)

DSAs are appointed to market new business

as per terms and conditions of Retail Credit

Schemes. The DSAs also assess the financial

worthiness and facilitate collection,

compilation and collation of pre-appraisal

documents then the complete information

is processed as per the predefined norms of

the Bank and if the proposal merits sanction,

it is put forth before the Sanctioning

Authority. The entire documentation and

disbursement formalities are completed by

DSAs. The post disbursement follow-up,

timely recovery etc. is also ensured by such

DSAs. The Bank is involved in overall quality

improvement and policy formulation.

Use of Web Technology

At present, the Banks have created many

outlets including the brick and mortar

structure to offer above activities to the

customers. However, the current set up

necessitates large investments in setting up

such infrastructure and also requires

substantial expenses in terms of

maintenance of the infrastructural

overheads, staff etc. on an ongoing basis. As

most of the above activities have clear and

well-defined processes, the technology can

be used to a large extent thereby minimising

the operational overheads.

With a view to minimise these infrastructural

related overheads, the concept of Web

Banking has been picking up during the last

few years in the global markets. In the Web

based Banking concept, the ‘Brick and Mortar’

structure of the Banks gets converted into a

‘Click and Portal’ Banking. The branches are

not required to have a physical

infrastructure in the shape of a building and

instead the Web Based Bank model offers

the concept of the banking transactions

through the Internet or through the

privately hosted websites.

Each web bank sets up a highly secured,

versatile, efficient and customer friendly


Website through which the customers can

either download or fill up the forms online for

various banking applications including for

opening of account or taking any other facility

such as funds transfer, mortgage etc. The

customer can interact and transact their

banking business at their homes/offices or at

any other convenient place by connecting the

Website of that Bank through the Internet.

A highly secured interactive website may

contain the details of such schemes which

interalia include the eligibility criteria,

prescribed documentation and other

formalities, EMI etc. The preliminary

information and the application form can be

downloaded or may be submitted online by

the prospective customers through the well-

articulated navigation screens which would

reduce the frequent visits to the branch by

such customers. It would also reduce the

reaction time in the decision making as the

back end staff can continuously monitor and

do the appraisal thereby conveying a prompt

decision to the customers.

With the well defined processes in place to take

a decision, large sets of such processes which

are required for appraisal of customers can also

be computerised and the decision can be

arrived at, with least human intervention.

For completion of the post disbursal

formalities, the customers may either visit a

branch or a back office which would be

limited in each city thereby ensuring the

central repository of such sensitive

documents.

Based on the agreement between the

customers and the Bank, the post disbursal

follow up can also be computerised by

generating the self-contained timely

reminders and even sending the triggers to

the mobile phones or through e-mail.

Continuous default can be contained and

wherever required the matter can be

personally followed up thereby avoiding the

need for fleet of persons involved in the post

disbursement follow up and recovery process.

Setting up of Retail Marts

As a step to give focussed growth to the

Retail Credit portfolio, the Bank may open

‘Retail Marts’ at prominent locations. These

Marts should be compact and self-contained

offices to deal with marketing, disbursal and

post disbursal process relating to the Retail

Credit Schemes. Such Retail Marts should be

manned by skilled, courteous and efficient

officials and should be supported with latest

technological tools such as Kiosks, E-mail

counters and comprehensive software to

provide quick decisions on the request of

the customers.

It is felt that with highly focussed and well-

equipped Retail Marts, substantial volumes

can be generated for the Retail Credit

Schemes. This would help improving the

bottom line of the Bank and would also give

enough publicity to the Bank.

Steps to increase the retail credit portfolio

within a Bank

● The existing policies and procedures of

the various retail credit schemes should

be made more customer savvy and the

processes should be fine-tuned to reduce

the paper work thereby improving the

reaction time to the customer.

● The identified team should be

comprehensively trained on the

complete suite of the retail credit

products. Special seminars should be

held at all levels so that the message

and intent of the top management of

giving special thrust to retail credit

percolates down at the operating level.

● The helpline policy for retail credit may

be articulated to ensure that repetitive

and mundane activities involved in the

complete cycle of marketing and

managing such retail credits, may be

entertained through call centres. This

would provide round the clock

infrastructure and assistance to the

existing and prospective customers at

their convenience.

● The Corporate Intranet may include

updated circulars on various retail

credit schemes which can be accessed

by the concerned staff through the

click of a mouse. The Intranet may also

include list of Frequently Asked

Questions (FAQs) by the customers so

that experience of a customer of a

particular branch/region may be shared

by all concerned.

● The banks should set up a

comprehensive secured website which

should cater to the requirement of

application form and other relevant

details for various schemes. The

customers may fill the form online

thereby minimising the visits of the

customer to the branch.

In a nutshell, we need to be more customer

centric and computer savvy for augmenting

the Retail Credit Portfolio. ❑

IBA BulletinFor Subscription kindly contact the Communication Department, IBA

Tel. : 022-2217 40 40 • Fax : 022-2218 42 22 • [email protected]

Y2K38: Problem and aPossible Way Out

Dr. Ashutosh Saxena


The greatestdanger with theyear 2038problem is itsinvisibility.Softwarecompanies willprobably notthink of trying outa Year 2038scenario beforedoomsday strikes.Of course, therewill be somewarning ahead oftime. Schedulingsoftware, billingprogrammes,personal remindercalendars andother such piecesof code that setdates in the nearfuture will fail assoon as one oftheir target datesexceeds 19-Jan-2038, assuming atime_t is used tostore them.

The Problem

It is quite possible that in the firstmonth of the year 2038 manycomputers will encounter a date-related bug resulting inaccurate.Just as Y2K problems arise from

Bonds and Polices etc. This problem of insufficientstorage for date variable can cause great errors intheir Books of account and reflect in major disaster.Software for, mortgage calculation, vital statistics andmany other applications may need to frequently andreliably examine a century or two forward andbackward.

The problem that results from computing dates intothe year 2038 and beyond in 32-bit operating systems.Unix and other C (and possibly some JAVA)applications represent time as the number of secondsfrom January 1, 1970. The 32-bit variable (time_t) thatstores this number overflows in the year 2038 andbecomes December 13, 1901. However, even today,any date calculations forecasted beyond that timewill be erroneous. By the year 2038, the time_trepresentation for the current time will be over 2 140000 000 and that is the problem. A modern 32-bitcomputer stores a “signed integer” data type, such astime_t, in 32 bits. The first of these bits is used for thepositive/negative sign of the integer, while theremaining 31 bits are used to store the number itself.The highest number these 31 data bits can storeworks out to exactly 2 ,147,483,647. A time_t value ofthis exact number, 2,147,483,647, represents Tuesday,January 19, 2038, at 7 seconds past 3:14 AM GreenwichMean Time. So, at 3:14:07 AM GMT on that fateful day,every time_t used in a 32-bit C or C++ or JAVA programwill reach its upper limit. One second later, on19-January-2038 at 3:14:08 AM GMT, disaster strikes.Table 1. gives more clarity on the exact time_trepresentations.

What causes it?

Unix and Unix-like operating systems do notcalculate time in the Gregorian calendar, they simplycount time in seconds since their arbitrary “birthday”,GMT 00:00:00, Thursday, January 1, 1970. The industry-wide practice is to use a 32-bit variable for this number(32-bit signed time_t). Imagine an odometer with 32

programmes not allocating enough digits to the year,Y2K38 problems arise from programmes notallocating enough bits to internal time.

The effect of this bug is hard to predict. Some expertsare of opinion that this bug can cause seriousproblems on many platforms, especially Unix andUnix-like platforms, because these systems will “runout of time”. Starting at GMT 03:14:07, Tuesday, January19, 2038, one may expect to see lots of systems aroundthe world breaking satellites falling out of orbit,massive power outages (like the 2003 North Americanblackout), hospital life support system failures, phonesystem interruptions, banking errors, etc. One secondafter this critical second, many of these systems willhave wildly inaccurate date settings, producing allkinds of unpredictable consequences. In short, manyof the awful predictions for the year 2000 are muchmore likely to actually occur in the year 2038, considerthe year 2000 just a dry run. In case if we sit on this

issue for another 30 years before addressing it,consider that reports of temporal echoes of the

2038 problem are already starting to appear infuture date calculations for mortgages and vital

statistics.

Most of the Banks, Financial Institutionsand Insurance companies servers are

running on Unix or Unix like OS, willneed to react now, as many

product and services offeredby them are for long

duration such asL o a n s ,


”

”Dr. Saxena is Faculty, Institute for

Development and Research in

Banking Technology, Hyderabad.

wheels, each marked to count from 0 and 1(for base-2 counting), with the end wheelused to indicate a positive or negativeinteger. The largest possible value for thisinteger is 2**31-1 = 2,147,483,647 (over twobillion). 2,147,483,647 seconds after Unix’sbirthday corresponds to GMT 03:14:07,Tuesday, January 19, 2038. One second later,many Unix systems will revert to their birthdate (like an odometer rollover from 999999to 000000). Because the end bit indicatingpositive/negative integer may flip over,systems may revert the date to 20:45:52,Friday, December 13, 1901 (whichcorresponds to GMT 00:00:00 Thursday,January 1, 1970 minus 2**31 seconds).

Table 1. Exact time_t representations of Dateand Time in signed 32-bits datatype.

Date & time time_tre-presentation

1-Jan-1970, 12:00:00 AM GMT 0

1-Jan-1970, 12:00:01 AM GMT 1

1-Jan-1970, 12:01:00 AM GMT 60

1-Jan-1970, 01:00:00 AM GMT 3 600

2-Jan-1970, 12:00:00 AM GMT 86 400

3-Jan-1970, 12:00:00 AM GMT 172 800

1-Feb-1970, 12:00:00 AM GMT 2 678 400

1-Mar-1970, 12:00:00 AM GMT 5 097 600

1-Jan-1971, 12:00:00 AM GMT 31 536 000

1-Jan-1972, 12:00:00 AM GMT 63 072 000

1-Jan-2003, 12:00:00 AM GMT 1 041 379 200

1-Jan-2038, 12:00:00 AM GMT 2 145 916 800

19-Jan-2038, 03:14:07 AM GMT 2 147 483 647

Which operating systems and platforms areaffected by it?

So far, the few operating systems are notfound susceptible to the 2038 bug includevery new versions of Unix and Linux portedto 64-bit platforms, one may refer to theonline list at the site in [1]. A large number ofmachines, platforms and applications couldbe affected by the 2038 problem. Most ofthese will, hopefully get decommissionedbefore the critical date. However, it is possiblethat some machines going into service now,or legacy systems, which have never beenupgraded due to, budget constrains, maystill be operating in 2038. These may includeprocess control computers, space probecomputers, embedded systems in traffic lightcontrollers, navigation systems, etc. and it

may not be possible to upgrade many ofthese systems. Clock circuit hardware thathas adopted the Unix time convention mayalso be affected if 32-bit registers are used.While 32-bit CPUs may be obsolete indesktop computers and servers by 2038, theymay still exist in microcontrollers andembedded circuits. Embedded functionspresent a serious maintenance problem forall rollover issues like the year 2038 problem,since the package part number and othermarkings usually give no indication of thedevice’s internal function. For instance, theZ80 processor was available till late 2000 asan Embedded Function withinprogrammable devices. Such embeddedfunctions present a serious maintenanceproblem for Y2K38 and similar rollover issues,since the package part number and othermarkings typically give no indication of theinternal function.

This problem is somewhat easier to fix thanthe Y2K problem on mainframes, fortunately.Well-written programmes can simply berecompiled with a new version of the librarythat uses, for example, 8-byte values for thestorage format. This is possible because thelibrary encapsulates the whole time activitywith its own time types and functions.

Some Unix vendors have already started touse a 64-bit signed time_t in their operatingsystems to count the number of secondssince GMT 00:00:00, Thursday, January1, 1970. Programmes or databaseswith a fixed field width shouldprobably allocate at least 48bits to storing time values.64-bit Unix time would besafe for the indefinitefuture, as this variablewould not overflowuntil 2**63 or 9,223,372, 036, 854, 775, 808(over nineq u i n t i l l i o n )seconds after thebeginning of theUnix epoch -corresponding toGMT 15:30:08,Sunday, December4, 292,277,026,596.This is a ratherartificial and arbitrarydate, considering that itis several times theaverage lifespan of a sunlike our solar system’s, the

The Y2K38 problem

involves the basic

system time-keeping

from which most other

time and date

information is derived,

while the Y2K problem,

mostly involves

application programs.


very same celestial body by which wemeasure time. The sun is estimated at presentto be about four and a half billion years old,and it may last another five billion yearsbefore running out of hydrogen and turninginto a white dwarf star. Thus a

straightforward approach is switching to64-bit computing and solves the problem.

What can one do about it?

If you are a programmer or a systemsintegrator who needs to know what you

can do to this problem. A quick check withthe following Perl and C script may helpdetermine if your computers will haveproblems (this requires Perl and/or C to beinstalled on your system):

These are incorrect outputs; check whetherthe date and time outputs come correct afterthe critical event second in your machine?

Further a checklist of suggestions

1. An organisation called The Open Group(formerly X/Open), which maintains theUnix specification and trademark, has anumber of programmingrecommendations [2] that should befollowed by developers to deal with theyear 2038 and other problematic dates.

2. If you are working with Open Source code,a free library at [3] may be a useful referencefor patching existing code for high-accuracy long-term time calculation

3. Also, see an article [4] regarding Solutionsto the Year 2000 Problem. Though fixingthe Y2K bug may not directly help infixing the Y2K38 bug but many of thesuggestions from this article can beapplied to the 2038 problem too.

How about making time_t unsigned in32-bit software?

One of the quick-fixes that has beensuggested for existing 32-bit software is tore-define time_t as an unsigned integerinstead of a signed integer. It sounds like agood idea at first. We already know that mostof the standard time_t handling functionsdo not accept negative time_t values anyway,

so why not just make time_t into a data typethat only represents positive numbers?

An unsigned integer does not have to wasteone of its bits to store the plus/minus signfor the number it represents. This doublesthe range of numbers it can store. Whereasa signed 32-bit integer can only go up to 2147 483 647, an unsigned 32-bit integer cango all the way up to 4 294 967 295. A time_tof this magnitude could represent any dateand time from 12:00:00 AM 1-Jan-1970 allthe way out to 6:28:15 AM 7-Feb-2106, surelygiving us more than enough years forsoftware to dominate the planet.

Well, there is a problem. time_t is not justused to store absolute dates and times. It isalso used, in many applications, to storedifferences between two date/time values, i.e.to answer the question of “how much time isthere between date A and date B?”. In thesecases, we do need time_t to allow negativevalues. It is entirely possible that date B comesbefore date A. Blindly changing time_t to anunsigned integer will, in these parts of aprogramme, make the code unusable.

Changing time_t to an unsigned integerwould, in most programmes, be robbing Oneto pay Other. You would be fixing one set ofbugs (the Year 2038 Problem) only tointroduce a whole new set as the time

Perl C

$ENV{‘TZ’} = “GMT”; #include <stdio.h>for ($clock = 2147483641; $clock < #include <time.h>2147483651; $clock++) print ctime($clock); int main()

{ time_t i;i=2147483641;for(;i<2147483651;i++)printf(“%s”,ctime(&i));

}

The output of this script on GNU/Linux (kernel 2.4.20-8) for both Perl and C:

Tue Jan 19 03:14:01 2038 Tue Jan 19 08:44:01 2038Tue Jan 19 03:14:02 2038 Tue Jan 19 08:44:02 2038Tue Jan 19 03:14:03 2038 Tue Jan 19 08:44:03 2038Tue Jan 19 03:14:04 2038 Tue Jan 19 08:44:04 2038Tue Jan 19 03:14:05 2038 Tue Jan 19 08:44:05 2038Tue Jan 19 03:14:06 2038 Tue Jan 19 08:44:06 2038Tue Jan 19 03:14:07 2038 Tue Jan 19 08:44:07 2038Fri Dec 13 20:45:52 1901 Sat Dec 14 02:39:12 1901Fri Dec 13 20:45:53 1901 Sat Dec 14 02:39:13 1901Fri Dec 13 20:45:54 1901 Sat Dec 14 02:39:14 1901

differences not being computed properly.

Not very obvious

The greatest danger with the Year 2038Problem is its invisibility. The more-famousYear 2000 is a big, it only takes a few secondsof thought, even for a computer-illiterateperson, to imagine what might happenwhen 1999 turns into 2000. Also this Bugreceived large amount of media attention.But January 19, 2038 is not nearly as obvious.Software companies will probably not thinkof trying out a Year 2038 scenario beforedoomsday strikes. Of course, there will besome warning ahead of time. Schedulingsoftware, billing programmes, personalreminder calendars, and other such piecesof code that set dates in the near future willfail as soon as one of their target datesexceeds 19-Jan-2038, assuming a time_t isused to store them.

Worse, the parts of their software they hadto fix for Year 2000 Compliance will becompletely different from the parts of theirprograms that will fail on 19-Jan-2038, sofixing one problem will not fix the other.Most programmes written in the C or otherhigh level programming language arerelatively immune to the Y2K problem, butsuffer instead from the Year 2038 problem.This problem arises because most C


programmes use a library of routines calledthe standard time library (time.h). This libraryestablishes a standard 4-byte format for thestorage of time values and also provides anumber of functions for converting,displaying and calculating time values.

Some Contrast Views

One school of thought feels that thisimpending disaster will NOT strike too manypeople and consider as non-problem. Theyreason that, by the time 2038 rolls around,most programmes will be running on 64-bitor even 128-bit computers. In a 64-bitprogrammes, a time_t could represent anydate and time in the future out to 292 000000 000 A.D., which is about several timesthe currently estimated age of the universe.

The problem with this kind of optimism isthe same root problem behind most of theYear 2000 concerns that plagued thesoftware industry in previous years : LegacyCode. Developing a new piece of software isan expensive and time-consuming process.It is much easier to take an existingprogrammes that we know works, and codeone or two new features into it, than to throwthe earlier program out and write a new onefrom scratch. This process of enhancing andmaintaining “legacy” source code can go on

for years, or even decades. The MS-DOS layer,still at the heart of Microsoft’s Windows 98and Windows ME was first written in 1981.Much of the financial software hit by thevarious Year 2000 bugs had also been usedand maintained since the 1970s, when theyear 2000 was still thought of as more of ascience fiction movie title than an actualimpending future. Surely, if this software hadbeen written in the 1990s its Year 2000Compliance would have been crucial to itsauthors, and it would have been designedwith the year 2000 in mind.

One may note that computer designers canno longer afford to make a “clean break” withthe computer architectures of the past. Noone wants to buy a new kind of PC if it doesnot run all their old PC’s programmes. So, justas the new generation of Microsoft Windowsoperating systems has to be able to run theold 16-bit programmes written for Windows3 or MS-DOS, similarly any new PC architecturewill have to be able to run existing 32-bitprograms in some kind of “backwardcompatibility” mode. Even if every PC in theyear 2038 has a 64-bit CPU, there will be a lotof older 32-bit programs running on them.

The other school of thought feels that theY2K38 threat is more likely to result in aircraftfalling from the sky, glitches in life-support

systems, and nuclear power plant meltdownthan the Y2K threat, which is more likely todisrupt inventory control, credit card payments,pension plans etc. The reason for this is that theY2K38 problem involves the basic system time-keeping from which most other time and dateinformation is derived, while the Y2K problem,mostly involves application programs.

Well whatever may be the thoughts we mustdo our homework and keep ourselvesupdate properly in order to run our systemaccurately in present for any future dates.

Acknowledgements

The author acknowledges Shri R. Gandhi, In-charge Director, IDRBT for initiation andmotivation and the Computing and Internetcommunity working in this area.

References

1. http://www.deepsky.com/~merovech/outputs.html

2. http://www.rdg.opengroup.org/public/tech/base/year2000.html

3. http://cr.yp.to/libtai.html

4. http://www.deepsky.com/~merovech/millennium.html ❑

CD onVIII Bipartite Settlement

for

Workmen Staff

and

Joint Note on

Wage Revision

for Officers

available at Rs.300/-Contact : Publications Department, Indian Banks’ Association, Stadium House,

6th floor, Block 3, V N Road, Mumbai 400 020.Phone : 022-22894500/22894530


bringing it to the main stream of economy through

reformation. In this Union Budget 2005-06, the

Hon’ble Finance Minister has introduced new

schemes to unearth black money and assets. He was

concerned about large cash transactions, especially

withdrawal of cash which become part of black

economy.

Therefore, two anti tax-evasion measures are

suggested in his budget speech. Firstly, Banking Cash

Transaction Tax and secondly, reporting to the

Government, all deposits which are exempt from TDS

on interest by banks.

Meaning & Applicability

The Banking Cash Transaction Tax (BCTT) means

Tax leviable on the taxable banking

transactions.

Taxable Banking Transaction (TBT) is

described below :

A transaction, being

withdrawal of Cash

by whatever

Banking CashTranscation Tax - A New step in

Indian Budget P.K. Barman

BCTT is leviableon a bankingtransaction, beingwithdrawal of Cashby whatever modeon any single dayfrom an account(other than asavings bankaccount)maintained withany scheduledbank, exceeding –

● Rs. 25,000/- incase suchwithdrawal isfrom theaccountmaintained byany individualor HinduUndividedFamily (HUF);

● Rs. 1,00,000/-in case suchwithdrawal isfrom theaccountmaintained bya person otherthan anyindividual orHUF.

Introduction

Our Hon’ble Finance Minister

Shri P. Chidambaram has always

shown the new path of revenue

collection, keeping in mind to

unearth black money and

mode on any single day from an account (other than a

savings bank account) maintained with any scheduled

bank, exceeding –

(i) Rs. 25,000/- in case such withdrawal is from the

account maintained by any individual or Hindu

Undivided Family (HUF);

(ii) Rs. 1,00,000/- in case such withdrawal is from

the account maintained by a person other than

any individual or HUF.

However such banking transaction tax is leviable

from the account holder whose cash is withdrawn

from any scheduled bank.

The rate of such tax is 0.10% of the value of every

such taxable banking transaction.

The value of taxable banking transaction shall be

the amount of cash withdrawn.

As for example Rs. 26,000/- is drawn in cash in a

single day from current account of M/s. X Enterprise

(a proprietorship business of Mr. X) or Rs. 1,05,000/- is

drawn in cash in a single day from Cash Credit

Account of M/s. XYZ. Co. Ltd., from any scheduled

bank, then Rs. 26/- or Rs.105/- shall be debited by the

scheduled bank respectively in the current account

of M/s. X Enterprise or Cash Credit account of

M/s. XYZ Co. Ltd. as BCTT.

A transaction, being receipt of cash from any

scheduled bank on any single day on encashment

of one or more term deposits, whether on maturity

or otherwise, from that bank exceeding –



Shri Barman, M.Com., F.C.A. is

founder Partner of M/s. P. K. Barman

& Co. (Chartered Accountants),

Jamshedpur. He is concurrent

auditor of several Banks.

(i) Rs. 25,000/-, in case such term deposit

or deposits are in the name of any

individual or HUF;

(ii) Rs. 1,00,000/-, in case such term deposit

or deposits are by any person other

than any individual or HUF.

However such banking transactions tax is

payable by the persons who receives the

cash on encashment of term deposit(s). The

rate of such tax is also 0.10% of the value of

every taxable banking transaction. Here the

value of taxable banking transaction shall

be the amount of cash received on

encashment of term deposit(s). However no

banking cash transaction tax shall be payable

if the amount of the term deposit(s) are

credited to any account with the bank.

As for example, Rs. X is the maturity value of

a fixed deposit in a scheduled bank and the

depositor or the nominee is eligible to

encash the FD. In such a case, Rs. Y=

(0.10/100.10 * Rs.X) shall be charged on the

depositor and Rs. (X-Y) should be paid in

cash by the scheduled bank

Here ‘scheduled bank’ means (i) State Bank

of India and it’s subsidiary banks, (ii) banks

constituted under the Banking Companies

(Acquisition and Transfer of Undertakings)

Act, 1970 or the Banking Companies

(Acquisition and Transfer of Undertakings)

Act, 1980, (iii) any other bank included in the

Second Schedule of the Reserve Bank of India

Act, 1934.

However BCTT is applicable to whole of India

except Jammu & Kashmir with effect from

01st June,2005.

Collection, Deposit and Recovery

Every scheduled bank shall collect the BCTT

from every person who enters into a TBT with

that bank. The BCTT collected during any

calendar month shall be paid by every

scheduled bank to the credit of the Central

Government by the 15th day of the month

immediately following the said calendar

month. Any scheduled bank, who fails to collect

BCTT, shall, not withstanding, such failure, be

liable to pay the tax to the credit of the Central

Government within specified time.

As per provision of the Banking Cash

Transaction Tax Rules, 2005

a) every branch of a scheduled bank shall

keep and maintain in Form No.1 the

particulars of taxable banking

transactions entered into in that branch;

b) every scheduled bank which is required

to collect and pay BCTT in respect of all

its branches, pay the amount of such

tax to the credit of the Central

Government by remitting it into any

branch of the Reserve Bank of India or

State Bank of India or any authorised

bank accompanied by a BCTT Challan.

Furnishing of monthly BCTT Statement to

the Income Tax Authority

Every scheduled bank shall furnish a

statement of taxable banking

transactions in respect of

which it is required to

collect tax during a

month, in Form No. 2 to

the income tax

authority specified

in this behalf by the

Board on or before

the expiry of the

m o n t h

i m m e d i a t e l y

following the said

month on a

computer media, in

accordance with the

following :

‘‘”

BCTT is introduced inthe budget to preventmoney laundering, taxevasion and blackmoney generation. Themain object is ‘not totax but to track’. Theintension is great butapplication should notbe compelled to bearthe cost by non-targeted group.


i) the computer media conforms to the

following specifications:-

a) CD ROM of 650 MB capacity or

higher capacity; or

b) 4mm 2GB/4GB (90M/120M) DAT

Cartridge; or

c) Digital Video Disc

ii) if the data relating to the schedules

is copied using data compression or

backup software utility, the

corresponding software utility or

procedure for its decompression or

restoration shall also be furnished;

iii) the statement shall be accompanied

by a certificate regarding clean and

virus free data.

Submission of Annual Return

Every scheduled bank (i.e., assessee) shall

submit annual return in Form No. 3 in

computer media, to the Assessing Officer or

any other authority or agency authorised

by the Central Board of Direct Taxes (CBDT)

within 31st July immediately following the

financial year. The particulars required to be

furnished in the Schedules A & B to Form

No. 3 shall be furnished on a computer

media, in accordance with the following :

i) the computer media conforms to the

following specifications :

a) CD ROM of 650 MB capacity or

higher capacity; or

b) 4mm 2GB/ 4GB (90M/ 120M) DAT

Cartridge; or

c) Digital Video Disc;

ii) if the data relating to the schedules is

copied using data compression or

backup software utility, the

corresponding software utility or

procedure for its decompression or

restoration shall also be furnished;

iii) the statement shall be accompanied

by a certificate regarding clean and

virus free data.

Such Annual Return shall be signed and

verified

i) in case of a scheduled bank, being a

company, by the managing director or

a director thereof:

ii) in case of a scheduled bank, not being

a company by the principal officer

thereof.

Where any assessee fails to furnish the above

Return within the prescribed time, the

Assessing Officer may issue a notice to such

assessee to furnish return within 30 days

from the date of service of the notice.

Any assessee who fails to furnish the return

within the prescribed/allowed time or having

furnished a return but discovers any

omission or wrong statement therein, may

furnish a return or a revised return, as the

case may be, at any time before the

assessment is made.

Assessment and Rectification of Mistakes

The Assessing Officer is empowered to make

assessment and demand to produce

accounts or documents or evidence, as he

requires for the purpose of such assessment.

The Assessing Officer after considering such

accounts, documents or other evidences and

any other relevant material, shall, by an order

in writing assess the BCTT payable or

refundable. Such assessment shall be made

within expiry of 2 years from the end of the

relevant financial year. Every assessee, in case

any amount is refunded to it on assessment,

shall, within 30 days from the date of receipt

of such amount, refunds to the concerned

person from whom such amount was

collected.

The Assessing Officer may amend any order

passed by him to rectify any mistake

apparent from record, within 1 year, from

the end of the financial year in which the

order was passed. Any amendment which

has the effect of enhancing an assessment

or reducing refund or otherwise increasing

the liability of the assessee, shall be made

only after giving the assessee a reasonable

opportunity of being heard.

Levy of Interest and Penalty

Every assessee who fails to credit the BCTT

to the account of Central Government within

15th day of the month immediately

following said calendar month, shall pay

simple interest @ 1% of such tax for every

month or part of a month by which such

credit of the tax or any part thereof is

delayed.

An assessee who fails to collect the whole or

any part of the BCTT, shall be liabile to pay by

way of penalty, a sum equal to the amount of

BCTT that it fails to collect in addition to

paying the tax and interest on it.

Any assessee who having collected the BCTT,

fails to pay such tax to the Credit of the

Central Government by the 15th day of the

month immediately following the said

calendar month, shall be liable to pay by

way of penalty Rs.1,000/- for every day

during which the failure continues in

addition to paying the tax and interest on it.

However such penalty shall not exceed the

amount of BCTT that it fails to pay.

If an assessee fails to furnish annual return

in due time or within time allowed by

Assessing Officer through any notice, shall

be liable to pay, by way of penalty, Rs.100/-

for every day during which the failure

continues.

If the Assessing Officer in the course of

proceedings relating to BCTT satisfied that

any person has failed to comply with a notice,


he may direct to such person to pay, by way

of penalty in addition to any BCTT and

interest, if any, payable by him, Rs.10,000/- for

each such failure.

No penalty shall be imposed under any of

the above situation, if the assessee proved

that there was reasonable cause for the

failure. No order imposing a penalty shall

be made unless the assessee has been given

a reasonable opportunity of being heard.

Where any tax, interest or penalty is payable

in consequence of any order, the Assessing

Officer shall serve upon the assessee a notice

of demand in Form No. 4 specifying the sum

payable.

Appeals

Any assessee aggrieved by any assessment

order, may appeal to the Commissioner of

Income Tax (Appeals) within 30 days from

the date of receipt of the order of the

Assessing Officer. Every appeal shall be made

in Form No. 5 describing the grounds of

appeal and the form of verification

appended thereto relating to an assessee.

Form No. 5 shall be signed and verified by

the person who is authorised to sign the

return of taxable banking transaction. Also

appeal filed to the C.I.T.(Appeals) by any

assessee shall be accompanied by a fee of

Rs. 1,000/-. Any assessee aggrieved by an

order passed by C.I.T. (Appeals) may appeal

to the Appellate Tribunal against such order.

Also the Commissioner of Income Tax may,

if he objects to any order passed by the

C.I.T.(Appeals), direct the Assessing Officer to

appeal to the Appellate Tribunal against

such order. Every such appeal to Appellate

Tribunal shall be filed within 60 days from

the date of receipt of the order by the

assessee, or by the C.I.T as the case may be.

Every such appeal shall be in Form No. 6

describing the grounds of appeal and the

form of verification appended thereto

relating to an assessee. Form No. 6 shall be

signed and verified by the person who is

authorised to sign the return of taxable

banking transaction. Also appeal filed to the

Appellate Tribunal by any assessee shall be

accompanied by a fee of Rs. 1,000/-.

Prosecution

If a person makes a statement in any

verification or delivers an account or

statement, which is false, which he either

knows or believes to be false or does not

believe to be true, he shall be punishable

with imprisonment for a term which extend

to 3 years and with fine. Notwithstanding

anything contained in the Code of Criminal

Procedure, 1973, the above offence shall be

deemed to be non-cognizable within the

meaning of that Code. A person shall not be

proceeded against for any offence under

BCTT except with the previous sanction of

the Chief Commissioner of Income Tax.

Deduction is respect of BCTT paid by the Tax

payer

Any amount paid as BCTT by a tax payer will

be allowed as a deduction under section

36(1)(xiii) while computing his business or

professional income w.e.f. assessment year

2006-07. It is subject to note that BCTT paid

by a person having no business or

professional income, cannot claim benefit

of this deduction.

Application of other Acts or Rule(s)

Where words and expressions, provisions

used but not defined but defined in the

Negotiable Instruments Act, 1881, the Reserve

Bank of India Act,1934, the Banking

Regulation Act, 1949, the Income Tax Act, 1961

or the rules and regulations made thereunder

shall have the meaning respectively assigned

to them in those Acts or the rules or the

regulations in relation to BCTT.

Conclusion

BCTT is introduced in the budget to prevent

money laundering, tax evasion and black

money generation. The main object is ‘not

to tax but to track’. The intension is great

but application should not be compelled

to bear the cost by non-targeted group.

This system may affect those who are

genuine tax payers and routing all

transactions through scheduled banks only

and specially have no income from

business. It is accepted fact that those who

evade tax do not carry out transaction

through scheduled banks. They neither

deposit, nor withdraw money from

scheduled banks.

On the other side, honest tax payers deposit

their entire receipts by way of sale proceeds of

business, rental and other incomes in the bank

and withdraw cash from bank for payment of

wages, salaries and other expenditures specially

by SSI or tiny units or small traders in rural and

semi urban areas of India. ❑

www.iba.org.in

Balancing Quality andQuantity in SHGs in India

R. Devaprakash


The leaps and

bounds in terms

of growth of SHGs

have brought in

attendant risks of

ensuring quality

in SHGs. There are

also many not-so-

serious players

who for the heck

of getting the kick

of SHG based

approach, have

come to adapt

SHG based

approach without

being convinced

of the seriousness

of the SHG

business.

banking leaving the rest to the MFI based Grameentype of lending or direct lending methodology.Anecdotal evidence suggests that there are over 26.9million clients covered by micro finance, of whichover 24.25 million clients are covered by SHG basedmainstream methodology. State-wise compilation ofSHG census put the total SHGs count at over 26million and out of which over 17.5 million have beencredit linked (1618476 million SHGs as credit linkedhas been reported as of March 2005). While 65% ofSHGs (roughly over 17 million SHGs) are denselylocated in the four southern states, leaving theremaining SHGs sparsely sprinkled across the rest ofthe states in India. There have been deliberateinterventions in the last two years by major playersin the sector including NABARD to address to thisinequity in distribution of SHGs. An estimate put the

micro finance NGOs at over 10000 out of over alakh of NGOs in India. There are over 800 MFIs,

over 4000 SHG federations and the total creditoutlay by all the micro finance entities is put at

around Rs. 10000 crores ( Rs. 6898 crores alonethrough SHG based lending). Of all the rural

credit products in India, there is no otherproduct, which has invaded the rural

credit inventory of banks than SHGlinkage banking which has

emerged as the mostsuccessful, viable,

sustainable andaccepted

Micro finance has come of ages inIndia and especially in the lastthree to four years there has beenan exponential growth in microfinance development. It is saidthat India brims with Self HelpGroups (SHGs) and over 91% ofthe Indian micro finance isthrough the SHG based linkage

product since the last decade. However the spreadand success of the program needs to spill overuniformly across the country.

The leaps and bounds in terms of growth of SHGshave brought in attendant risks of ensuring qualityin SHGs. There are also many not-so-serious playerswho for the heck of getting the kick of SHG basedapproach, have come to adapt SHG based approachwithout being convinced of the seriousness of theSHG business. The fact that for many of theGovernment programs, SHGs have become a formatto deliver the services though have caused someaberrations in quality and standards, but fairly goodnumber of Government programs like MahalirThittam of Tamil Nadu, Mission Shakti of Orissa, Veluguof Andhra Pradesh, Kudumbashree of Kerala to namea few, have been virtually anchoring the SHGmovement in the concerned states setting newstandards and ensuring best practices on SHGs whichremains largely appreciated and complements to thelarger efforts of the other stake holders in the sector.The target-based approach both for formation ofSHGs and credit linkage has been worrying factorwhich had its own negative implications on thequality of SHGs. In the game of ensuring largeroutreach, the challenge remains for largeGovernment programs promoted by key anchoringagencies like Women and Child DevelopmentDepartment and Panchayat and Rural Development.Department (which happens to take a lions share interms of number of SHGs promoted) of theGovernment to balance the quality of SHGs whilebroadcasting of SHGs over wider area.

SHG Rating

Rating of SHGs assumes importance as it is not onlya pre-appraisal tool but as well a self monitoringyardstick for the SHGs themselves for self evaluationwhich is a continuous process. Quality assessment of

Contd. on Page 35...


Performance Highlights of

Public Sector Banks 2004-05

important parameters such as Total Assets,Deposits, Investments, Advances, Non-Performing Assets (Gross and Net), InterestIncome, Other Income, Total Income,Interest Expenditure, OperatingExpenditure, Total Expenditure, OperatingProfit, Provisions and Contingencies andNet Profit and important ratios like Credit-Deposit Ratio, Investment-Deposit Ratio,Spread to Total Assets, Operating expensesto Total Expenses, Return on Assets, CapitalAdequacy Ratio, NPA ratio and productivityratios. Significant features of the operationsof banks on each of the above-mentionedparameters are given below :

Total Assets – As on 31st March, 2005, totalassets of the public sector banks increasedto Rs. 17,58,207 crores from Rs. 14,71,428crores of the previous financial yearrecording a growth of 19.5 per cent during2005 as against 14.4 per cent of the previousyear. Higher growth in total assets is duelargely to inclusion of total assets of IDBILtd. in 2005. Excluding IDBI Ltd., the growthin total assets was marginally lower at 14.0per cent during 2004-05. 10 banks recordedhigher growth than the group average.Oriental Bank of Commerce tops the listwith a growth of 31.9 per cent, closelyfollowed by the Allahabad Bank (30.1 percent) and State Bank of Indore (29.5 percent). Bank of Maharashtra recorded lowestgrowth in assets with 2.1 per cent during2004-05.

Deposits – Total deposits mobilised by thePublic Sector Banks increased fromRs. 12,26,838 crores as on 31st March,2004 to Rs. 14,21,672 crores as on 31stMarch, 2005. Deposits showed a subdued

growth during 2004-05. Total depositsrecorded a growth of 15.9 per cent during2004-05, which is higher than 13.7 per centof the previous year. Excluding IDBI Ltd.,the total growth was only 14.6 per centduring 2004-05. 15 banks recorded highergrowth than the group average. OrientalBank of Commerce recorded the highestgrowth in deposits with a growth of 34.1per cent, closely followed by State Bank ofIndore with 32.5 per cent during 2004-05.Indian Overseas Bank recorded the lowestgrowth in deposits with 6.7 per centduring 2004-05. SBI and Associates as agroup recorded a growth of 16.8 per centas compared to nationalised banks’ groupwith a growth of 13.5 per cent during2004-05.

Investments – Banks’ investmentsshowed a lower growth of 8.5 per centduring 2004-05 as against the growth of14.7 per cent during 2003-04. In absoluteterms, the total investments increasedfrom Rs. 6,25,678 crores as at March 31st,2004 to Rs. 6,78,637 crores as on 31stMarch, 2005. Excluding IDBI Ltd., thegrowth in investment was only 4.5 per centduring 2004-05. Seven Banks recorded ahigher growth than the group average.Allahabad Bank recorded the highestgrowth in Investments with 22.1 per cent,closely followed by Punjab National Bankwith 20.3 per cent during 2004-05.Nationalised Banks as a group showed agrowth of 4.0 per cent during 2004-05,which is much lower than the previousyear’s growth of 17.3 per cent during 2003-04. SBI group as a whole recorded a growthof 5.2 per cent during 2004-05 as against10.9 per cent recorded in the previous year.

Advances - The year 2004-05 witnessedhigher credit off take by the commercial

banks. This was reflected in the totaldisbursement made by the PSBs during2004-05. Total advances of the banksjumped up from Rs. 6,32,740 crores as on31st March, 2004 to Rs. 8,48,340 crores ason 31st March, 2005 showing animpressive growth of 34.1 per cent asagainst the previous year’s growth of 15.2per cent. Excluding the IDBI Bank Ltd., thegrowth was 26.9 per cent during 2004-05.Eight banks recorded higher growth thanthe group average. United Bank of Indiashowed the maximum growth in advanceswith 43.02 per cent closely followed byState Bank of Indore with 41.1 per centand State Bank of Bikaner & Jaipur with39.7 per cent during 2004-05. Nationalisedbanks as a group recorded a growth of 25.7per cent during 2004-05 as against theprevious year’s growth of 14.5 per cent. Asfor SBI Group the growth was 29.1 per centduring 2004-05 as against 16.6 per centrecorded in the previous year.

Non-performing Assets (NPA) – During2004-05, both gross and net non-performing assets showed decline inabsolute terms and as percentage ofadvances inspite of the reduction in thetotal provisions towards non-performingassets as compared to the previous year.Persistent recovery set up coupled withclose monitoring of the assets could besighted as reasons for reduction in non-performing assets. Gross NPA of the PublicSector Banks decreased from Rs. 51,537crores as on 31st March, 2004 to Rs. 47,596crores as on 31st March, 2005 showing adeclined growth of (-) 7.6 per cent. NetNPA declined from Rs. 18,860 crores as on31st March, 2004 to Rs. 16,983 crores ason 31st March, 2005 recording a declinedgrowth of (-) 10.0 per cent. Six banks

Highlight

I n this note we analyse theperformance of public sector banks(except Punjab and Sind Bank) on


namely Bank of India, Bank of Maharashtra,Oriental Bank of Commerce, Vijaya Bank,State Bank of Indore and State Bank ofPatiala recorded higher growth in GrossNPA during 2004-05 as compared toprevious year. In the case of Net NPA, ninebanks recorded higher growth in net NPAthan the previous year. SBI Group recordedhigher net NPA than the previous year.

Income – Total Income of the Public SectorBanks recorded a growth of 3.8 per centduring 2004-05 as compared to 7.2 percent of the previous year. Excluding IDBILtd. the growth was only 1.4 per cent during2004-05. Growth in income in PSBs wasdue largely to higher contribution frominterest income than the fee basedincome. Non-interest income, which wasshowing a higher growth during the lastthree years, has recorded a declinedgrowth during 2004-05. This could be dueto lower treasury earnings during 2004-05. Interest income of the banks increasedfrom Rs. 1,09,572 crores during 2003-04to Rs. 1,19,098 crores during 2004-05recording a growth of 8.7 per cent asagainst 2.10 per cent during 2003-04. Onthe other hand, the other income of thebanks recorded a declined growth of (-)15.5 per cent during 2004-05 as againstthe previous year’s growth of 32.3 per cent.Interestly, the share of fee income in thetotal income declined to 16.6 per centduring 2004-05 as against 20.4 per cent ofthe previous year. Ten banks recordedhigher growth in income than the groupaverage. Allahabad Bank tops the list witha growth of 11.9 per cent, closely followedby State Bank of Mysore with 11.2 per centduring 2004-05.

Expenditure – Total expenditure(excluding provisions and contingencies)of the banks increased from Rs. 98,127crores during 2003-04 to Rs. 1,04,038crores during 2004-05 showing a growthof 6.0 per cent as against previous year’slower growth of (-) 0.6 per cent. ExcludingIDBI Ltd., the growth in total expenditurewas 3.0 per cent during 2004-05. Interestexpenditure recorded a higher growth of

3.5 per cent during 2004-05 as against theprevious year’s growth of (-) 5.9 per cent.Operating expenditure, on the other hand,recorded a lower growth of 11.1 per centduring 2004-05 as compared to 11.9 percent during 2003-04. Nationalised Banksand SBI Group recorded lower growth inoperational expenditure during 2004-05.14 banks recorded higher growth in totalexpenditure than the group averageduring 2004-05. Allahabad Bank (-2.9 percent), Indian Bank (-13.9 per cent) andState Bank of Saurashtra (- 6.5 per cent)were the only three banks, which recordeda decline in operating expenses than theprevious year.

Profit – The total operating profit of thePSBs declined from Rs. 39,536 croresduring 2003-04 to Rs. 38,799 crores during2004-05 recording a declined growth of(-) 1.9 per cent during 2004-05 as against33.1 per cent of the previous year. Thoughthe total provisions made by the banksincreased from Rs. 22,928 crores during2003-04 to Rs. 23,241 crores during2004-05, the growth was only marginal at1.4 per cent during 2004-05 as against 31.6per cent during 2003-04. Majority of thebanks have made lower provisions during2004-05 as compared to previous year. Netprofit of the banks also declined fromRs. 16,546 crores during 2003-04 toRs. 15,558 crores during 2004-05 recordinga declined growth of (-) 6.0 per cent asagainst 33.6 per cent of the previous year.Excluding IDBI Ltd., the decline is evensharper at (-) 7.8 per cent during 2004-05.None of the banks analysed in this noteshowed net loss during 2004-05. Ten banksrecorded higher growth in net profit thanthe previous year.

Capital Adequacy Ratio – All PSBs hadachieved the stipulated CRAR of 9 per centas on 31st March, 2005. United Bank of Indiatopped the list with a CRAR of 18.2 percent closely followed by Corporation Bankwith a CRAR of 16.2 per cent. 10 banksrecorded higher CRAR during 2004-05,than the previous year.

Return on Assets – Net Profit aspercentage to total assets (Return onassets) declined marginally from 1.1 percent during 2003-04 to 0.9 per cent during2004-05. 14 banks have higher ROA thanthe group average, of which 10 banks haveROA of more than 1 per cent. Andhra Banktopped the group with an ROA of 1.59 percent, followed by Oriental Bank ofCommerce with 1.41 per cent.

Credit-Deposit Ratio – Credit-DepositRatio (C/D) Ratio of public sector banksshowed considerable improvement during2004-05. This is largely due to higherdeployment of credit and lower resourcemobilization during 2004-05. C/D ratio ofthe banks improved from 51.6 per centduring 2003-04 to 59.7 per during 2004-05. Excluding IDBI Ltd, the ratio was 57.1per cent during 2004-05. IDBI Ltd. tops thelist with a C/D ratio of 300.7 per centfollowed by Bank of India with 71.1 percent and Corporation Bank with 68.1 percent. The lowest ratio of 44.9 per cent wasrecorded by Central Bank of India.

Investment-Deposit Ratio – As notedbefore, the investments of the banks werelower during 2004-05 as compared to theprevious year. This is reflected in theinvestment –Deposit (I/D) ratio also during2004-05. The I/D ratio of the banksdeclined from 51.0 per cent during2003-04 to 47.7 per cent during 2004-05.IDBI Ltd. with a ratio of 165.9 per cent topsthe group followed by UCO Bank andUnited Bank of India with 56.8 per centand Indian Bank with 51.5 per cent during2004-05. Bank of India recorded the lowestratio with 35.8 per cent during 2004-05.

Interest Spread – Interest spread or netInterest Income as percentage of totalassets declined marginally from 3.0 percent during 2003-04 to 2.9 per cent duringthe financial year 2004-05. In the case ofnationalized banks, interest spreaddeclined from 3.1 during 2003-04 to 3 percent during 2004-05. On the other hand,for SBI group, the interest spread ratiomoved up from 2.8 per cent during

Contd to page 34...


0

100000

200000

300000

400000

500000

600000

700000

800000

200520042003

Investments(Rs. in crore)

SBISBIAssociates

NationalisedBank

Statement I : Public Sector Banks : Deposits/Investments/AdvancesAs on March 31 (Rs. crore)

Deposits Investments Advances

Sr. No BANKS 2003 2004 2005 2003 2004 2005 2003 2004 2005

I. NATIONALISED BANKS1. Allahabad Bank 25463 31477 40762 12372 15555 18988 12544 15342 211502. Andhra Bank 21062 22941 27550 10518 10317 10646 11513 12885 175163. Bank of Baroda 66441 72967 81333 30179 38019 37074 35348 35601 434004. Bank of India 64098 71003 78821 24435 27163 28203 42633 45856 560135. Bank of Maharashtra 22176 26446 28844 11802 13943 14479 9508 11732 130616. Canara Bank 72095 86345 96908 30458 35793 38053 40472 47639 604217. Central Bank of India 51165 55909 60751 26045 31405 30834 23159 22804 272778. Corporation Bank 21725 23191 27233 10670 10685 10261 12029 13890 185469. Dena Bank 16491 18349 20096 8500 9736 9696 8436 9412 11308

10. Indian Bank 27016 30444 34808 14839 16696 17920 12275 14126 1838011. Indian Overseas Bank 36699 41483 44241 18603 20172 19015 17447 20295 2520512. Oriental Bank of Commerce 29809 35674 47850 14781 16794 18342 15677 19681 2529913. Punjab & Sind Bank 13224 13642 N.A 6237 6777 N.A 5892 6030 N.A14. Punjab National Bank 75813 87916 103166 34030 42125 50672 40228 47225 6041215. Syndicate Bank 30661 42585 46294 13823 17917 20370 16305 20647 2672916. UCO Bank 31343 39244 49470 14138 17611 19064 15923 20626 2765617. Union Bank of India 44749 50559 61830 19371 22442 22792 25515 29426 4010518. United Bank of India 21031 22758 25348 12639 13916 14403 7352 7963 1138919. Vijaya Bank 17020 21015 25617 8862 10837 12068 7884 11045 14335

TOTAL OF 19 NATIONALISEDBANKS [I] 688081 793947 900923 322302 377904 392880 360140 412224 518202

II. State Bank of India (SBI) 296123 318619 367047 172348 185676 197097 137758 157934 202374III. ASSOCIATES OF SBI

1. State Bank of Bikaner & Jaipur 13234 15642 19038 7682 8430 8362 6773 8597 120092. State Bank of Hyderabad 20599 24258 28929 12519 15017 14559 9663 11814 155993. State Bank of Indore 9217 10419 13807 5137 5429 5898 5183 6406 90404. State Bank of Mysore 9013 11084 13585 4761 5487 5796 5261 6307 87815. State Bank of Patiala 17870 22473 26495 8122 11110 12312 10746 13086 153596. State Bank of Saurashtra 9054 10675 12613 4730 5846 6086 4649 5240 67147. State Bank of Travancore 15926 19721 24133 8039 10778 10592 9171 11132 14848

TOTAL OF 7 ASSOCIATES [III] 94913 114272 138600 50989 62097 63605 51445 62582 82350

TOTAL OF STATE BANKGROUP [II+III] 391036 432891 505647 223337 247774 260702 189204 220516 284724

IV. OTHER PUBLIC SECTOR BANKS1. IDBI Ltd. 15102 25055 45414

TOTAL OF PUBLIC SECTORBANKS [I+II+III+IV] 1079117 1226838 1421672 545639 625678 678637 549344 632740 848340

Source: Balancesheets of BanksN.A: Not Available

0

300000

600000

900000

1200000

1500000

200520042003

Deposits(Rs. in crore)

SBISBIAssociates

NationalisedBank

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

200520042003

Advances(Rs. in crore)

SBISBIAssociates

NationalisedBank


0

5000

10000

15000

20000

25000

200520042003

Net NPA(Rs. in crore)

SBISBIAssociates

NationalisedBank

0

10000

20000

30000

40000

50000

60000

200520042003

Gross NPA(Rs. in crore)

SBISBIAssociates

NationalisedBank

0

500000

1000000

1500000

2000000

200520042003

Total Assets(Rs. in crore)

SBISBIAssociates

NationalisedBank

Statement II : Public Sector Banks : Total Assets, Gross and Net Non-Performing AssetsAs on March 31 (Rs. crore)

Total Assets Gross NPA Net NPA

Sr. No BANKS 2003 2004 2005 2003 2004 2005 2003 2004 2005


10. Indian Bank 35375 39154 43860 1630 1192 748 755 383 24711. Indian Overseas Bank 41155 47322 50815 1896 1576 1388 912 578 31912. Oriental Bank of Commerce 33999 41007 54069 1146 1211 2492 225 – 32713. Punjab & Sind Bank 14491 15011 N.A 1247 1204 N.A 639 577 N.A14. Punjab National Bank 86222 102332 126241 4980 4670 3741 1527 449 11915. Syndicate Bank 34435 47223 52109 1420 1590 1433 700 532 42616. UCO Bank 34914 43798 54589 1366 1479 1399 697 753 81117. Union Bank of India 51060 58317 72413 2388 2347 2058 1253 845 106018. United Bank of India 24269 25843 29097 959 764 726 406 299 27719. Vijaya Bank 19072 24071 29335 506 390 431 206 100 85



1. State Bank of Bikaner & Jaipur 18038 20256 23401 580 484 400 282 107 1942. State Bank of Hyderabad 26132 30646 34922 740 691 553 315 77 953. State Bank of Indore 11364 13044 16898 295 266 303 138 – 914. State Bank of Mysore 11336 13758 16552 562 515 415 273 186 815. State Bank of Patiala 21289 26897 31502 531 503 653 161 – 1896. State Bank of Saurashtra 11453 12837 15039 354 200 184 164 – 947. State Bank of Travancore 19033 24003 28874 635 662 652 280 154 269



IV. OTHER PUBLIC SECTOR BANKS

1. IDBI Ltd. 81360 1216 848



0

30000

60000

90000

120000

150000

200520042003

Total Income(Rs. in crore)

SBISBIAssociates

NationalisedBank

0

5000

10000

15000

20000

25000

30000

200520042003

Other Income(Rs. in crore)

SBISBIAssociates

NationalisedBank

0

20000

40000

60000

80000

100000

120000

200520042003

Interest Income(Rs. in crore)

SBISBIAssociates

NationalisedBank

Statement III : Public Sector Banks : IncomeAs on March 31 (Rs. crores)

Interest Income Other Income Total Income

Sr. No BANKS 2003 2004 2005 2003 2004 2005 2003 2004 2005


10. Indian Bank 2532 2667 2871 525 747 569 3057 3414 344011. Indian Overseas Bank 3486 3754 3951 520 741 640 4006 4495 459112. Oriental Bank of Commerce 3304 3301 3572 531 722 505 3836 4022 407713. Punjab & Sind Bank 1284 1279 307 256 1591 153414. Punjab National Bank 7485 7780 8460 1250 1867 1676 8735 9647 1013615. Syndicate Bank 2875 3085 3758 495 776 565 3370 3861 432316. UCO Bank 2793 3096 3547 609 625 516 3402 3722 406317. Union Bank of India 4306 4516 4970 825 831 766 5131 5348 573618. United Bank of India 2119 2073 2133 428 505 478 2548 2578 261119. Vijaya Bank 1671 1940 2094 346 526 354 2017 2466 2448







IDBI Ltd. 2656 627 3283



0

20000

40000

60000

80000

100000

120000

200520042003

Total Expenditure*(Rs. in crore)

SBISBIAssociates

NationalisedBank

0

5000

10000

15000

20000

25000

30000

35000

40000

200520042003

Operating Expenses(Rs. in crore)

SBISBIAssociates

NationalisedBank

0

10000

20000

30000

40000

50000

60000

70000

80000

200520042003

Interest Expenses(Rs. in crore)

SBISBIAssociates

NationalisedBank

Statement IV : Public Sector Banks : ExpenditureAs on March 31 (Rs. crores)

Interest Expenses Operating Expenses Total Expenditure*

Sr. No BANKS 2003 2004 2005 2003 2004 2005 2003 2004 2005









1. IDBI Ltd. 2468 454 2922


* Excluding Provisions and Contingencies


0

5000

10000

15000

20000

200520042003

Net Profit(Rs. in crore)

SBISBIAssociates

NationalisedBank

0

5000

10000

15000

20000

25000

200520042003

Provisions & Contingencies(Rs. in crore)

SBISBIAssociates

NationalisedBank

0

5000

10000

15000

20000

25000

30000

35000

40000

200520042003

Operating Profit(Rs. in crore)

SBISBIAssociates

NationalisedBank

Statement V : Public Sector Banks : ProfitAs on March 31 (Rs. crores)

Operating Profit Provisions and Contingencies Net Profit

Sr. No BANKS 2003 2004 2005 2003 2004 2005 2003 2004 2005









1. IDBI Ltd. 361 54 307



Statement VI : Public Sector Banks : RatiosAs on March 31 (in per cent)

Credit Deposit Ratio Investment Deposit Ratio Spread as % of Assets

Sr. No BANKS 2003 2004 2005 2003 2004 2005 2003 2004 2005I. NATIONALISED BANKS

1. Allahabad Bank 49.26 48.74 51.89 48.59 49.42 46.58 3.24 3.13 3.022. Andhra Bank 54.66 56.17 63.58 49.94 44.97 38.64 3.05 3.37 3.273. Bank of Baroda 53.26 48.79 53.36 45.47 52.10 45.58 2.75 3.02 3.154. Bank of India 66.15 64.58 71.06 37.91 38.26 35.78 2.66 2.59 2.365. Bank of Maharashtra 42.88 44.36 45.28 53.22 52.72 50.20 2.71 2.40 2.686. Canara Bank 56.14 55.17 62.35 42.25 41.45 39.27 2.72 2.69 2.867. Central Bank of India 45.26 40.79 44.90 50.90 56.17 50.75 3.32 3.35 3.468. Corporation Bank 55.37 59.89 68.10 49.11 46.07 37.68 3.02 3.56 3.339. Dena Bank 51.15 51.29 56.27 51.54 53.06 48.25 2.82 2.67 2.86

10. Indian Bank 45.44 46.40 52.80 54.93 54.84 51.48 2.32 2.85 2.9711. Indian Overseas Bank 47.54 48.92 56.97 50.69 48.63 42.98 2.97 3.38 3.6512. Oriental Bank of Commerce 52.59 55.17 52.87 49.58 47.08 38.33 3.54 3.55 2.8213. Punjab & Sind Bank 44.56 44.20 N.A 47.17 49.67 N.A 2.67 3.29 N.A14. Punjab National Bank 53.06 53.72 58.56 44.89 47.92 49.12 3.62 3.54 3.1715. Syndicate Bank 53.18 48.48 57.74 45.08 42.07 44.00 3.51 3.03 3.2516. UCO Bank 50.80 52.56 44.93 45.11 44.88 56.82 2.53 2.73 2.5817. Union Bank of India 57.02 58.20 64.86 43.29 44.39 36.86 2.93 2.98 2.8518. United Bank of India 34.96 34.99 44.93 60.10 61.15 56.82 2.97 3.02 3.1419. Vijaya Bank 46.37 52.56 55.96 52.07 51.57 47.11 3.37 3.48 3.35

TOTAL OF 19 NATIONALISEDBANKS [I] 52.32 51.92 57.52 46.82 47.60 43.61 2.99 3.06 3.01

II. State Bank of India (SBI) 46.52 49.57 55.14 58.20 58.28 53.70 2.65 2.74 3.03III. ASSOCIATES OF SBI

1. State Bank of Bikaner & Jaipur 51.18 54.96 63.08 58.05 53.89 43.92 3.06 3.54 3.712. State Bank of Hyderabad 46.91 48.70 53.92 60.77 61.91 50.33 2.86 2.75 2.753. State Bank of Indore 56.23 61.49 65.47 55.74 52.11 42.72 3.23 3.48 2.984. State Bank of Mysore 58.37 56.90 64.64 52.82 49.50 42.66 3.41 3.30 3.295. State Bank of Patiala 60.14 58.23 57.97 45.45 49.44 46.47 3.71 3.06 3.106. State Bank of Saurashtra 51.36 49.09 53.23 52.59 54.77 48.25 2.94 3.15 3.387. State Bank of Travancore 57.58 56.45 61.53 50.47 54.65 43.89 2.75 2.85 3.10

TOTAL OF 7 ASSOCIATES [III] 54.20 54.77 59.42 53.76 54.34 45.89 3.12 3.09 3.15

TOTAL OF STATE BANKGROUP. [II+III] 48.39 50.94 56.31 57.12 57.24 51.56 2.77 2.83 3.06


1. IDBI Ltd 300.72 165.91 0.23

TOTAL OF PUBLIC SECTORBANKS [I+II+III+IV] 50.89 51.57 59.67 50.55 51.00 47.74 2.91 2.98 2.90

Statement VII : Public Sector Banks : RatiosAs on March 31 (In per cent)

Interest Income Opr. Exp. as % to Total Expenses Net Profit as % to Assets Capital Adequacy

Sr. No BANKS 2003 2004 2005 2003 2004 2005 2003 2004 2005I. NATIONALISED BANKS

1. Allahabad Bank 35.61 37.73 33.82 0.59 1.34 1.20 11.15 12.52 12.532. Andhra Bank 29.44 33.34 40.78 1.63 1.72 1.59 13.62 13.71 12.113. Bank of Baroda 29.21 33.55 36.47 1.01 1.14 0.72 12.65 13.91 12.614. Bank of India 29.75 32.76 33.74 1.11 1.19 0.36 12.02 13.01 11.525. Bank of Maharashtra 26.86 28.13 32.64 0.89 0.95 0.54 12.05 11.88 12.686. Canara Bank 28.31 30.49 32.30 1.24 1.34 1.01 12.50 12.66 12.787. Central Bank of India 32.47 34.62 37.33 0.54 0.98 0.52 10.51 12.43 12.158. Corporation Bank 26.46 31.68 36.25 1.58 1.73 1.19 18.50 20.11 16.239. Dena Bank 29.80 30.39 34.61 0.57 1.04 0.25 6.02 9.48 11.91

10. Indian Bank 30.61 40.66 36.84 0.53 1.04 0.93 10.85 12.82 14.1411. Indian Overseas Bank 29.49 32.02 35.59 1.01 1.08 1.28 11.30 12.49 14.2112. Oriental Bank of Commerce 21.80 25.89 27.99 1.34 1.67 1.41 14.04 14.47 9.2113. Punjab & Sind Bank 31.48 43.30 N.A 0.03 0.06 N.A 10.43 11.06 N.A14. Punjab National Bank 32.05 36.33 40.05 0.98 1.08 1.12 12.02 13.10 14.7815. Syndicate Bank 39.47 41.02 37.98 1.00 0.92 0.77 11.03 11.49 10.7016. UCO Bank 31.22 31.42 34.01 0.59 0.99 0.63 10.04 11.88 11.2617. Union Bank of India 26.61 28.06 30.20 1.08 1.22 0.99 12.41 12.32 12.0918. United Bank of India 29.72 34.23 36.63 1.26 1.22 1.03 15.17 17.04 18.1619. Vijaya Bank 35.16 31.11 33.09 1.03 1.71 1.30 12.66 14.11 12.92

TOTAL OF 19 NATIONALISEDBANKS [I] 30.22 33.38 35.15 0.98 1.18 0.91


1. State Bank of Bikaner & Jaipur 33.68 54.96 41.63 1.13 1.49 0.88 13.18 12.93 12.602. State Bank of Hyderabad 25.49 28.04 32.99 1.15 1.24 0.72 14.91 14.29 11.743. State Bank of Indore 28.61 32.23 35.08 1.76 1.73 0.79 13.09 12.39 11.614. State Bank of Mysore 33.50 38.03 43.47 1.02 1.28 1.25 11.62 11.53 12.085. State Bank of Patiala 28.84 29.63 29.28 1.51 1.60 0.91 13.57 13.56 14.216. State Bank of Saurashtra 29.76 32.10 28.93 0.81 1.38 0.27 13.68 14.53 11.457. State Bank of Travancore 25.74 29.98 31.15 0.90 1.02 0.86 11.30 11.36 11.05

TOTAL OF 7 ASSOCIATES [III] 28.98 32.04 34.41 1.19 1.37 0.82TOTAL OF STATE BANK GROUP [II+III] 27.71 32.33 35.06 0.91 1.02 0.91

IV. OTHER PUBLIC SECTOR BANKS1. IDBI Ltd. 15.54 0.78 15.51

TOTAL OF PUBLIC SECTORBANKS [I+II+III+IV] 29.26 32.98 34.56 0.96 1.12 0.88


Statement VIII : Public Sector Banks : RatiosAs on March 31 (In Crores) (In lacs)

Interest Income Net NPA as % to Net Advances Business Per Employee Profit per Employee

Sr. No BANKS 2003 2004 2005 2003 2004 2005 2003 2004 2005I NATIONALISED BANKS

1 Allahabad Bank 7.08 2.37 1.28 1.83 2.15 2.82 0.87 2.46 2.862 Andhra Bank 1.79 0.93 0.28 2.27 2.77 3.46 3.10 3.54 3.973 Bank of Baroda 3.72 2.99 1.45 2.38 2.53 3.10 1.92 2.43 1.714 Bank of India 5.37 4.50 2.77 2.43 2.67 3.20 1.97 2.35 0.805 Bank of Maharashtra 4.82 2.46 2.15 2.22 2.69 2.95 1.58 2.16 1.256 Canara Bank 3.59 2.89 1.88 2.50 2.98 3.51 2.26 2.97 2.487 Central Bank of India 7.02 5.57 2.98 1.68 1.82 2.07 0.77 1.58 0.938 Corporation Bank 1.65 1.80 1.12 3.29 3.66 4.38 4.06 4.98 3.959 Dena Bank 11.83 9.40 5.23 2.42 2.74 3.13 1.08 2.23 0.60

10 Indian Bank 6.15 2.71 1.35 1.74 1.89 2.46 0.85 1.85 1.8711 Indian Overseas Bank 5.23 2.85 1.27 2.04 2.55 2.69 1.70 2.12 2.6612 Oriental Bank of Commerce 1.40 Nil 1.29 3.43 4.16 5.15 3.40 5.10 5.2013 Punjab & Sind Bank 10.89 9.62 N.A 1.96 2.05 N.A 0.05 0.09 N.A14 Punjab National Bank 3.86 0.98 0.20 1.96 2.28 2.77 1.43 1.88 2.4215 Syndicate Bank 4.29 2.58 1.59 1.80 2.40 2.80 1.30 1.62 1.5316 UCO Bank 4.36 3.65 2.93 1.97 2.49 3.21 0.85 1.79 1.4317 Union Bank of India 4.91 2.87 2.64 2.50 2.86 3.47 2.15 2.78 2.8118 United Bank of India 5.52 3.75 2.43 1.62 1.69 2.08 1.77 1.76 1.7219 Vijaya Bank 2.61 0.91 0.59 1.94 2.49 3.13 1.76 3.73 3.48

TOTAL OF 19 NATIONALISEDBANKS [I]


1. State Bank of Bikaner & Jaipur 4.13 1.24 1.61 1.46 1.70 2.20 1.63 2.44 1.692. State Bank of Hyderabad 3.25 0.65 0.61 2.26 2.66 3.40 2.25 2.87 1.913. State Bank of Indore 2.66 Nil 0.01 2.21 2.31 2.94 3.06 3.45 2.074. State Bank of Mysore 5.19 2.96 0.92 1.46 1.63 2.04 1.19 1.82 2.165. State Bank of Patiala 1.49 Nil 1.23 2.46 3.05 3.61 2.76 3.69 2.486. State Bank of Saurashtra 3.53 Nil 1.40 1.68 1.93 2.50 1.25 2.40 0.567. State Bank of Travancore 3.06 1.39 1.81 2.18 2.72 3.46 1.51 2.16 2.21

TOTAL OF 7 ASSOCIATES [III]

TOTAL OF STATE BANKGROUP [II+III]


1. IDBI Ltd. 1.74 13.50 6.85

TOTAL OF PUBLIC SECTORBANKS [I+II+III+IV]

N.A. : Not Available

2003-04 to 3.1 per cent during 2004-05.16 banks have the interest spread ratio ofmore than 3 per cent during 2004-05.

Non-Performing Assets – As mentionedbefore, both the gross and net non-performing assets showed declined inabsolute terms and as percentage of netadvances during 2004-05. For majority ofthe banks, this ratio is less than 3 per cent.Dena Bank has the highest ratio with 5.2per cent during 2004-05.

Operating Expenses - Ratio of operatingexpenses to total expenses increased to 34.6per cent during 2004-05 from 33.0 per centof the previous financial year. 4 banks have aratio of more than 40 per cent during 2004-05. Majority of the banks recorded a higherratio than the previous year.

Business per Employee – Business peremployee of most of the banks werehigher than that of the previous year.

Highest per employee business wasrecorded by IDBI Ltd. with Rs. 13.5 crores.Lowest business ratio was shown byCentral Bank of India with 2.1 crores during2004-05. Majority of the banks recorded abusiness ratio of Rs. 3.0 crores to Rs. 4.0crores during 2004-05.

Profit per Employee – Majority of thebanks recorded a lower profit peremployee ratio than the previous year.Highest ratio was recorded by the IDBI Ltd.with Rs. 6.85 lacs during 2004-05. This ratiofor majority of the banks ranged fromRs.1.5 lacs to Rs. 3.0 lacs during 2004-05.

Conclusion

Compared to 2003-04, the performanceof the Public Sector Banks was notimpressive during 2004-05. Resourcemobilisation and investments were lowerduring 2004-05 as compared to 2003-04.Disbursement of credit was impressive

during this year. Total income and totalexpenditure of these banks were higherthan the financial year 2003-04. Sincegrowth in expenditure were higher thanthe growth in income, the banks recordeddeceleration in operating and net profitduring 2004-05. A significant achievementfor the banks was reduction in the grossand net non-performing assets of thebanks in absolute term and also aspercentage of net advances during 2004-05. Banks were able to maintain spread atthe same level as that of the previous year.Slight deceleration in the Capital AdequacyRatio and Return on Assets were alsoobserved during 2004-05. Productivity ratioshowed improvement than the previousyear. However, profitability ratio was lowerthan the previous year. ❑

Prepared by Mrs Jayshree Menon, Managerwith data support from

Mr. Ramesh Kumar Nair, Officer,DRS Dept. IBA.

Contd from Page 27


”

”

SHGs has come to be accepted as animportant tool to ensure standards in SHGs.In the enthusiasm to ensure monitoring ofSHGs every stakeholder had their owninnovation in designing a new tool forgrading of SHGs. This has resulted in floodingof market with rating tools with slightvariation here and there. Multiplicity of ratingtools though is a good indication for theconcerns of many players is on quality aspects.Administration of these tools remainedlargely one of monitoring the SHGs ratherthan ensuring how these tools becomeinternalized at SHG level for their own selfmonitoring. It is interesting to notice that therehas been good number of participatory toolsdeveloped by stakeholders for the self-assessment by SHGs themselves. Over a periodof time the parameters set within the ratingtools become a benchmark for the SHGs toreach such milestone in their quest to reachhigher grades. It is also important that thisassessment shall not be a one off approachbeing administered at the time of lending bybanks but rather a periodic self assessmentby SHGs and rating by other stakeholdersperpetually, giving scope for raising thebenchmarks over a period of time. In a studyconducted by Andhra Pradesh MahilaAbhvriddhi Society (APMAS) in 400 randomlyselected SHGs across 40 randomly selectedmandals in 8 selected districts in AndhraPradesh, only 22% of the groups werereported to be appraised using rating toolbefore bank linkage by banks and DRDAs.

Market distortions

The largesse perpetrated by Governmentprograms has been worrying the microfinance specialists and apart fromdisintegrating the groups, setting wrongprecedents, inequity in subsidy distribution,pulling down the quality of groups ingeneral, there has been perceived marketdistortions caused by the subsidy orientedGovernment programs. The sector has beencrying fowl over such reckless sprinkling ofunhealthy practices; as the whole SHGmovement is built on structured, processintensive and a time bound program toensure group formation, grading of groups,credit linkage, ensuring definitive creditdemand. The quick spread cultureperpetrated by such mass scale programshas played spoilsport with the establishedconventions and best practices. Distortionsare galore due to easy-go-approachfollowed by many stake holders andpromoters leaving the hilly, tribal, dry tractswithout giving the benefit to such remote

areas even the smell of the SHGs have causedlopsided distribution of SHGs and manypotential pockets in north east and east aredeprived of sizeable chunk of SHGs. Asagainst 16.18 million SHGs credit linked, only34238 SHGs (a mere 2.1%) represent northeast, against the 8 north eastern states, Assamalone accounts for 31234 SHGs. It is also thefact that in many states over 80% of the SHGsare anchored by large Govt. initiatives.

Federations

The urge for aggregating the SHGs at ahigher level without appraising the value-add and the cost implications has been asource of worry. It is also corroborated bymany studies that as more and more theSHGs are up streamed at higher level withoutgetting convinced on the role for suchintermediaries, more and more the clientsare distanced from the intermediarystructures including the banks. There is alsoa tension between SHGs and federations asperceived by the clients. It is not out of placeto mention that in many places the qualityof SHGs have gone down after they arefederated. In the quest of ensuring thesustainability of federations, which was thestrong reason for why federations havecome into being, the challenge remains asto how to overcome the quality issues andhow the federations can directly contributefor this. While there is a big debate on theneed for federations, it is to be ensuredthat the zeal for making federationsshall not end up in belittling therole of SHGs and cut into thevery quality aspects of SHGs.

Comparative analysis ofgood practices withbest practices

The variations inpractices at SHGlevel have beens p u r r i n ginnovations interms of products,systems andm e t h o d o l o g i e sand encouragingnew standards inSHG promotion andp r a c t i c e s ;nevertheless it hasbrought lot ofincongruity in theestablished practices. Acomparison of such

Shri Devaprakash is an Agro Economist holding

masters degree from TamilNadu Agricultural

University, Coimbatore. He is a Technical Support

Specialist working for CASHE (Credit And Savings for

Household Enterprise) Project of CARE India. CASHE

happens to be the largest national microfinance

initiative, outside the Govt. programs and NABARD

linkage program which attempts to address

inadequacies and gaps in the micro finance sector

in the country. At present he is anchoring the sector

building initiatives on microfinance at the national

level. Earlier Devaprakash worked for Indian Bank in

various capacities heading the Gramodaya

Kendras(Rural Development Centers) of the bank in

various places contributing towards poverty

lending, rural finance and micro finance mandate

of the bank.

The quest for promotingSHGs cannot becomemerely a number drivenagenda and the one andhalf decades ofexperimentation on SHGsshall gradually evolve intosetting new benchmarkson the quality andstandards of SHGs.

Contd. from page 25...


practices with the recommended practicesleads us to revisit some of the establishedparameters and norms set in the

standardized rating or grading tools. Whilemuch has been said about the relevance ofthe rating tools, there is certainly a need to

standardize the grading tools across theboard and the process of such design itselfneeds to be revisited periodically.

COMPARATIVE ANALYSIS OF SOME EXISTING PRACTICES WITH THE RECOMMENDED PRACTICES IN SHG

Details Normal practice Recommended practice

Fund Management Groups savings and external loan funds are held Group savings and external loan funds areseparately. pooled. Accounting principles shall need to

take care of this.

Group Meetings SHGs take it as a rigor to meet frequently SHGs meet at appropriate intervals as andwhen needed appreciating the hightransaction cost for members for attending thegroup meeting.

Fee for services Not all services the members are accessing are Services are priced across the board thoughpriced; as some services are small and frequent some may appear to be small and intermittent.

This is to inculcate the habit of appreciating theneed for paying for services

Leveraging Process -Retailing or wholesaling Retailing from formal financial sector at SHG Retailing at SHG level and slowly moving on tolevel as a means of mainstreaming wholesaling with formal sector for bulk funding

for mother units ( cluster/ federation/ NGO/ MFI)

Subsidy dependence SHGs deriving more subsidy and more and more SHGs moving out of subsidy regimen andmoving on towards subsidy regime phasing out subsidy dependence

Growth in Savings Static savings as clients agree to pool in same Growth in rate of per capita savings over yearsamount of savings all through out will make the SHGs leverage more and more

funds from external sources

New financial services SHGs are comfortable only with credit and SHGs are open to mainstreaming new financialsavings and consider other services as not services like insurance, money transfer, pensionfalling within the mandate for which they etc., and need not directly deal with suchare established services and open to the idea of clients

accessing such services

Affiliation to federation SHGs remain, as stand-alone piece without any SHGs are moving to affiliating to cluster/ affiliation to SHG-upstream like clusters/ federations and SHGs shall feel that they willfederations and more often feel their role will have space for their operation in the largerbe limited in a federal set up. domain of federation framework

Inter group lending SHGs do not lend to other groups as a matter of SHGs proactively look at inter group lending aspolicy though more of idle funds are locked an option to park the idle funds if they areup within SHG, as the scope of lending within confident of managing such risksthe group is limited beyond certain extent

Risk Fund SHGs operating themselves risk fund and SHGs understanding the implications of big payat times embarrassed at huge pay outs at times outs, buying such services from professionalof emergencies without adequate reinsurance service providers rather than managing such back ups risks themselves

Rotation of leadership Rotation of leadership is seriously taken, with Rotation of leadership is adapted whereverthe result clients with poor leadership qualities feasible and not as a matter of routinecome to manage the SHGs very often on turn periodically and limited to persons ofbasis leadership quality

Sharing of dividend Resources are kept as reserves, as such and any Resources as earnings are shared periodicallyslicing up of reserves as dividends may erode which will be a sort of incentive to perk up thethe fund base interest of clients further

Sharing the funds available as loans Loan funds are shared equally as loans amongst Need assessment is the basis and loan funds aremembers at any point in time without taking the not divided equally amongst the members. Aindividual needs into consideration. More or demand based approach to decide the loanless a supply based approach to decide the quantumloan quantum

Type of loan account Mostly term loans are from the external finance A line of credit called cash credit limit which isinstitution with clear terms and many times a revolving account which will be renewedrepaid much in advance periodically



Loan hedging SHGs especially when they are mature tend SHGs shall not bother about productive nature (productive uses Vs consumption) to invest more in productive loans than of loans and narrow down their priorities to

consumption loans productive uses of credit alone; instead theyshall fairly assess and appreciate other non-productive uses of credit and prudently hedgethe risk by pricing more for consumption loansthan production loans to cut downostentatious consumption

Multiple membership within the family Sometimes, promoters find it easy to include Membership shall not devolve more than amembers from the same family for easy person from each family unless and otherwisemanagement of groups there are any specific reasons like widow/

deserted or physically challenged personsexisting in the same family as second/thirdeligible member

Marital status of members SHGs for the sake of membership may include It is better to include only married women inall women including spinsters SHGs in anticipation of migratory problems

once the women get married. This shall notcause any erosion of membership to a largeextent

Unisex or multi sex group Some SHGs especially activity based SHGs are The experience shows that unisex groups aremixed groups having the presence of both sexes fairing well than mixed groups where peer

dynamics are limited and there is less space forarticulation for women in mixed groups

Neighbourhood or Diversity Many promoters believe the peer pressure Neighbourhood alone shall not be the criterionworks more vigorously amongst neighbuorhood as this may result in inbreeding. Diversity inmembers terms of members’ profile will spur new thinking

and bring new values in SHGs. Ideally acombination of neighborhood and diversitywill help the SHG’s dynamics grow

Activity based groups Activity based groups are favored to push Activity based groups does not work in manymicro enterprises easily on the members cases as issues of economic activity takes the

foreground than the group dynamics itself.

Common economic activity Common economic activity is preferred in On many occasions common economic activitysome cases like SGSY groups due to project does not work and members prefer to mangecompulsions activity individually and may like to draw

linkages from common sources. Commoneconomic activity coming on volition shall besupported

Targeting Strategy and Tool Income based poverty line and reference to Move away to non-income based acceptedration cards/ revenue records are taken as tools like wealth ranking, housing index, meansbenchmarks test, geographic targeting etc

Investment policy of SHG Lending to SHG members is the normal practice Lending outside the group for the purpose ofand if resources are idle lending outside the earning interest on the pretext of investinggroup is encouraged the idle money is not a sound practice

Participation in political process Many SHGs separate politics from business and Politics is integral part of life and more anddo not allow clients to be part of the political more clients participating in the process willprocess on the pretext, participation in political help SHGs apart from leveraging externalprocess will play spoilt sport. linkages will ensure a say for clients in the

political system of the village

Participation in PRI SHGs get glued to their business and think SHGs need to associate itself in villageparticipation in PRI may not have any strategic development and PRIs are right forums tovalue for itself propagate much inclusive development

planning and SHGs shall need to spare time forsuch development centered activities

Encouraging visitors SHGs believe that visitors may borrow their own SHGs must follow transparent practicesconcepts and keep certain things within as tricks including encouraging visitors and if possibleof trade and do not encourage visitors visitors need to be charged for taking their

time off



Subsidized interest rate or market rate SHGs feel that less and less is the rate of interest, SHGs shall need to work on the market rate andmore and more it can satisfy the members establish an acceptable rate of interest to strike

a balance between the formal and informalsector. Interest rates need to respond to themarkets and not to client’s interests

Common interest regimen for all clients SHGs practice common interest regimen for Realizing that within the groups some clientsall categories of clients like widows/ deserted persons/ physically

challenged need special treatments asrelatively limited opportunities available tothem, SHGs having differential interestregimen with clear policy on ground withoutscope for misinterpretation to include in-eligible clients the benefit of such preferentialtreatments

Common regimen for all purposes SHGs fix uniform interest rates for all purposes A forward looking interest regimen needs toregardless of the purpose for which the loans look at the purposes of such loans and tweak ithas been taken to the requirements

Loan Terms Uniform loan terms for all loans irrespective of Loan terms are decided based on the type ofwhether they are productive loans or loans, which shall take into account the streamconsumption loans and even within this of income flow into the purposes lent. Holdingthere is less scope for further variations. tight on the policy of uniform repayment

period for all loans may be regressive and matbreed loan delinquency

Encouraging voluntary savings Voluntary savings is not encouraged for fear of Voluntary savings will increase the fundsbringing in inequity amongst members available to SHGs for on-lending and mop up

such savings potential in the community asindividuals. If this is not harnessed fully suchsavings will anyway be leaking into otherestablished informal rural financial systems invillages

Nominal savings Collecting savings from non-members in the Nominal savings are prohibited by RBI Act andname of members to shore up the fund base of many times there is scope for misappropriationSHGs and false claims on such savings which can not

be monitored by SHGs effectively

Depositing in banks SHGs may tend to deposit idle funds with Depositing in banks leaves little return for SHGsbanks in the beginning and in the process and this is not to be encouraged as a matter ofcultivates this as a habit and some bank routine and SHGs need to invest internally onbranches may also insist for this loans to members which will give better

returns to both SHGs and members

Parallely taking loans from banks as Members are not allowed to take loans from Members depending on their needs mayindividuals banks individually once they are registered in approach banks for their individual needs and

SHGs, as this may bring inequity amongst SHGs shall be used to leverage funds formembers. Such loans are looked upon as threat individual enterprises. This is apart from whatto the very survival of SHGs SHGs collectively leverage from banks for all

members. SHGs shall actively encourage suchloan linkages for individual clients

Dependence on promoters SHGs looking for more and more technical SHGs looking at promoters only for strategicsupport from promoters and looking for issues and able to manage more and more ofpromoters’ role in all operational issues which operational issues which are quite routinewill cause inordinate delays in clients accessingessential services

Key research questions?

It is more important to know that why weneed to do this comparison rather thanmerely knowing the better practices. Suchanalysis will lead to know the process partof delivering the best practices. While a much

deeper analysis may need to go intoinvestigating the reasons for the hugevariation between established practices andhow it is broadcasted in the field, it isworthwhile to compare betweenGovernment promoted vis-à-vis NGO

managed groups, rapid growth of SHGsversus systematic growth, standardised toolsvs adhoc processes. How SHGs in South areranking compared to North, how MFIpromoted SHGs are scoring when comparedto bank linkage model, whether SHGs of


micro finance focus are faring better thanintegrated models of SHGs, whether hugerating difference is observed between bankpromoted SHGs and NGO nurtured SHGs. AreSHGs linked to federations doing better thanstand alone SHGs? Quality differencesbetween community formed groups andothers and how the remotely located SHGsare putting up as against closely located SHGs.Yet such comparisons are leading to largegaps between what is the accepted practiceand what is being observed as of now.

Way forward

The quest for promoting SHGs cannot

become merely a number driven agendaand the one and half decades ofexperimentation on SHGs shall graduallyevolve into setting new benchmarks on thequality and standards of SHGs. Analysis ofSHGs’ performance over years by many stakeholders (however stake holder centric theanalysis might be) have revealed dip inqualitative attributes like repayments, groupdynamics and robustness, business focus,interest of clients in participation in decisionmaking, attendance of group members ingroup meetings, zeal in taking leadershipresponsibilities and increase in delinquencyin savings, client drop outs, etc.

Issues of excessive dominance of dairy

activity even in SHGs, bunching of credit

linkages to the last quarter of the financial

year, credit camps being practiced in SHG

lending make them as good as any other

rural credit product which banks in India

has been experimenting with and certainly

to make a difference. SHGs need to over

come the ‘Quality blues’, the control of which

rests with the stakeholders themselves, given

the right orientation and attitude. Let’s set

things right before the celebration of

success wanes into a story of mourning. ❑

Contribution of ArticlesOur Editorial Committee has decided to bring out articles on different topics of interest to bankers. Some

of the areas receiving focused attention of bankers in the recent past are:

Fringe Benefit Tax - Its nuances and implications

Boosting of fee based income of Banks – ways and means

Role of Banks in Commodity Markets

Implications of CBS in Banks – utility, application and customer perspective

Financing Software Developments/Exports.

Accordingly, the IBA Bulletin will carry articles on current topics on different aspects both in English and

Hindi languages.

Your contribution on any topic should be around 2500 words. The write-up should be crisp and concise but

certainly not at the cost of clarity. The manuscript should be sent on a floppy (MS Word) along with a hard

copy or e-mailed to [email protected]; [email protected]; [email protected]. Please also submit a

statement declaring that the material has not been published elsewhere nor has been given to any other

publisher for publication. A passport size photograph of the author together with a small write-up about

the author may be sent alongwith the article. The Association pays honorarium to authors whose articles

are published.

Change, Competition, Leadership &Rethinking Future K.M. Gopinath

Globalisation brings

along with it the ‘Change’

in the form of local

competition to product

and services. In business

scenario, change takes

place in the form of new

technologies, changing

attitudes and consumer dynamics.

The evolving customer needs, also fosters

change from traditional methods of serving

the customer to use of technology

transcending all geographical barriers.

Change has also altered the manner of

competition. Change is now looked more as

an opportunity and not as a threat. To really

understand change, examination of the

fundamental would reveal why the need for

change has arisen. Firstly, there has been shift

from industrial economy to information

economy, national economy to global

economy, hierarchies to networking, either

or options to multiple options. Quite

naturally working in such changed

environment has brought along with it

different skill sets, radically different from

what had been practiced in the past.

Procedural competencies have given way to

customer assistances competencies, routine

repetitive work to non-routine abstract work,

isolated work to group interactive work. In

short, there is a cultural change in the form

of demand for skill required to operate in

an everchanging environment to earlier well-

defined stable environment. This signals a

new era of ‘Competition’ totally different

from the traditional one.

The changing role of the present day

customer, from isolated to connected, from

unaware to well-informed, determines the

future competition. Banks are competing

with one another to woo the customer

through variety of service and product

innovation by the use of technology. Strategy

and tactics adopted have to move from the

traditional bank centric value creation to

customer centric value creation. Innovated

products and services have to be marketed

and sold based on what value and

satisfaction it creates for the customer. Banks

can no longer assume that value resides

exclusively in the bank’s product and services

and thereby go about marketing and selling

products and services which bank feel are

good, without understanding and studying

whether there is any value creation in these

products and services for the customer who

is the final user. The success of failure of

products and services to a large extent

depends on this factor. For example, some

banks have launched credit cards on co-

branded basis with other service providers

(like Airlines etc.) aimed to provide more

value creation and satisfaction from the

customer‘s point of view. This implies that

future competition is based on value

creation and not merely on the introduction

of plain vanilla products which was good

enough few years ago. Market proactive

banks have started realising the importance

of Customer Relationship Management and

have already started pricing, based on

customer relationship. Hence in the future,

banks will have to focus on what they can

offer, juxtaposed with the desire and

satisfaction of the customer, for only this,

can result in value-creation and a win-win

situation for both.

This brings us to the importance of

‘Leadership’ in the new era. It is thought

that, to meet future competition, we need a

new organisational step up but what is

equally important is that traditional

leadership has to give way to 21st century

leadership. The new leader has to be more

forward looking, have a vision, should be

able to spot early emerging trends, seize new

opportunities, leverage on technology and

human resources to derive the best before

others get there. In other words, new leaders

should, inter-alia, have strategic direction. As

someone said “Strategy is cerebral but the intent

to put into practice is the absolute lever to

productivity of any business endeavour”.

Traditional leadership style to micromanage

every minute details leads to over-managing

the present, which leaves no time to create the

future. The mantra is to empower, delegate, defy

traditions, get bureaucratic shackles off the feet

which alone is certain to ensure success as this

would encourage decision making at all levels

which sadly is at discount at Public Sector Banks

due to the fear of accountability.

This leads us to the ultimate, i.e. ‘Rethinking

the Future’. As stated earlier, we have moved

from the industrial era to an information

age of networking. Therefore, we cannot

expect the future to be a continuation of

the past. Hence the planning for the future

will be quite different because the

fundamentals and assumptions of the past

will no longer hold good for the future. The

classic example is the introduction of Core

Banking Solutions which is in tune with

information age. This leads us to re-think

whether the present organizationl structure,

in existence over the years is capable to

handle the complexities of the information

age. Banks have traditionally structured the

organizational set up, functional-wise

whereas in the information age, there is a

need to reorganise it on major business lines.

The leaders of today cannot be just content

in just improving the business in terms of

greater market share. While this is important

to remain profitable, more important is to be

a true leader (or trend-setter). He should

have a vision, create new ideas and take the

organisation forward in that direction. In

short, it calls for inventing the future. ❑

Shri Gopinath is General Manager (IIS), Indian Bank, Head office, Chennai.


Counter – The Best Marketing JointS. Pradeep Naidu

The very old tradition ofCounters in the banksjust like the Great Wallsor Cages have becomeobsolete and thepresent day hitechenvironment changedthe pattern of counters.

Now-a-days the counters are just like thetea tables between the bankers andcustomers.

Take the example of any organization,company or business concern, counter actsas a mediator between the customer andthe seller. We can say that the counter is thegateway of any business wherein entirebusiness starts and grows through thecounters only. Counter is just like a battlefield but where it is not the battle forfreedom or kingdom but the battle forrelation with the customers to improve thebusiness.

Counter staff should be like warriors whoalways be alert to capture the financial stressof the customers and give the solutions toget them absolutely satisfied. Whatever theplans, policies, budgets, targets, products etc.,are introduced or adopted, it is the counterthat only push them through the customerswho feel tension free from his burden ofmoney management.

In a broader extent, we can say that counteris just like a market place where bankersgive the service, explain the features ofvarious products and customers transacttheir banking business. It is the duty of everybanker to make the customer a goodmarketing zeal for the bank. Take a smallexample how the customer himself becomesthe marketing man sometimes. If the qualityof food, service and prices are appreciableand reasonable in a small hotel, certainly avisitor who tasted these will tell his friendsand known persons about them. Withouthis knowledge, he has become a marketing

executive for that hotel simply for no reason.

From Management Towards Customers

Here the counter management or branch

management is the key task which helps to

make customers experience the relationship

banking and banker to experience the

professional banking. In a bus, the driver

should be perfect then only the passengers

reach the destination safely, likewise in the

branch, counter staff should be well-

experienced to fulfill the objectives of both

the customer as well as the bank.

Following are the five special skills of counter

staff which helps both banks as well as

customers.

1. Patience : The first and foremost quality

required is patience. This is the only

main skill which takes you to the

maximum heights if you possess the

nature of hard work along with it.

2. Courtesy : Patience is an inner skill and

courtesy is the outer skill which

includes wishing with a smile, calling

the person by name, offering the

customer a seat, paying a special heed

etc. These qualities make the customer

friendly and feel happy at your service.

3. Versatility : The counter staff should

have thorough knowledge about

various products of banks, rules and

regulations. If the customer asks for

C

O

U

N

T

E

R

Marketing Courtesy

Clear Vision Empathy

Financial

Services Service

Skills of

Negotiation Negotiation

MIS

Dignity of Relational

Organization Approach

service/clarifications the staff should

be in a position to render the service/

clarified the doubt and if not possible,

guide him to the proper person

concerned.

4. Attention : Allow the customer to speak

first and answer him accordingly point

by point. Interfering in between his

conversation will irritate the customer

and ultimately the bank will lose the

customer.

5. Smart : This is more important than

the above skills or features because

the first impression to the customer

should always be the best. You should

be smart in dress, way of talking, style

of functioning and delivering the

transactions. The impression makes the

customer confident that he will be

guided properly in his financial

transactions and his money will be

safer.

The employee at the counter carries the

brand of the bank and he has to live in the

Brand i.e. confidence of the Bank and

customer so that the customer certainly gets

new relationships into the fold of the bank.

Earning and spending are not important;

Earning, spending and saving are important.

Likewise getting customer is not important;

getting customer, retaining the customer and

enriching your banking family with new

relations are important. Every new customer

relation brings many more new relations

unless you should be a Relationship banker.

Hence, Counter is the threshold where the

relation begins; bank grows; customer

prospers; employee Cherishes which

ultimately lead to the growth of the

economy. ❑

Shri Naidu is presently working as Manager, ING Vysya Bank, Davangere.


Whether Amendement to CPC –A Boon or Myth K. Shivaramakrishnan

Shri Shivaramakrishnan is Manager & Faculty , Canara Bank, Regional Staff Training Centre, Hyderabad.

Act 2002 i.e. Act 22 of 2002 and the

amendments came into force with effect

from 1.7.2002. However the amendments

were challenged in Supreme Court and

Ultimately Supreme court has upheld the

Amendments in June 2003.

Main aim of the Amendments

The aim of the amendments inter alia is to

reduce delay in disposal of cases,

empowering courts to refer the cases to

alternate dispute resolution systems like

Arbitration, Lok Adalats etc., fixing specific

time limits for various processes of courts

etc.

Some of the important amendments which

reduces delay and pave way for faster

disposal of cases are as under.

● Summons are to be issued to

defendants within in 30 days of filing

of suit.

● Plaintiff has to produce documents and

copies of plaint to defendants within 7

days of orders of Court.

● If Summons to defendants are returned

undelivered, Plaintiff has to apply for

fresh summons within 7 days of return

as otherwise suit will be dismissed.

● Written Statements are to be filed by

Defendants within 30 days of Service

of Summons.

Government of India has

made certain

amendments to CIVIL

PROCEDURE CODE Vide

CPC (Amendment ) Act

1999 i.e. Act 45 of 1999

and CPC (Amendment)

● The date of hearing will be adjourned

for non-appearance not later than 7

days from the date of original hearing.

● Courts will not grant more than 3

adjournments.

● All endeavour should be made to

pronounce Judgement within 30 days

from the date of conclusion of hearing.

● Decree has to be drawn within 15 days

from the date of pronouncement of

Judgement.

What Is the Factual Position

While the aim of the Amendment is to

reduce delay and ensure faster disposal of

cases, in practice , in majority of cases this is

not happening for the following reasons :-

● Written Statements are to be filed within

30 days from the date of Service of

Summons.

However since maximum time limit is given

upto 90 days, courts are extending time

invariably upto 90 days and even they

extend time beyond 90 days as well.

In effect, it takes atleast 90 days for filing

written statement as against the envisaged

time limit of 30 days. Also courts are allowing

further 30 days time to defendants for filing

additional written statements.

● Eventhough adjournments due to non-

appearance should not be later than 7

days, courts are granting longer

adjournments.

● As per the amendments, courts cannot

grant more than 3 adjournments. But

in practice, courts are invariably

granting more than 3 adjournments for

some reason or other.

● Courts are expected to pronounce

Judgement within 30 days from the

date of conclusion of hearing and in

extraordinary circumstances the time

limit can be 60 days. In practice courts

take longer time and also in some cases

courts reserve the Judgements.

● As per the amendments, Decree has to

be drawn within 15 days from the date

of pronouncement of Judgement. But

in practice courts take longer time and

even months together in some cases to

draw a decree on some grounds or

other.

In spite of all the above one can definitely

notice a lot of improvements in disposal of

cases. Eventhough courts could not strictly

adhere to time norms prescribed under the

amendments for some reason or other, still

time consciousness is developed while

conducting cases. Instead of simply

postponing/adjourning the cases

indefinitely without any time limit as was

being done during earlier times, now courts

have started implementing reasonable time

norms though not strictly as per CPC

amendments as above.

For any new act/amendment, it takes

considerable time to settledown and

implementation part gets streamlined in

course of time. While hoping for better fruits

of the CPC amendments in the ensuring

periods, by having proper rapport and constant

follow-up with the advocates, the benefits of

the above amendments in CPC can be reaped

by the banks to the fullest extent. ❑


Legal Decision Affecting Bankers Ajit Singh Cheema

Fixed Deposit Payable “Either or Survivor”Cannot be pledged by Either

AnumatiVersus

Punjab National Bank2004 (9) Scale 10

The appellant Mrs. Anumati and her husbandMam Chand got issued a fixed depositreceipt for Rs. 20,000/- with the respondentbank for a period of 84 months. The amountpayable on maturity was Rs. 39,930/-.According to appellant, half of the depositedamount belonged to her and the other halfbelonged to her husband. A loan was takenby one Khem Chand in his sole proprietarybusiness M/s. Verma Agro Industries. Thebank filed suit against M/s. Verma AgroIndustries, Khem Chand and appellant’shusband Mam Chand. During the pendencyof the above said suit a legal notice wasservied on the bank, by appellant and MamChand for premature encashment of thefixed deposit receipt. The bank filed anapplication in the court that the fixeddeposit receipt had been “mortgaged” assecurity towards the disputed loan and theamount of fixed deposit has been creditedin the disputed loan.

The trial court allowed the banks applicationholding that the amount of fixed depositaccount had rightly been adjusted in theaccount of the disputed loan. Mam Chandchallenged this order by way of a revisionapplication under Section 115 of CPC. Therevisional court held that the application wasnot maintainable and that it was open toMam Chand and his wife to initiate legalactions/proceedings for the receovery of theamount deposited against the Bank and itwas further held that the order of trial courtwould not in anyway inhibit the appellantfrom initiating such proceedings since shewas not a party either in the suit or to anyother proceedings initiated by the Bank. Therevisional court found as a fact that the fixeddeposit receipt did not bear the thumbimpression of appellant and the only thumb

impression appearing thereon was that ofMam Chand and it also held that since theFDR was not mortgaged as guarantee for theloan taken by M/s. Verma Agro Industries orKhem Chand the dispute regarding the FDRwas not in issue in the suit filed by the Bank.

The appellant then filed a complaint beforethe District Forum under the ConsumerProtection Act. The District Forum came tothe conclusion that the appellant wasentitled to recover half of the amount ofthe FDR i.e. Rs. 19,965 because she had nevermortgaged her share of the fixed deposit infavour of any party. It was further held thatsince the receipt was in the joint names ofthe appellant and her husband, the bankshould not have accepted any pledge of theaccount without informing the appellantand getting her consent. The Bank preferredan appeal to the state commission, whichproceeded on the basis that Mam Chandhad validly pledged FDR. The FDR waspayable to “either or survivor”, it showed thatthe Bank could have got discharge bymaking payment to either of the accountholders. According to the State Commissionwhen payment could have been made to asingle individual in terms of the directionsof the depositors then the bank was at libertyto accept mortgage of the FDR on behalf ofone of the depositors and the consent ofthe other depositor was not necessary. Theappeal was accordingly allowed and itscomplaint was rejected The NationalCommission merely concurred with the StateCommission and held that the financialinstitutions had every right to protect theirinterest by taking “conscious decision”, thebank has taken “conscious decision” in thiscase and it could not be faulted and therewas no deficiency of services. Aggrieved bythe decision and the National Commission,appellant preferred the present appeal tothe Supreme Court.

The Supreme Court held as under –

A fixed deposit receipt in the joint names oftwo persons is nothing but a joint account

which, as the name suggests, is repayableon the expiration of the agreed period. TheFDR is merely a written acknowledgementby the bank that it holds a certain sum tothe use of its customers. The Bank is thus adebtor to the account holders in respect ofthe amount deposited. A debt which isrepayable by the Bank to the accountholders with interest on the expiry of anagreed period. An “either or survivor” clausein such an account means that the amountpayable by the Bank on maturity of the fixeddeposit may be paid to either of the accountholders by the Bank in order to obtain avalid discharge. In other words under atriparitite agreement between the jointaccount holders inter se and the Bank, theBank may, on maturity, make payment onlyto either of them. This tripartite agreementcannot be bilaterally modified by one of thejoint account holders, for example bypledging the account with any third partyincluding the Bank itself in its capacity ofcreditor, so that the amount becomespayable to such third party, without theconsent of the joint account holder.

In the present case, the contract in respect ofthe joint account was between the Bank andthe husband and wife. The fixed deposit wasnot a debt due by the bank to Mam Chandalone which could be set off by the bankagainst any claim that the bank may haveagainst Mam Chand. Besides the right of MamChand was to receive the money depositedonly after it matured, if he survived, supposingMam Chand had died before the fixeddeposit matured, the only person entitled toget the money would be the appellant. Thisright of the appellant could not have beentaken away without her consent.

Under the circumstances it was held that theBank had no right to refuse payment of theamount deposited to the appellant. TheDistrict Forum was correct accepting and theState Commission and National Commissionerred in rejecting the appellants complaint.

The appeal allowed ❑

Contributed by Shri Ajit Singh Cheema, Senior Manager, Punjab & Sind Bank, Amritsar.


Banking Scene : IndianMid Term Appraisal of the 10th Plan

Targets

The Mid Term Appraisal of the 10th Plan

conducted by the National Development

Council (NDC) noted that in some areas of the

economy is doing well and these gains need

to be consolidated, but there are also important

weaknesses, which if not corrected could

undermine even the current performance level.

Overview of the performance of the economy

and problems of the economy are summarized

as follows:

GDP growth has averaged 6.5 per cent in the

first three years, which is below the Tenth Plan

target of 8.1 per cent. Positive factors include

(a) improvement in private corporate sector

investments, (b) positive international

perceptions on India (c) tolerant inflation level

(d) comfortable external payment position

with substantial inflows from abroad leading

to comfortable foreign exchange position.

Industrial sector also showed signs of

improvement. The ultimate aim should be to

consolidate the gains in these developments

and to overcome the weakness in the economy.

Key weak areas are identified as follows:

Aggregate Growth : Though the plan fixed

a target of 8.1 per cent, it is difficult to achieve

the target and the likely growth rate is

expected to below 7 per cent during the plan

period. An important reason for the lower

growth is that investment did not increase in

line with available investible resources.

Agriculture Growth : Agriculture growth is

very poor over the last two decades.

Agriculture growth has decelerated sharply

from 3.2 per cent to 1.9 per cent between

1980-81 and 1995-96. There is a need to

revamp the entire strategy and more action

is called for to improve the performance in

agricultural sector.

Infrastructure Problems: Inadequate

infrastructure in both rural and urban areas

are a major factor constraining India’s growth.

The quality of infrastructure impacts on our

ability to compete globally and also to attract

Foreign Direct Investment.

International Developments : Owing to

high oil prices, our import outgo is quite high.

Since we have ample foreign exchange

reserves at the moment, the impact of the oil

prices are not passed on to the users. But if

the oil prices remain high, its impact need to

be passed on to the consumers, which will

lead to inflation or fiscal deficit in the country.

Another cause of concern is the downturn in

the world economy, which will affect our

export growth considerably. It is estimated

that every 1 percentage point reduction in our

export growth rate will reduce the growth rate

of GDP by 0.2 percentage points.

Social Development : Our social indicators

are not only lower than the levels in East Asian

countries, but they are lower even in

comparison with the levels achieved by these

countries twenty five years ago. The social

indicators also show wide disparity in the

gender gaps, large rural and urban differences

and wide variation across states.

Employment : This is another area of grave

concern. Studies based on data collected from

organized and unorganized sectors state that

while employment may be increasing in the

unorganized sector in response to growth,

there is actually a contraction in employment

in the organized sector, which is the preferred

sector for employment by new entrants to the

labour force.

Inequality and Poverty : Though the poverty

has declined, the decline was less than

targeted. The moderate improvement in

education and health indicators implies that

access to more productive employment

remains limited, especially in backward

regions and amongst disadvantaged groups.

Balanced Regional Development : Regional

imbalances in the development of different

states present a picture which require

focussed attention. Some states were able to

reap the benefits of the economic reforms,

but some others were not able to do so. Even

district backwardness in a well performing

state also presents a grim picture.

Resources in the Public Sector : The

availability of resources in the public sector

to meet targeted levels of plan expenditure is

an area which deserves attention. Neither the

Centre nor the States have been able to

44 IBA BULLETINSEPTEMBER 2005

mobilize the resources needed to keep

outlays in line with Tenth Plan projections and

this has led to significant under funding in

many sectors. The consolidated public debt

of the Centre and States taken together is

about 80 per cent of the GDP which is among

the highest in emerging market economies.

The scope and time for correcting these

deficiencies during the 10th plan period is

very limited. The Mid Term Appraisal suggest

various corrective measures in these areas.

These corrective measures could be

considered for formulating the 11th Five Year

Plan targets and policies.

Declaration of Dividend

The Reserve Bank has decided to grant

general permission to banks to declare

dividends, provided they comply with the

following conditions:

Eligibility Criteria

1. Only those banks, which comply with the

following minimum prudential

requirements, would be eligible to

declare dividends without the Reserve

Bank’s prior approval :

(a) capital to risk-weighted assets ratio

(CRAR) of at least 9 per cent for

preceding two completed years and

the accounting year for which it

proposes to declare dividend.

(b) Net non-performing assets (NPAs) of

less than 7 per cent.

In case any bank does not meet the

above CRAR norm, but is having a

CRAR of at least 9 per cent for the

accounting year for which it

proposes to declare dividend, it

would be eligible to declare

dividend provided, its net NPA ratio

is less than 5 per cent.

2. The bank should comply with the

provisions of Sections 15 and 17 of the

Banking Regulation Act, 1949.

3. The bank should comply with the

Reserve Bank’s prevailing regulations/

guidelines, including creating adequate

provisions for impairment of assets and

staff retirement benefits, transfer of

profits to statutory reserves, etc.

4. The proposed dividend should be

payable out of the current year’s profit.

5. The Reserve Bank should not have placed

any explicit restrictions on the bank for

declaration of dividends.

Regarding the quantum of dividend, the

following stipulations were made by the RBI.

Banks which fulfil the eligibility criteria, may

declare and pay dividends, provided –

● The dividend payout ratio does not

exceed 40 per cent. [Dividend payout

ratio should be calculated as a

percentage of ’’dividend payable in a

year’’ (excluding dividend tax) to ‘‘net

profit during the year’’.

● In case the profit for the relevant period

includes any extraordinary profits/

income, the payout ratio should be

computed after excluding such extra-

ordinary items for reckoning compliance

with the prudential payout ratio.

● The financial statements pertaining to

the financial year for which the dividend

is declared, should be free of any

qualifications by the statutory auditors,

which have an adverse bearing on the

profit during that year. In case of any

qualification to that effect, the net profit

should be suitably adjusted while

computing the dividend payout ratio.

The Reserve Bank will not entertain any

application for a higher dividend payout ratio

than the one for which the banks qualify.

Door-step Banking

The Reserve Bank has advised all scheduled

commercial banks to formulate a scheme for

providing services at the premises of a

customer within the framework of Section 23

of the Banking Regulation Act, 1949.

Accordingly, the banks have to formulate the

scheme with the approval of their respective

bank boards and send the same for RBI

approval. In the interregnum, agency banks

may continue to lift cash and credit

instruments, etc., from the premises of central

and state government departments.

India’s trade deficit

India’ s exports recorded an increase of 19.5

per cent during the first quarter of the current

fiscal. Imports on the other hand recorded a

sharper growth of 38 per cent during the

same period. As a result, the trade deficit

doubled to $11.4 billion in the first quarter of

2005-06 compared to $5.9 billion in April-June

2004-05. ❑

Compiled from different sources bySmt. Jayasree Menon

45IBA BULLETINSEPTEMBER 2005


ADB gets tougher on Philippine Reforms

The Asian Development Bank (ADB) hasannounced a new three year strategy for thePhilippines, under which new lending couldrange from zero to as much as $1.5 billiondepending on the pace of fiscal consolidationand key sector reforms. The ADB expects thePhilippines to proceed with measures toboost tax collection and cut the budgetdeficit. If the fiscal consolidation is weakened,the bank may stop lending to the country. Onthe other hand, if the government succeedsin improving public finance, the bank willconsider to double future lending to $1.5billion in the next three years. Around 90 percent of the new loans would be quickdisbursing, but they are high-conditionalityprogramme loans that could help thePhilippines cut costly commercial borrowingsto refinance maturing debt. InternationalCredit Rating Agencies like Standard & Poor,Fitch and Moody’ s have cut the outlook forPhilippine credit ratings over the future of theexisting government. They felt that theexisting government would not be in aposition to avoid budget deficit and avoid anArgentine-style debt default. Against thisback drop, the ADB had stated that the levelof financial support for the Philippines for2005 to 2007 would be contingent onsignificant front loading of the fiscalconsolidation process, backed by anenhanced tax effort to ensure thesustainability of economic reforms. It wouldalso stop the other funds because the counterpart funds from the government will not bethere once the government falls. As such, thebank intends to disburse $1.5 billion in newstructural adjustment loans, which do notrequire counterpart funds. But if phillippinesimprove tax revenues and implementedother policy reforms, then it is a strategic shiftin approach and modality.

Retail Banking is catching up in Centraland Eastern Europe

Retail banking is catching up with corporatebusiness as the main driver of financial

activity in the fast –growing economies ofCentral and Eastern Europe. According to astudy conducted by the Austria’s co-operativebanks, one of the biggest financial group inthe region, the demand for retail bankingproducts has soared on the back of strongeconomic growth and rising affluence. Whiledemand for retail banking products hasneared west European levels in some centraland eastern European countries, massivegrowth potential remains in less developedor affluent regions. The penetration of debitand credit cards in Slovenia and Croatia isabout 1200 cards for every 1000 inhabitantswhich is now virtually at Austrian levels. Butother parts of Eastern Europe still have hugeroom for growth. In Romania, one of the leastdeveloped banking markets in the region,Raiffeisen International is opening between40,000 and 60,000 new retail accounts amonth. But in a relatively developed Hungary,upto 25 per cent of people still has no bankaccount. Demand for consumer credit is sostrong in Croatia, Bulgaria and to a lesserextent, Romania that local authorities havetaken action to prevent overheating in themarket. Their measures have varied fromceilings on lending to forcing banks toincrease the level of non-interest bearingminimum reserves they deposit with centralbanks. Demand for mortgages has soared inthese regions. Strong underlying economicgrowth rates and the potential in retail andcorporate banking suggest foreign banks willexpand further in the region. Growth in theseregions is expected to come throughtakeovers of the dwindling number of localbanks still available, and consolidation amongbig foreign banks, which are already present.

Vietcom bank seeks partner

Vietcom bank, one of Vietnam’s four mainstate-owned commercial banks, wants to sella strategic stake to a foreign partner as partof its planned privatization. The bank islooking for a partner, which is culturally fit andalso help the bank to change fast and improvethe corporate governance structure as well.

Vietcom bank is viewed by the analysts as thebest managed of Vietnam’s big four statecommercial banks, which together accountfor about 70 per cent of total loans. However,they are highly susceptible to politicalpressure to lend to loss-making stateenterprises. Vietcom bank is slated to betransformed into a public company, withcommon shares issued and sold andaccountability to all its shareholders, ratherthan political leaders. The analysts also viewthis as a critical test of the Communistgovernment’s ability to undertake tough butessential structural reforms. Inspite of all theefforts, the government is planning to retain70 per cent of the equity. According tobanking industry sources, Vietcom bank hadapproached potential investors, but theinstitution’s asset quality is a concern and duediligence is expected to take a longer time.Vietcom bank, on its part had already shiftedits lending away from state enterprises, whichaccounted for just 50 per cent of its total loanportfolio, down from 90 per cent in 2005.Consumer lending and mortgage lending,now about 15 per cent of the loan book, areexpected to grow to around 40 per cent by2012.

Reforming OECD

The Organization for Economic Co-operationand Development (OECD) is essentially theeconomic policy research unit of 30 richnations, establishing guidelines oneverything from telecoms liberalization andfarm subsidies to macro economic policy. Theoversight of the OECD is undertaken by ahuge diplomatic staff from member countries.It entails more than 100 formal meetingsannually. Though discussions are on toincrease the OECD members to include someemerging economies and other EuropeanUnion countries, but before that, theorganization wants to reform internally.America has proposed that the OECD’scouncil meet only four times a year, insteadof twice a month. It also wants newprocedures for setting work priorities, voting

Banking Scene : Global


rights and budget matters. The challenges ofreform and enlargement have to be met withcourage and it also calls for certain toughmeasures in the near future.

General Guidance for Payment SystemDevelopment

Committee on Payment and SettlementSystems (CPSS) issued a consultative reporton general guidance for Payment SystemDevelopment which aims to give assistanceand advice on the planning andimplementation of reforms in the paymentsystem as a whole. The report includes 14guidelines and accompanying explanatorytext on payment system development. TheCPSS had released these guidelines in May,2005 and sought comments by 30thSeptember, 2005. The Guidelines are groupedtogether to reflect the four key dimensionsof developing a national payment system. 1)the role of the banking sector 2) effectiveplanning and project implementation 3)developing the institutional frameworkrequired to sustain payment system reformand 4) designing a safe and efficient paymentinfrastructure to meet the particularemerging needs of a country’s economy.These guidelines are developed on the basisof the actual reform experiences of thedifferent countries. Since the development ofa national payment system is highly country-specific and conditional on a variety ofinstitutional, financial and economic factors,the specific implementation approach for aparticular guideline should be considered inthe context of each country’s ownenvironment. Therefore, from this angle, theseguidelines cannot necessarily be the “bestpractice standards” for every country.Guidelines are summarized below:

Banking System

1. Keep the central bank at the center :Due to its overall responsibility for a soundcurrency, the central bank has a centralrole in the development of the use ofmoney as an effective means of payment.

2. Promote the role of a sound bankingsystem : Payment accounts, instrumentsand services available to end users aremainly provided by banks, whichcompete individually but often need toact co-operatively as a system.

Planning

3. Recognise Complexity : Planningshould be based on a comprehensiveunderstanding of all the core elementsof the system and the principal factorsinfluencing its development.

4. Focus on needs : Identify, and beguided by, the payment needs of allusers in the system and by thecapabilities of the economy.

5. Set Clear Priorities : Plan and Prioritisepayment system developmentstrategically. Top priority should notnecessarily be assigned to theintroduction of highly sophisticatedtechnology. The plan should considerwhich elements of the existing systemcan be an avenue for futuredevelopment.

6. Implementation is key : To ensureeffective implementation of thestrategic plan, the success of thepayment system reforms dependscrucially on the effectiveimplementation of the strategic plan.

Institutional Framework

7. Promote market development : Theexpansion and strengthening of marketarrangements is a key aspect of theevolution of the payment system.

8. Involve relevant stakeholders :Encourage the development of effectiveconsultation among relevantstakeholders in the payment system. Theinvolvement of relevant stakeholders ininformation sharing, consultation andcollaboration facilitates coordinationbetween the central bank and other key

players on emerging payment systemchanges and policy initiatives.

9. Co-operate with other authorities :Effective payment system oversight bythe central bank requires collaborativearrangements with other authorities.Arrangements between the centralbank and other agencies to exchangeviews, collaborate on relevant issues and,where needed, coordinate relevantpolicies can help to ensure safe andefficient development of the system.

10. Promote legal certainty : Develop atransparent, comprehensive and soundlegal framework for the system. The legalframework is necessary to provide legalcertainty and reduces the risk.

Infrastructure

11. Retail – give more choice to morepeople : Extend the coverage andchoice of non-cash paymentinstruments-and services available toend-users by expanding and improvinginfrastructures.

12. Large value –business case leads,technology follows : Develop a large-value payment system based primarilyon the needs of financial markets andthe growth in time-critical interbankpayments.

13. Securities-Plan Securities andpayment systems together : Co-ordinate the development of theinfrastructures for securities and large-value payments.

14. Retail, large value and securities-co-ordinate settlement : Co-ordinatesettlement processes for the coresystems to effectively manage theinterrelated liquidity needs andsettlement risks among them. ❑

(Compiled from various sources bySmt. Jayasree Menon)

IBA BulletinFor Subscription kindly contact the Communication Department, IBA

Tel. : 022-2217 40 40 • Fax : 022-2218 42 22 • [email protected]


Book Review

Manual on Foreign Exchange is a textbook or

a reading material covering wide ranges of

topics on Exchange Rate Mechanism, Foreign

Currency Financing Options, International

Trade (Export and Import of goods and

services) and matter relating to Foreign Trade

Policy, Capital Account Convertibility and

Anti – Money Laundering Guidelines.

The book contains thirty chapters, which are

divided into five sections. In Section I (ten

chapters), after giving introduction on the

concept of foreign exchange, it deals with

Exchange Rate System, Exchange Rate

Mechanism, Natural Real Exchange Rates,

Forex Derivatives, etc. Section II (ten

chapters) discusses about Export-Import

business, Export Credit, EXIM Bank, External

Commercial Borrowings, Foreign Currency

Financing Options, etc. Section III (three

chapters) basically deals with the concepts

and issues in Inward and Outward

Remittances. Section IV (six chapters)

elaborates on Foreign Trade Policy, FEDAI

rates, Anti-Money Laundering Guidelines,

Sodhani Committee Report and Tarapore

Committee Report on Capital Account

Convertibility. Section V (one chapter) gives

Foreign Exchange Arithmetic with practical

examples. Updation of Foreign Trade Policy of

India as on March, 2005 is also given in the

annexure that follows.

The book, although is an updation of the

earlier version, has many add-on new features

that have been introduced in the process of

Reviewed by : Shri P. K. NayakAssistant Advisor, Reserve Bank of India,

Mumbai - 400 001.

liberalisation. The book is best suited for bankers,

exporters/importers, corporate having foreign

exchange component of business, consultants

and professionals, for students appearing for

CAIIB exams and for all those who have interest

in international business.

The book, written by a senior and seasoned

banker Shri R.S. Arora, is not only authentic in

its information content but also an interesting

piece as the author has presented the theory

and concepts punctuated by his practical

experience. This book is a treasure trove. The

content of the book truly reflects its title

“Manual on Foreign Exchange”. ❑

Book : Mannual on Foreign Exchange (Exchange Rate Mechanism and Foreign Currency Financing Options)Author : R. S. Arora

Publishers : Skylark Publications, 1/5, Bhagat Singh Lane, Gole Market, New Delhi - 110 001

Year of Publication : 2005Price : Rs. 250/-

Pages : 458

Book : A Customised Banker

Author : Dr. M.G. Kale

Publishers : Varada Prakashan Pvt. Ltd. 397/1, Senpati Bapat Marg, Pune - 411 016

Price : Rs. 450/-

Reviewed by : Shri T. Ravi Sankar TrivediGeneral Manager, Andhra Bank,

Mumbai.

A Customised Banker – A monologue Book

by Dr. M.G. Kale by name itself suggests he has

explained in detail about the relationship

between a Banker and a Corporate Borrower.

Dr. Kale who himself had a long stint at one

of the nationalized Banks and covered in

detail in terms of Credit (Appraisal) in 3 parts.

The first part consists of Eight chapters which

covers the changing Indian Banking scenario,

the role of banker as an advisor both the

cultures of banker and borrower and finally

about good governance, which is of great

importance as of now and also in the days to

come as we are also fast moving from

Corporate Governance to Entrepreneur

Governance.

The 2nd part which consists of six chapters are

really useful for a banker especially those who

are handling credit in their day to day

functioning. It covers topics like – credit

appraisal and assessment of WC and WC

management and also practicial tips as to what

a Banker has to do during his interactions and

visits to the client’s place of work.

The last part consists of 6 chaptes mainly

deals with Human Resources subject. It tunes

one’s mind to the knowledge management,

individuals emotional competence and

intelligence and how the CRM Technology

can be scientifically utilized to the better

benefit of the individual and through him for

the benefit of the organization.

In total, this book, which has been the great

efforts of a professional banker, is really useful

to the existing as well as new entrants in the

banking sector. ❑


The new developments in Indian financialmarkets are but offshoots of implementationof financial sector reforms and de-regularization of markets. In a decontrolledfinancial market, interest rates are guided byintense competition and demand & supplytheory will aptly apply.

The falling returns on traditional investmentslike bank deposits led the common public tomove towards other avenues, which will givebetter returns.

In this backdrop, it has become imperative toboth financial students, as well as, commoninvesting public to understand various facetsof Securities & Financial products.

At the outset, I would like to appreciate IIB&Fefforts to develop and nurture qualified andcompetent bankers / financial professionals.

The author of the book Mr. Sunder Sankarandid a splendid job in preparing theenlightening course material. This book willbe immense use to the readers.

Structured in 10 chapters, majority aspectsrelated to Securities and Financial Investmentproducts are explained in a simple, easy tounderstand manner.

In chapter ‘Investment Concepts & AssetClasses’ different investment concepts, theirfeatures, risks etc., have been brought-out.Different investment styles, important termslike short settling, margin trading, hedging,diversifiication, immunization etc., have beenexplained. Debt & Equity investments are alsomethodically covered.

Chapter on ‘Financial Investment Products’contain useful information regardinginvestment terms like equity, preferencedebenture, bank deposits, mutual fundinvestment, postal savings etc. The bona fidebenefit to the reader is detailed elucidationon different types of derivatives, forwardcontracts, futures, options and swaps. Everyfinancial student needs to go through thischapter meticulously.

Chapter on ‘Statistical and MathematicalTools’ are particularly important for finance

and investment professionals. Complexcalculations/tools like differentiation, linerequation, quadratic equation, compounding,discounting, arithmetic mean, geometricmean, standard deviation, Z-scale, co-variance,R-square etc., are explained in an enchantingmanner. Indeed, a multifaceted stuffexplained in a coherent manner.

The chapter on ‘Risk & Return’ illustrates theinvestor’s ability and willingness to invest ordetermine suitable investment options.Important terms like opportunity set,indifference curve, meeting point, utilityanalysis, and absolute/relative returns are wellcovered. Also explanied are portfolio risk,portfolio return, counter party risk, credit risk,inflation risk, re-investment risk etc.

To follow up with the different statistical/mathematical methods deliberated already,the chapter on ‘Portfolio Analysis’ containsdifferent examples on portfolio analysis.Different mathematical/statistical formalaedescribed in previous chapter are showcasedin example manner for the benefit of readers.Essential terms/investment models like Beta,Capital Assets Pricing Model and ArbitragePricing Model are brain stirring and are ofintellectural stuff. These calculations areuseful tools in assessing security risks andreturns. Though of limited significance inIndia, the case of International Investments i.e.global diversification and its advantages havebeen highlighted.

The relation between information, responseof markets to information is well explained.The alternative efficiency of markets, i.e. weak,semi-strong and strong is covered in a fineway, which will ultimately, determine theinvestment strategies and potential returnsfrom the market. Key points of Prohibition ofInsider Trading Regulation 1992 Act, i.e.Insider, Connected Person, Price SensitiveInformation, Prohibition, Compliance Officer,Trading Window etc., are deliberated in a stepby step method. Undeniably, this is a usefulchapter for officials of many a IndianCompany/Financial Institution.

Different types of primary issues, namely IPO,

public issue, rights issue, bonus issue, raisingcapital through GDR/ADR, de-mutualizationand corporatization of stock exchanges havebeen discussed in chapter ‘SecuritiesMarket’. The role of SEBI in protectinginvestor interest, Investment Bankers role inprimary issues and Merger & Acquisitiontransactions, borkers/sub-brokers role inpublic issues is well discussed.

The chapter on ‘Depository and InvestmentProcess’ throws light on depositoryfunctioning and related aspects. The chaptercontains vital information on how todetermine likely return from a shareinvestment. It also describes the ground rulesfollowed in stock exchanges for settlementand the ways to handle defaults. I suggestthat small investors should go through thischapter for protecting their securities andenhancing returns on them.

Last chapter, i.e. ‘Regulatory Frame Work’ iswell structured. The regulatory aspects ofderivatives, FIIs & Collective Investmentschemes are well explained. Variousregulatory aspects realted to SEBI & itsfunctions; Securities Contracts Regulation Act1956; RBI, Companies Act; CorporateGovernance rules etc., are described in asimple and intelligible manner. Enhancementof shareholder value, keeping in view theinterests of other stakeholders is the essenceof Corporate Governance.

There is no exaggeration in stating that thisbook is worth its gold in terms of content.

Author Mr. Sunder Sankaran provided aqualitative and knowledge boosting materialon a subject that is taking roots in India. Iadvocate that this book should be made asubject for all financial students.

Price (Rs. 175/-) is quite irrelevant consideringthe content and its worth.

I recommend this book to a) all students offinance, banking & treasury and b) to all smallinvestors. ❑

Reviewed by : Shri V.S.R. MurthyGeneral Manager, Union Bank of India,

Mumbai - 400 021.

Book : Securities Market & Products

Author : IIB&F

Publishers : Taxmann Allied Services P. Ltd.

59/32, New Rohtak Road

New Delhi 11 0 005

Price : Rs. 175/-

Pages : 271

Book Review

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DeeOeeefjle HeÇeslmeenve cesb HeÇyebOekeâesb keâes hegjmkeâej

efyevee ueeiele Deewj ueeYe DeeOeeefjle HeefjJeleer& Hej

efceuelee nw~ DeeefLe&keâ JeefOe&le cetuÙe DeeOeeefjle

HeÇeslmeenve HeÇCeeueer cesb HeÇyebOekeâeW keâes Flevee HeÇeslmeenve

efceuelee nw efkeâ Jes DeHeves keâejesyeej ceW

Fleves o#e nes peeles nQ efkeâ DeeefLe&keâ

JeefOe&le cetuÙe DeHeves DeeHe yeÌ{

peelee nw Deewj keâcHeveer keâe

yengcegKeer efJekeâeme Yeer neslee

nw~ DeleSJe DeeefLe&keâ

JeefOe&le cetuÙe keâe

GodosMÙe HeÇlÙeskeâ

keâce&Ûeejer keâes Skeâ

GÅeceer keâer lejn

lewÙeej keâjvee nw

e f p ememe s J en

DeHeves keâeÙe& keâe

efve<Heeove megÛee®

¤He me s k e âj

mekesâ~

iv. cevee s J e = e f l le :


Skeâ Ssmeer ¤HeevlejCe

leke âve e r k e â n w e fpeme s

ßeer efmebn FefC[Ùeve DeesJejmeer]pe yeQkeâ ceW cegKÙe DeefOekeâejer

nQ~ ßeer efmebn yeer.Sme.meer. (Dee@veme&), S«eerkeâuÛej SJeb

S.SÛe.Sce.Smemeer. (ke=âef<e) ef[«eerOeejkeâ nQ~ efheÚues oes

oMekeâ ceW yeQefkebâie mebyebOeer efJe<eÙeeW hej Deehekesâ 270 mes Yeer

DeefOekeâ uesKe efJeefYevve he$e-heef$ekeâeDeeW ceW ØekeâeefMele nes

Ûegkesâ nQ~ Deehekeâes je°^erÙe yeQkeâ, YeejleerÙe efjpeJe& yeQkeâ,

Fbef[Ùeve FbefmššdÙetš Dee@heâ yeQefkebâie Sb[ heâeFveQme leLee

DevÙe keâF& yeQkeâeW Éeje DeeÙeesefpele efveyebOe ØeefleÙeesefieleeDeeW ceW

keâF& hegjmkeâej Øeehle ngS nQ~

51

”

”Skeâ keâcHeveer keâe DeeefLe&keâ JeefOe&le cetuÙe Gmekesâ

efveJesMe Hej yeepeej oj mes DeefOekeâ efceueves Jeeueer

Je=efæMeerue jeefMe nw~ FefkeäJešer efveJesMekeâ DeHeves

efveJesMe Hej Gleves ner HeÇefleHeâue keâer DeHes#ee jKelee

nw pees Gmes yeepeej cesb efveJesMe keâjves mes efceuelee nw~


Deiemle 2005

HeÇYeeJeMeeueer {bie mes ueeiet keâjves kesâ efueS

keâeÙe&-mebmke=âefle Deewj ceveesJe=eflle ceW ÙeLeesefÛele

HeefjJele&ve keâer DeeJeMÙekeâlee nw~ JeemleJe ceW,

DeeefLe&keâ JeefOe&le cetuÙe Skeâ Ssmee DeeoMe& meeOeve

nw efpememes Fme HeefjJele&ve keâes megefveefMÛele efkeâÙee

pee mekeâlee nw~

DeeefLe&keâ JeefOe&le cetuÙe kesâ Ieškeâ

ÙeÅeefHe, DeeefLe&keâ JeefOe&le cetuÙe Skeâ uesKee HeÇCeeueer

DeeOeeefjle GHeeÙe nw, Ùen HeejcHeefjkeâ GHeepe&ve ceeHeoC[eW

mes efYevve nw~ Ùen Deblej Fve oes efyevogDeeW Hej

DeeOeeefjle nw :

HejcHejeiele uesKee HeÇCeeueer (efveJeue DeeÙe) keâes

meceeÙeesefpele keâj JÙeJemeeÙe keâer Jele&ceeve efmLeefle

keâe Helee ueieeÙee peelee nw~

MesÙejOeejkeâesb keâes Gvekesâ FefkeäJešer efveJesMe Hej

nesves Jeeues peesefKece kesâ yeejs cesb #eefleHetefle& osvee~

meYeer $e+Ce Deewj FefkeäJešer Hej HeÇYeej efveJeue

HeefjÛeeueve ueeYe (keâj meceeÙeesefpele keâjkesâ) mes

Ieše efoÙee peelee nw~

e f veJeue Hee fjÛeeueve ueeYe (keâj

meceeÙeespeve kesâ yeeo) : Ùen Jen ceeHeoC[

nw pees Hetjs ueeYe keâe mecetn nw efpememes meYeer

efveJesMekeâesb Deewj GOeejkeâlee&Deesb keâes Gvekesâ Ùeesieoeve

kesâ cegleeefyekeâ Yegieleeve efkeâÙee peelee nw~

efveJesefMele Hetbpeer : efveJesefMele Hetbpeer Jen mecemle

Hetbpeer nw pees Skeâ keâcHeveer cesb Gmekesâ Hetjs keâeÙe&keâeue

cesb ueieeÙeer peeleer nw~ Jeneb Gmekesâ meÇesle mes keâesF&

DeLe& veneR neslee~ Hetbpeer $e+Ce kesâ ¤He cesb, FefkeäJešer

kesâ ¤He ceW, keâeÙe&Meerue Hetbpeer kesâ ¤He cesb Ùee

mLeeÙeer DeeefmleÙeesb kesâ ¤He ceW nes mekeâleer nw~

efveJesefMele Hetbpeer Hej HeÇefleHeâue : Skeâ keâcHeveer

keâe DeeefLe&keâ JeefOe&le cetuÙe Gmekesâ efveJesMe Hej

yeepeej oj mes DeefOekeâ efceueves Jeeueer Je=efæMeerue

jeefMe nw~ FefkeäJešer efveJesMekeâ DeHeves efveJesMe Hej

Gleves ner HeÇefleHeâue keâer DeHes#ee jKelee nw pees

Gmes yeepeej cesb efveJesMe keâjves mes efceuelee nw,

ÙeÅeefHe Ùen meye keâcHeveer kesâ peesefKece keâer

¤HejsKee Hej efveYe&j keâjlee nw~ Fmeer lejn,

mebmLeeiele (HeÇesHeâeFue) Deewj efvepeer efveJesMekeâ

keâce mes keâce yeQkeâ keâer cetue GOeej oj Hej lees

HeÇefleHeâue keâer Gcceero keâjlee ner nw~

efveJeue HeefjÛeeueve ueeYe

efveJesefMele hetbpeer (meceeÙeesefpele keâj Iešekeâj)

hej Øeefleheâue

Deewmele efveJesefMele Hetbpeer

Hetbpeer ueeiele keâe Yeeefjle Deewmele : Hetbpeer

ueeiele keâe Yeeefjle Deewmele Skeâ DeJemej ueeiele

nw pees Gme oj kesâ mecekeâ#e nw efpemes efveJesMekeâ

DevÙe legueveerÙe peesefKece Jeeueer keâcHeefveÙeesb kesâ

mšekeâ cesb ueieekeâj HeÇeHle keâj mekeâlee nw~ Skeâ

keâcHeveer keâes Ssmeer HeefjÙeespeveeDeesb kesâ yeejs cesb

mebYeeJeveeDeesb keâer leueeMe keâjveer ÛeeefnS peneb

efveJeue HeefjÛeeueve ueeYe Hebtpeer ueeiele kesâ Yeeefjle

Deewmele mes DeefOekeâ nes efpememes Fmekeâer Hebtpeer

keâer GHeepe&ve #ecelee ceW Je=efæ nes mekesâ pees

Fmekesâ efveJesMekeâesb cesb efJeleefjle keâer pee mekesâ~

Fmeer lejn, keâcHeefveÙeesb keâes Ssmeer HeefjÙeespeveeDeesb

cesb Yeeie veneR uesvee ÛeeefnS peneb efveJeue HeefjÛeeueve

ueeYe (keâj meceeÙeespeve kesâ yeeo) Hetbpeer ueeiele

kesâ Yeeefjle Deewmele mes keâce nes~ Hetbpeer ueeiele

keâe Yeeefjle Deewmele JeemleJe cesb $e+Ce Deewj

FefkeäJešer keâe Deewmele Yeeefjle ueeiele nw~

DeeefLe&keâ JeefOe&le cetuÙe kesâ ceeHe

DeeefLe&keâ JeefOe&le cetuÙe Je=efæMeerue HeÇefleHeâue keâe Skeâ

ceeHe nw Ùee Skeâ keâcHeveer keâer Jen ÙeesiÙelee nw peneb

Fmekeâe HeÇefleHeâue Hebtpeer keâer ueeiele mes DeefOekeâ nw~

Ssmes DeeefLe&keâ JeefOe&le cetuÙe keâes mekeâejelcekeâ keânles

nwb~ peneb HeÇefleHeâue Hetbpeer keâer ueeiele mes keâce nw Jeneb

Fmes vekeâejelcekeâ keâne peeÙesiee~

DeeefLe&keâ JeefOe&le cetuÙe keâe Heâecet&uee

DeeefLe&keâ JeefOe&le cetuÙe · efveJeue HeefjÛeeueve ueeYe

(keâj meceeÙeespeve kesâ yeeo) - Hetbpeer HeÇYeej

Ùee

efveJesefMele Hetbpeer Hej HeÇefleHeâue - Hetbpeer ueeiele keâe

Yeeefjle Deewmele

yeQkeâeW ceW DeeefLe&keâ JeefOe&le cetuÙe %eele keâjves keâer HeÇCeeueer

efveJeue HeefjÛeeueve ueeYe (keâj meceeÙeespeve kesâ yeeo)

(keâ) kegâue DeeÙe.....

(Ke) HeefjÛeeueve ueeiele.....

(ie) DeeÙe (yÙeepe Deewj keâj Iešekeâj)......

(Ie) keâj keâe HeÇeJeOeeve.....

(*) DeemLeefiele keâj ceW HeefjJele&ve

(Ûe) efveJeue HeefjÛeeueve ueeYe (keâj meceeÙeesefpele

keâjkesâ)

· { (ie) - (Ie) - (keâ) }

efveJesefMele Hetbpeer

(1) HeefjÛeeueve Ûeeuet DeeefmleÙeeb { (keâ) ± (Ke) ±

(ie) }

(i) vekeâoer SJeb YeejleerÙe efjpeJe& yeQkeâ

ceW pecee jeefMe

(ii) yeQkeâeW SJeb ceebie cegoÇe yeepeej

cesb pecee jeefMe

(iii) DeefieÇce (3 Je<e& keâer HeefjHekeäJelee Jeeues)

(2) yÙeepejefnle osÙeleeÙeW { (keâ) ± (Ke) ± (ie)

± (Ie) }

(i) osÙe efyeue

(ii) GHeefÛele yÙeepe

(iii) Devle: DeeefHeâme meceeÙeespeve (efveJeue)

(iv) DevÙe (HeÇeJeOeeve keâes Meeefceue keâjkesâ)

(3) HeefjÛeeueveerÙe keâeÙe&Meerue Hetbpeer {(1) - (2)}

(4) mLeeÙeer DeeefmleÙeeb (Hegvecet&uÙeve Deejef#ele

efveefOe Iešekeâj

(5) DevÙe HeefjÛeeueveerÙe DeeefmleÙeeb { (keâ) ± (Ke) } :

(i) DeefieÇÇce (3 Je<e& mes DeefOekeâ HeefjHekeäJelee

Jeeues) - efveJeue Devepe&keâ DeeefmleÙeeb

(ii) efveJesMe

(6) DevÙe HeefjÛeeueveerÙe osÙeleeÙeW ({ (keâ) ± (Ke)

± (ie) } :

(i) Hetbpeer

(ii) Deejef#ele efveefOe (Hegvecet&uÙeve Deejef#ele

efveefOe Deueie keâjkesâ)

(iii) DeOeervemLe $e+Ce Deewj DevÙe yÙeepe

Oeeefjle yeeC[

(7) DevÙe HeefjÛeeueveerÙe DeeefmleÙeeb (HeefjÛeeueveerÙe

osÙeleeDeesb keâes Iešekeâj) { (5)-(6) }

(8) HeefjÛeeueveerÙe efveJesefMele Hetbpeer { (3) ±

(4) ± (7) }

(9) iewj-HeefjÛeeueveerÙe Hetbpeer {(keâ) ± (Ke)} :

(i) efveJeue Devepe&keâ DeeefmleÙeeb

(ii) DevÙe DeeefmleÙeeb

(10) kegâue efveJesefMele Hetbpeer { (8) ± (9)}

Hetbpeer ueeiele keâe Yeeefjle Deewmele

[e@. yeer. meeceue (2003) ves Hetbpeer ueeiele keâe

Deewmele %eele keâjves kesâ efueS 2000-01 kesâ

efueÙes FefkeäJešer keâer ueeiele 10.5 HeÇefleMele

Deewj 2001-02 kesâ efueS 10 HeÇefleMele keâer

oj mes efveOee&efjle efkeâÙee nw~ Ùen HetJee&vegceeve

Jele&ceeve yÙeepe ojeW SJeb yeepeej Heefjo=MÙe Hej

DeeOeeefjle nw~

[e@. yeer. meeceue (2003) ves Je<e& 2001-02 kesâ

DeeOeej Hej efveJesefMele Hetbpeer Hej HeÇefleHeâue keâes efveJeue

HeefjÛeeueve ueeYe (keâj meceeÙeesefpele keâjkesâ) Deewj Deewmele

efveJesefMele Hetbpeer kesâ DevegHeele mes efvekeâeuee nw~ je<š̂erÙeke=âle

yewbkeâeW keâe efveJesefMele Hetbpeer Hej HeÇefleHeâue 7.82 HeÇefleMele

(efmebef[kesâš yeQkeâ) Deewj 10.13 HeÇefleMele (DeesefjSbšue

yeQkeâ DeeHeâ keâe@ceme&) kesâ yeerÛe jne~ Fmeer lejn, Hetbpeer

ueeiele keâe Yeeefjle Deewmele 6.53 HeÇefleMele (yeQkeâ DeeHeâ

FefC[Ùee) Deewj 22.27 HeÇefleMele (Fbef[Ùeve yeQkeâ) kesâ

yeerÛe jne~ Fmekeâe efJeJejCe Deeies meeefjCeer ceW efoÙee ieÙee

nw~

² 100·


Deiemle 2005

meeefjCeer

je<šêrÙeke=âle yewbkeâesb kesâ DeeefLe&keâ JeefOe&le cetuÙe

yeQkeâ keâe veece

efveJesefMele Hetbpeer Hej

hetbpeer ueeiele keâe

2-4

3-5

DeeefLe&keâ JeefIe&le cetuÙe

heejcheefjkeâ efJeefOeÙeeB

Øeefleheâue

Yeeefjle Deewmele

(keâjesÌ[ ®heÙes ceW)

mebÙegkeäle jQkeâ

12

34

56

78

910

11

12

13

2000-01

2001-02

2000-01

2001-02

2000-01

2001-02

2000-01

jQkeâ

2001-02

jQkeâ

2000-01

2001-02

1.

Fueeneyeeo yeQkeâ

8.60

8.82

7.35

7.19

1.25

1.63

252.92

10

370.69

10

11

14

2.

DeevOeÇe yeQkeâ

9.62

9.67

8.32

7.81

1.30

1.86

240.19

11

347.86

11

54

@3.

yeQkeâ DeeHeâ yeÌ[ewoe

8.77

8.75

7.22

6.99

1.54

1.76

848.54

31098.62

46

10

4.

yeQkeâ DeeHeâ Fbef[Ùee

8.47

8.58

7.17

6.53

1.30

2.04

694.66

41288.33

38

9

5.

yeQkeâ DeeHeâ ceneje<š^

8.66

9.39

7.38

7.62

1.28

1.77

222.84

12

386.44

12

10

8

6.

kesâveje yeQkeâ

8.61

9.50

6.96

7.34

1.65

2.16

985.02

11389.33

14

@4

@7.

mesvšûe yeQkeâ DeeHeâ Fbef[Ùee

8.41

8.52

8.92

6.98

-0.51

1.54

-214.30

15

725.89

612

13

8.

keâejHeesjsMeve yeQkeâ

10.21

9.58

7.91

7.29

2.30

2.29

394.85

7466.40

91

@1

9.

osvee yeQkeâ

7.84

10.07

9.92

10.48

-2.08

-0.41

-311.64

16

-64.24

16

16

@16

10.

FefC[Ùeve yeQkeâ

8.11

8.95

24.60

22.27

-16.50

-13.33

-3605.26

19

-3253.73

19

16

@17

11.

FefC[Ùeve DeesJejmeer]pe yeQkeâ

8.48

9.40

7.41

7.47

1.07

1.93

294.98

8617.53

87

7

12.

DeesefjSbšue yewbkeâ DeeHeâ keâe@ceme&

10.20

10.13

8.41

7.76

1.79

2.37

444.97

6690.29

73

2@

13.

Hebpeeye vewMeveue yeQkeâ

8.88

9.26

7.30

7.18

1.58

2.08

897.79

21347.80

22

2@

14.

Hebpeeye SC[ efmebOe yeQkeâ

8.77

9.06

7.82

7.64

0.95

1.42

114.14

14

178.10

15

14

15

15.

efmebef[kesâš yeQkeâ

8.04

7.82

6.98

6.66

1.06

1.16

269.16

9331.87

13

1@

3

16.

Ùetkeâes yeQkeâ

8.92

9.28

15.94

14.09

-7.03

-4.81

-1541.70

18

-1310.16

18

13

11

17.

ÙetefveÙeve yeQkeâ DeeHeâ Fbef[Ùee

8.84

9.08

7.53

7.11

1.31

1.96

461.36

5782.80

54

@5

18.

ÙegveeFšs[ yeQkeâ DeeHeâ Fbef[Ùee

8.75

8.66

15.10

13.52

-6.35

-4.86

-1182.75

17

-956.89

17

15

12

19.

efJepeÙee yeQkeâ

8.83

9.42

7.33

7.63

1.51

1.79

192.77

13

264.75

14

96

je<šêrÙeke=âle yeQkeâ

8.78

9.09

8.92

8.40

-0.14

0.69

-760.46

4306.65

meÇesle : DeeFyeerS yeguesefšve ceeÛe&, 2003

@ yejeyejer keâe jwbkeâ

Fmemes Skeâ yeele mHe<š nes peeleer nw efkeâ je<šêrÙeke=âle yeQkeâeW keâe DeeefLe&keâ JeefOe&le cetuÙe Glmeenpevekeâ nw~ 19 je<šêrÙeke=âle yewbkeâesb cesb, 15 yeQkeâeW keâe DeeefLe&keâ JeefOe&le cetuÙe mekeâejelcekeâ jne nw

peyeefkeâ 4 yeQkeâeW keâe vekeâejelcekeâ jne nw~ Fmemes Ùen Helee Ûeuelee nw efkeâ Fve 15 yeQkeâeW ceW efveefOe keâe HeÇyebOeve keâce yÙeepe ojesb kesâ JeeleeJejCe cesb HeÇYeeJeMeeueer jne nw~

HeejcHeefjkeâ ceeHeoC[eW - efveJeue yÙeepe ceeefpe&ve, DeeefmleÙeeW Hej HeÇefleHeâue, FefkeäJešer Hej HeÇefleHeâue Deewj HeÇefle MesÙej GHeepe&ve #ecelee Deewj mebÙegkeäle jQkeâ kesâ DeeOeej Hej yeQkeâeW keâes ßesCeeriele efkeâÙee

ieÙee nw~ Fme lejn HeejcHeefjkeâ ceeHeoC[eW SJeb DeeefLe&keâ JeefOe&le cetuÙe kesâ DeeOeej Hej yeQkeâeW keâer ßesefCeÙeeW ceW meceevelee veneR nw~ Deepe peye ueieYeie meYeer je<šêrÙeke=âle yeQkeâ yeepeej mes Hetbpeer keâer

Gieener keâj jns nQ lees Ùen GHeÙegkeäle meceÙe nw efkeâ yeQkeâ DeHeves efve<Heeove kesâ HeejcHeefjkeâ ceeHeoC[eW mes yeenj Deekeâj DeeefLe&keâ JeefOe&le cetuÙe DeHeveeÙesb efpememes MesÙejOeejkeâesb kesâ cetuÙe cesb Je=efæ

nes mekesâ~

uesKe

ceevekeâ Je Devepe&keâ DeeefmleÙeeb :

yesnlej ØeyebOeve

mejpeerle efmebn

Deepe kesâ yeoueles heefjÂMÙe ceW GoejerkeâjCe,

efvepeerkeâjCe Deewj Yetceb[ueerkeâjCe kesâ oewj ves

efpeme ØeeflemheOee&lcekeâ yeepeej keâe efvecee&Ce

efkeâÙee nw GmeceW efkeâmeer Yeer yeQkeâ Éeje Dehevee

DeefmlelJe yeveeÙes jKeves kesâ efueS Deheveer

keâeÙe&ØeCeeueer SJeb JÙeJemLee heefjJele&ve ceW

Deewj yesnlej ØeyebOeve keâer DeeJeMÙekeâlee nesieer~

$e+Ce osves keâer JÙeJemLee ceW

heefjJele&ve keâjkesâ mšeheâ

keâer menYeeefielee yeÌ{eveer

ÛeeefnS keäÙeeWefkeâ mšeheâ keâer

efmeheâeefjMe hej efoÙee ieÙee

$e+Ce keâYeer Yeer SveheerS

veneR nes mekeâlee~ $e+Ce

osles meceÙe meYeer mšeheâ

keâes ceeuetce jns efkeâ

DecegKe JÙeefkeäle keâes Decegkeâ

$e+Ce efoÙee pee jne nw~

Fmemes Deiej $e+Ceer ceW

keâesF& keâceer nesleer nw lees

Gmes menpe hekeâÌ[e pee

mekeâlee nw~ otmeje, mšeheâ

keâes Jemetueer kesâ efueS Yeer

Øesefjle efkeâÙee pee mekeâlee nw

Deewj $e+Ce keâes mšeheâ keâer

menYeeefielee mes SveheerS

nesves mes yeÛeeÙee pee

mekeâlee nw~


Deiemle 2005

Dele:, Deepe kesâ «eenkeâesvcegKeer yeepeej ceW «eenkeâ keâer Dehes#eeDeeW

keâes hetje keâjles ngS Deewj $e+Ce GlheeoeW keâer iegCeJeòee keâes yeÌ{eles

ngS ceevekeâ DeeefmleÙeeW keâes yesnlej ØeyebOeve Éeje Devepe&keâ DeeefmleÙeeW

ceW peeves mes jeskeâe pee mekeâlee nw~

ceevekeâ DeeefmleÙeeW keâes ceevekeâ DeeefmleÙeeb yeveeÙes jKevee efveleeble

DeeJeMÙekeâ nw, DevÙeLee Ùes Devepe&keâ DeeefmleÙeeW ceW yeouekeâj iebYeerj

¤he ues uesleer nQ~ Fmemes yeÛeves kesâ efueS yesnlej ØeyebOeve Éeje

Devepe&keâ DeeefmleÙeeW keâer Fme iebYeerj Ûegveewleer mes menpe Je meheâueleehetJe&keâ

efveheše pee mekeâlee nw~

ceevekeâ DeeefmleÙeeW keâes Devepe&keâ DeeefmleÙeeW ceW peeves mes jeskeâves kesâ

efvecveefueefKele oes efJekeâuhe nes mekeâles nQ :

(keâ) JÙeJemLee ceW heefjJele&ve Deewj

(Ke) mebØes<eCe ceW JÙeeJeneefjkeâlee

(keâ) JÙeJemLee ceW heefjJele&ve : ceevekeâ DeeefmleÙeeW keâer

Jemetueer yesnlej ØeyebOeve mes leLee JÙeJemLee ceW heefjJele&ve

keâjkesâ menpe SJeb efveÙeefcele yeveeÙeer pee mekeâleer nw

Deewj $e+Ce keâes Devepe&keâ nesves mes yeÛeeÙee pee

mekeâlee nw~

Ùes heefjJele&ve efvecveefueefKele nes mekeâles nQ :

$e+Ce osves ceW osjer ve keâjvee

omleeJes]peerkeâjCe keâe mejue nesvee

$e+Ce osves ceW mšeheâ keâer menYeeefielee yeÌ{evee

$e+Ce osves ceW osjer ve keâjvee : Ssmee osKee ieÙee nw efkeâ

$e+Ce osves Jeeuee (yeQkeâj) $e+Ceer keâes yeQkeâ kesâ Fleves DeveeJeMÙekeâ

Ûekeäkeâj keâšJeelee nw efkeâ $e+Ce uesves Jeeuee hejsMeeve nes peelee

nw Deewj Fmekeâe ØeYeeJe efveefMÛele ¤he mes $e+Ce Jemetueer hej

heÌ[lee nw~ Deepe kesâ heefjÂMÙe ceW $e+Ce osves ceW osjer veneR

keâjveer ÛeeefnS, efpememes $e+Ceer KegMeer ceve mes $e+Ce keâer

Ûegkeâewleer keâjlee jns~ Dele: yeQkeâjeW keâes Fme JÙeJemLee ceW

menÙeesie keâjvee ÛeeefnS~

omleeJes]peerkeâjCe keâe mejue ¤he ceW nesvee : yeQkeâeW ceW

$e+Ce keâe omleeJes]peerkeâjCe Skeâ peefšue Øeef›eâÙee nw efpevnW

hetje keâjves ceW yengle-meer hejsMeeveer Deeleer nw Deewj meceÙe keâer

yeyee&oer nesleer nw~ Dele: yeQkeâeW keâes $e+Ce osves kesâ omleeJes]pe Yeer

mejue Je mešerkeâ ¤he ceW yeveeves ÛeeefnS~ otmeje, Devepe&keâ

DeeefmleÙeeW keâer Jemetueer kesâ keâevetveer omleeJes]pe Yeer mejue Je

mešerkeâ neW, efpememes SveheerS Jemetueer keâe MeerIeÇ GheeÙe nes

mekesâ Deewj keâevetve keâer uebyeer Øeef›eâÙee mes yeÛee pee mekesâ~

$e+Ce osves ceW mšeheâ keâer menYeeefielee : JÙeJemLee ceW

heefjJele&ve keâe Ùen cegKÙe Debie nw efpemekesâ Éeje Devepe&keâ

Deeefmle keâes jeskeâe pee mekeâlee nw~ yeQkeâeW keâer MeeKeeDeeW ceW

Dekeämej osKeves keâes efceuelee nw efkeâ MeeKee ceW $e+Ce osves Jeeuee

›esâef[š ØeyebOekeâ Deheves Deehekeâes Denced mecePelee nw Ùeeefve

$e+Ce mebyebefOele efveCe&Ùe Gmekesâ mJeÙeb kesâ nesles nQ Deewj DevÙe

mšeheâ keâer menYeeefielee veieCÙe nesleer nw~ menÙeesie uesves keâer

pe¤jle ner veneR mecePeer peeleer~ Devepe&keâ nesves hej DevÙe

”

”ßeer efmebn yeQkeâ Dee@heâ yeÌ[ewoe, meerkeâjer Kego& MeeKee,

ieeef]peÙeeyeeo (G.Øe.) ceW keâeÙe&jle nQ~ efJe%eeve ceW

mveelekeâ ßeer efmebn ves meerSDeeF&DeeF&yeer keâer hejer#ee

Yeer GòeerCe& keâer nw~ Deeheves yeQkeâ keâer keâF& MeeKeeDeeW

ceW efJeefYevve keâeÙe& efkeâÙee nw~ Deeheves yeQefkebâie leLee

meeceeefpekeâ efJe<eÙeeW keâes keWâõ-eEyeog yeveekeâj keâF&

uesKe efueKes nQ~ efheÚues 7-8 Je<eeX ceW Deehekesâ

yeQefkebâie leLee DeeefLe&keâ efJe<eÙeeW hej efJeefYevve uesKe

ØekeâeefMele nes Ûegkesâ nQ~

yeQkeâ MeeKeeDeeW keâes meceÙe-meceÙe hej ieebJeeW ceW

Jemetueer keQâhe keâe DeeÙeespeve keâjvee ÛeeefnS Deewj

Ùen Jemetueer keQâhe leye ueieves ÛeeefnS peye

efkeâmeeveeW keâer heâmeue lewÙeej nes Deewj hewmee

efkeâmeeve kesâ neLe ceW Deeves ueies~ Ssmee keâjves mes

SveheerS Jemetueer keâes efveefMÛele ¤he mes Øeeslmeenve

efceuesiee~


Deiemle 2005

mšeheâ keâer Ùeeo Deeleer nw efkeâ Gkeäle $e+Ceer kesâ

mebheke&â ceW efkeâmes Yespee peeS efpememes ØeYeeJeMeeueer

Jemetueer keâer peeÙes~

Dele: $e+Ce osves keâer JÙeJemLee ceW heefjJele&ve keâjkesâ mšeheâ

keâer menYeeefielee yeÌ{eveer ÛeeefnS keäÙeeWefkeâ mšeheâ keâer

efmeheâeefjMe hej efoÙee ieÙee $e+Ce keâYeer Yeer SveheerS veneR

nes mekeâlee~ $e+Ce osles meceÙe meYeer mšeheâ keâes ceeuetce

jns efkeâ DecegKe JÙeefkeäle keâes Decegkeâ $e+Ce efoÙee pee jne

nw~ Fmemes Deiej $e+Ceer ceW keâesF& keâceer nesleer nw lees Gmes

menpe hekeâÌ[e pee mekeâlee nw~ otmeje, mšeheâ keâes Jemetueer

kesâ efueS Yeer Øesefjle efkeâÙee pee mekeâlee nw Deewj $e+Ce keâes

mšeheâ keâer menYeeefielee mes SveheerS nesves mes yeÛeeÙee pee

mekeâlee nw~

(Ke) mebØes<eCe ceW JÙeeJeneefjkeâlee : mebØes<eCe Skeâ

Ssmee #es$e nw efpemekesâ Éeje $e+Ce Jemetueer Deewj SveheerS

Jemetueer keâes mejue Je megiece yeveeves ceW ceoo efceueleer nw~

Dele: mebØes<eCe keâer Yetefcekeâe keâes vekeâeje veneR pee mekeâlee

nw~ mebØes<eCe ceW JÙeeJeneefjkeâlee keâes Yeer leerve ¤heeW ceW

efJeYekeäle efkeâÙee pee mekeâlee nw :

$e+Cekeâlee& keâes Devegmceejkeâ he$e Yespevee :

yeQkeâeW keâes Deheveer MeeKee kesâ mlej hej efoÙes ieÙes

$e+Ce kesâ yeejs ceW $e+Ceer keâes meceÙe-meceÙe hej

Devegmceejkeâ he$e Yespevee ÛeeefnS efpememes $e+Ceer

keâes efkeâmle Ùeeo Deeleer jns Deewj meceÙe hej $e+Ce

Jemetueer nesleer jns~ SveheerS $e+Ce KeeleeW kesâ yeejs

ceW Yeer yeQkeâ MeeKee keâes meceÙe-meceÙe Jemetueer

veesefšme DeJeMÙe efvekeâeueveer ÛeeefnS~ Fmemes $e+Ceer

hej ceveesJew%eeefvekeâ ØeYeeJe heÌ[lee nw Deewj $e+Ce

Jemetueer Deeves keâer p]Ùeeoe Gcceero jnleer nw~ Dele:,

Ssmee he$eeÛeej mebheke&â efvejblej yevee jnvee ÛeeefnS~

JÙeefkeäleiele mebheke&â yeveevee : $e+Ce osves mes

henues SJeced $e+Ce osves kesâ yeeo yeQkeâ mšeheâ keâes

$e+Ceer kesâ mebheke&â ceW yevee jnvee ÛeeefnS~ Ùen yeQkeâ

keâer cegKÙe Øeef›eâÙee nw~ Fmemes JÙeefkeäle keâer henÛeeve

keâe helee Ûeuelee nw~ otmeje, JÙeefkeäleiele ØeYeeJe

mes $e+Ce Jemetueer mejue yeveeÙeer pee mekeâleer nw~

Dele:, yeQkeâ ØeyebOeve keâes $e+Ceer kesâ JÙeefkeäleiele

mebheke&â ceW efvejblej yevee jnvee ÛeeefnS efpememes

$e+Ce Jemetueer keâer yeeOee keâes jeskeâe pee mekeâlee nw~

Ùen Jemetueer keâe meMekeäle ceeOÙece ceevee ieÙee nw~

šsueerheâesve Éeje mebheke&â jKevee : Ùen mebheke&â

keâjves keâe leer›e Je meMekeäle Fueskeäš^e@efvekeâ ceeOÙece

nw~ yeQkeâ keâes $e+Ceer keâe heâesve vebyej jKevee ÛeeefnS

efpememes meceÙe hej legjble mebheke&â efkeâÙee pee mekesâ

Deewj $e+Ce Jemetueer kesâ efueS Øesefjle efkeâÙee pee

mekesâ Fme Øekeâej, $e+Ce keâes SveheerS nesves mes

yeÛeeÙee pee mekeâlee nw~

Deepe kesâ oewj ceW, yeQefkebâie GÅeesie keâer Devepe&keâ

DeeefmleÙeeb Skeâ iebYeerj Ûegveewleer nQ~ SveheerS yeQkeâeW

hej efvecveevegmeej oesnje ØeYeeJe [euelee nw :

(i) ceevekeâ DeeefmleÙeeW hej Øeehle nesves Jeeues Øeefleheâue

keâes keâce keâjlee nw~

(ii) yeQkeâeW keâer ueeYeØeolee keâes ØeYeeefJele keâjlee nw~

SveheerS mes leerve mlej ØeYeeefJele nesles nQ : (i) yeQkeâeW keâe

efJeòeerÙe DeeOeej (ii) ceevekeâ DeeefmleÙeeW keâe Øemeej, Deewj

(iii) osMe keâe DeeefLe&keâ efJekeâeme~

keäÙeeW neslee nw SveheerS?

Ùeneb SveheerS mecemÙee keâe efveoeve {tBÌ{ves mes henues Ùen

peevevee pe¤jer nw efkeâ ceevekeâ DeeefmleÙeeW keâes Devepe&keâ

DeeefmleÙeeW ceW yeoueves Jeeues keâejkeâ keäÙee nes mekeâles nQ~

Fmekesâ efvecveefueefKele keâejCe nes mekeâles nQ :

Yeü° lejerkeâe : mJeÙeb yeQkeâ DeefOekeâejer Éeje Yeü° lejerkeâe

Deheveekeâj Ùee jepeveereflekeâ ØeYeeJe ceW Deekeâj efoÙee ieÙee

$e+Ce SveheerS nesves keâe keâejCe yeve mekeâlee nw~

Øeeke=âeflekeâ keâejCe : Øeeke=âeflekeâ Deeheoe Deeves

hej yeQefkebâie $e+Ce SveheerS nes mekeâles nQ~

mJeÙeb $e+Ceer : $e+Ceer Éeje $e+Ce

jeefMe keâes Deheveer Iejsuet pe¤jleeW

ceW ueiee uesves mes $e+Ce SveheerS

nes mekeâlee nw~

mejkeâejer veere fleÙeeb :

mejkeâej Éeje meceÙe-

meceÙe hej $e+Ce ceeheâer

keâer Iees<eCee Ùee $e+Ce

Jemetueer keâes mLeefiele

keâjevee Deeefo Yeer $e+Ce

Jemetueer keâes ØeYeeefJele

keâjlee r nw pee s $e+Ce

SveheerS nesves keâe keâejCe

yevelee nw~

DeveeJeMÙekeâ osjer : $e+Ce

keâes SveheerS ceW yeoueves keâe

ØecegKe keâejCe DeveeJeMÙekeâ osjer

ceevee ieÙee nw efpemeceW yeQkeâj "erkeâ

meceÙe hej GefÛele $e+Ceer keâe ÛegveeJe veneR keâj heeles nQ,

efpememes «eenkeâ keâes yeQkeâ kesâ DeveeJeMÙekeâ Ûekeäkeâj ueieeves

heÌ[les nQ~ Dele:, yeeo ceW $e+Ce Jemetueer ceW hejsMeeveer keâe

keâejCe yevelee nw~

mebheke&â ve jKevee : ØeeÙe: osKee peelee nw efkeâ ØeyebOekeâ

$e+Ce osves kesâ yeeo $e+Ceer mes mebheke&â veneR jKe heeles nQ

Deewj ve ner meceÙe hej veesefšme Yespeles nQ efpememes $e+Ce

Jemetueer ØeYeeefJele nesleer nw Deewj $e+Ce SveheerS yevelee

nw~

mšeheâ keâer menYeeefielee ve yeveevee : ceevekeâ DeeefmleÙeeW

keâe Devepe&keâ DeeefmleÙeeW ceW yeoueves keâe ØecegKe keâejCe

mšeheâ keâer menYeeefielee ve yeveevee ceevee ieÙee nw~ ›esâef[š

DeefOekeâejer $e+Ce osles meceÙe efkeâmeer Yeer mšeheâ keâes mebheke&â ceW

veneR ueslee nw efpememes $e+Ceer kesâ yeejs ceW peevekeâejer DeOetjer

jnleer nw Ùee mšeheâ $e+Ce Jemetueer ceW efoueÛemheer veneR ueslee

nw Deewj $e+Ce SveheerS nes peelee nw~

Dele: keânvee GefÛele nesiee efkeâ keâneR-ve-keâneR ØeyebOeve ceW

keâceer jnleer nw efpememes ceevekeâ DeeefmleÙeeb neefvekeâejkeâ

DeeefmleÙeeW ceW heefjJeefle&le nes peeleer nQ~ Devepe&keâ DeeefmleÙeeW

keâer Jemetueer kesâ efueS efvecveefueefKele GheeÙe efkeâS pee

mekeâles nQ :

(keâ) MeeKee mlej hej Jemetueer FkeâeF& keâe ie"ve

(Ke) ØeefleYetefleÙeeW kesâ Øeefle mepeielee

(keâ) MeeKee mlej hej Jemetueer FkeâeF& keâe ie"ve :

SveheerS Jemetueer kesâ efueS yeQkeâeW Éeje MeeKee mlej hej

Fme Øekeâej Jemetueer FkeâeF& yeveeÙeer pee mekeâleer nw :

MeeKee mlej hej Jemetueer keâ#e keâe ie"ve : $e+Ce osves

Jeeueer MeeKee kesâ mlej hej oes Ùee leerve mšeheâ keâe

ÛegveeJe keâjkesâ Skeâ mesue keâe ie"ve efkeâÙee peeS Deewj

meceÙe-meceÙe hej FmeceW mšeheâ meomÙeeW keâe heefjJele&ve

nesvee ÛeeefnS~ mesue ceW Skeâ ›esâef[š Dee@heâermej neslee nw

pees mesue keâe ØeYeejer Je mLeeÙeer meomÙe yevelee nw Deewj

otmejs meneÙekeâ keâce&Ûeejer pees DemLeeÙeer meomÙe nesles nQ~

mesue kesâ meomÙe SveheerS keâer Jemetueer kesâ efueS $e+Ceer kesâ

heeme peeSbies~ Fme Øekeâej keâer Øeef›eâÙee mes efveefMÛele ner

SveheerS Jemetueer hej mekeâejelcekeâ ØeYeeJe heÌ[lee nw~

MeeKee mlej hej Jemetueer SpeWš keâer efveÙegefkeäle : osKee

ieÙee nw efkeâ ØeeFJesš efJeòeerÙe mebmLeeSb oyebie ueesieeW Éeje

Deheves $e+CeeW keâer Jemetueer keâjeleer nQ~ FmeceW $e+Ce Jemetueer

100 ØeefleMele nesleer nw~ Fmeer Øekeâej, yeQkeâeW keâes Yeer

Deheves MeeKee kesâ mlej hej efkeâmeer Jemetueer SpeWš keâer

efveÙegefkeäle keâjveer ÛeeefnS~ yeQkeâ Fvekesâ SJepe ceW Jemetueer

keâe oes Ùee leerve ØeefleMele keâceerMeve os mekeâles nQ~

MeeKee mlej hej Jemetueer keQâhe keâe ie"ve : yeQkeâ MeeKeeDeeW

keâes meceÙe-meceÙe hej ieebJeeW ceW Jemetueer keQâhe keâe DeeÙeespeve

keâjvee ÛeeefnS Deewj Ùen Jemetueer keQâhe leye ueieves ÛeeefnS

peye efkeâmeeveeW keâer heâmeue lewÙeej nes Deewj hewmee efkeâmeeve

kesâ neLe ceW Deeves ueies~ Ssmee keâjves mes SveheerS Jemetueer

keâes efveefMÛele ¤he mes Øeeslmeenve efceuesiee~ Deblele: yeQkeâ

keâe SveheerS keâce nesiee~

(Ke) ØeefleYetefleÙeeW kesâ Øeefle mepeielee : yeQkeâeW kesâ

›esâef[š Dee@heâermej keâes $e+Ceer keâer ØeefleYetefleÙeeW kesâ Øeefle

mepeie jnvee ÛeeefnS~ Ùeeefve efpeme efove $e+Ce Keelee

heemš [dÙet Ùee DeefveÙeefcele nes peelee nw Gmeer efove Ùen

peeve uesvee ÛeeefnS efkeâ ØeefleYetefle megjef#ele nw Ùee veneR~

ØeefleYetefleÙeeW kesâ Øeefle peeie¤keâlee kesâ yeeJepeto kegâÚ $e+Ce

Keeles SveheerS nes peeles nQ Deewj SveheerS Jemetueer kesâ

GheÙeg&keäle meYeer ØeYeeJe efJeheâue jnles nQ~ leye efvecveefueefKele

GheeÙe efkeâS peeves ÛeeefnS efpevnW keâevetve Éeje SveheerS

Jemetueer keâe ØeÙeeme keâne pee mekeâlee nw, pewmes -

efJeefOekeâ keâej&JeeF& Éeje : yeQkeâeW kesâ SveheerS keâes keâce

keâjves kesâ efueS mejkeâej ves keâ"esj keâoce G"eS nQ~

efJeefOekeâ keâej&JeeF& SJeb GmeceW megOeej nsleg mejkeâej Éeje

21 petve, 2002 keâes Skeâ DeOÙeeosMe ueeiet efkeâÙee

ieÙee nw~ Fme DeOÙeeosMe kesâ Devegmeej yeQkeâeW Je efJeòeerÙe

mebmLeeDeeW keâes DeefOekeâej Øeoeve efkeâS ieÙes nQ efpememes Jes

efkeâmeer keâesš& Ùee efš^yÙetveue ceW peeS yeiewj ner yebOekeâ Ùee

Âef°yebOekeâ kesâ Debleie&le jKeer ieÙeer ØeefleYetefle keâes Øeehle

keâjves keâer keâej&JeeF& keâj mekeâles nQ~

Fme DeOÙeeosMe kesâ Devegmeej, yeQkeâ SveheerS Keelesoej

keâes Skeâ efueefKele veesefšme Yespe mekeâlee nw (efpemeceW mee"

efove kesâ Debleie&le $e+Ce keâer hetjer Ùee yekeâeÙee jeefMe

Ûegkeâeves nsleg efueKee nes) Ùeefo $e+Ceer Ùee ØeefleYetefleoelee

Dehevee oeefÙelJe efveOee&efjle meceÙe hej hetje veneR keâjles nQ

lees yeQkeâ efvecveefueefKele keâej&JeeF& keâj mekeâles nQ :

yebOekeâ Ùee Âef°yebOekeâ DeeefmleÙeeW keâes Deheves

DeefOekeâej ceW ues mekeâles nQ~

$e+Ceer Ùee Âef°yebOekeâ DeeefmleÙeeW keâe ØeyebOeve Deheves

neLe ceW ues mekeâles nQ~

efkeâmeer DevÙe JÙeefkeäle keâes DeeefmleÙeeW kesâ ØeyebOeve

kesâ efueS efveÙegkeäle keâj mekeâles nQ~

ueeskeâ Deoeuele : MeerIeÇ vÙeeÙe efoueeves kesâ efueS mejkeâej ves

meved 1987 ceW ueeskeâ DeoeueleeW keâe ie"ve efkeâÙee ieÙee~

yeQkeâ SveheerS Jemetueer kesâ efueS ueeskeâ Deoeuele ceW pee

mekeâles nQ~ ueeskeâ Deoeuele oesveeW he#eeW keâes megveves kesâ yeeo

MeerIeÇ vÙeeÙe keâjleer nw Deewj Jemetueer ØeceeCe he$e osleer nw

efpemekesâ DeeOeej hej yeQkeâ keâesš& mes ef[›eâer Øeehle keâj mekeâles

nQ Deewj SveheerS Jemetueer keâes ØeYeeJeer yevee mekeâles nQ~

mecePeewlee-ØemleeJe : Ùen ØemleeJe Oeve kesâ mececetuÙe hej

DeeOeeefjle nw~ Fmekesâ Debleie&le Skeâ Deesj ØeefleYetefle keâer

Jemetueer keâef"ve nw Deewj otmejer Deesj keâevetveer Øeef›eâÙee

uecyeer, peefšue Je {erueer nw~ Fve meyemes yeÛeves kesâ efueS

mecePeewlee-ØemleeJe Skeâ mejenveerÙe Je leer›e SveheerS Jemetueer

keâe keâejkeâ yeve mekeâlee nw~ Fme lejn Øeehle jeefMe keâes

hegve: ØeJeen ceW ueekeâj yeQkeâ Deewj DeefOekeâ ueeYe keâcee

mekeâles nQ~ Ùen SveheerS Jemetueer keâe Debeflece keâoce ceevee

peelee nw~

Deepe YeejleerÙe yeQefkebâie kesâ mece#e Devepe&keâ DeeefmleÙeeW

keâer Jemetueer Skeâ iebYeerj Ûegveewleer DeJeMÙe nw~ hejbleg,

Fmekesâ yesnlej ØeyebOeve, JÙeJemLee heefjJele&ve Deewj mšeheâ

kesâ Deehemeer menÙeesie Je meodYeeJevee Je ÂÌ{ FÛÚe Meefkeäle

Éeje GefÛele mecevJeÙe yeveekeâj Fmes menpe Je mejue

yeveeÙee pee mekeâlee nw~


Deiemle 2005

uesKekeâeW mes DevegjesOe...

DeeFyeerS yeguesefšve kesâ efueS uesKe Yespeles meceÙe ke=âheÙee Dehevee heemeheesš& Deekeâej keâe veJeervelece heâesšes Deewj yeeÙees[eše DeJeMÙe YespeW leeefkeâ uesKe ØekeâeefMele

nesves keâer efmLeefle ceW Gmekeâe GheÙeesie efkeâÙee pee mekesâ~


COMMUNICATION@IBA

Some of the event highlights were :◆ Shri S.C. Basu, Chairman &

Managing Director - Bank ofMaharashtra; Deputy Chairman -Indian Banks’ Association was thePresiding Host; Shri V. Leeladhar,Deputy Governor - Reserve Bankof India was the Chief Guest andShri Rajiv Vaishnav, RegionalDirector - NASSCOM was Master ofCeremonies.

◆ Keynote Session by Shri A.N. Roy,Commissioner of Police - GreaterMumbai.

◆ Interactive and Educative sessionson IT Security, Anti MoneyLaundering, Financial Crime &Fraud.

◆ Key Speakers presenting were :

IBA-TFCI jointly organized a conference ‘BANKING SECURITY 2005’on June 22, 2005 at Mumbai. The Conference brought together all the facetsof banking security for frank and meaningful discussions, learning andstrategizing to ensure the industry’s Collective Security future.

Shri Dirk Mohrmann, President -WorldCompliance; Shri MatthewSyme, Product Marketing Manager- Nortel Security Solutions;Shri Neeraj Dotel, Industry Manager(Financial Services) - Microsoft India;Shri Sujan Pandit, ProgramManager - CIANT; Shri Vineet Mittal,Practice Head (Enterprise) WebServices & Identity ManagementPractice) - Sun Microsystems, Indiaand Shri Vivek Gupta, SecurityConsultant - IBM Global Services.

◆ Other Industry & Sponsor Speakerswere : Shri D.V.S. Prakash, AVP(Product Manager) - FinancialSoftware and Systems; Shri G.N.Nagaraj, Director (Sales) - OnwardNovell; Shri Hanuman Tripathi,

Chief Guest Shri V. Leeladhar, Dy. Governor, Reserve Bank of India lighting the lamp and inaugurating the Seminar, flanked by (L-R)Shri Balmohan Tarakad, President & ED-TFCI, Shri A.N. Roy, Commissioner of Police, Greater Mumbai, Shri S.C. Basu, Dy. Chairman,

IBA & CMD, Bank of Maharashtra.

Managing Director - InfraSoftTechnologies; Shri John Hele, GlobalProduct Head - BSI ManagementSystems and Shri S. ShankarNarayanan, Head (InformationSecurity Practice) - 3D Networks.

◆ Locknote Panel Discussion on ‘‘CyberCrime, Security & Compliance : It’s issuesand the future for the Banking Industy’’by Shri Nandkumar Saravade,Director (Cyber Security & Compliance)- NASSCOM; Shri Satish Warrier, Head(Information Security) - IDBI Ltd.;Shri Srivalsan Ponnachath, Director(Financial Services) - Sun Microsystemsand Shri Venugopal R. Iyenagar,Practice Director (eSecurityCompetancy and Consulting Services)TCS.

(Links to these events are available at www.iba.org.in)



FINANCE MINISTER’S MEETING WITH CEs OFPUBLIC SECTOR BANKS - 3rd June, 2005

Shri P Chidambaram, Hon’ble Union Minister of Finance took a review meeting of the Chief Executives of Public Sector Banks and FIs onthe 3rd June, 2005 at New Delhi. The key issues addressed by the Finance Minister in the meeting relate to performance of the PSBs on theflow of credit to agriculture, Rural Housing, Educational Loan Scheme, Flow of Credit to Small and Medium Enterprises, Performance ofRegional Rural Banks, Debt Recovery Tribunals (DRTs), Convergence in the Banking Industry, NPA Recovery, Human Resources Development,Consolidation of PSBs and Review of Managerial Autonomy.

At the sequel to discussions of the meeting, the Banking Division, Ministry of Finance has sought banks specific action reports on the followingissues:Recovery of NPAs : Banks having net NPA in excess of 5 percent were directed to take measures to reduce the NPA Level within a definitetime frame.Consolidation of PSBs : CEOs were advised that before considering any proposal, the unions might be suitably sensitized on the need andadvantages of consolidation.Review of Managerial Autonomy : The Government would focus its role to the four main areas viz., (i) Nationally important policies;(ii) Uniform Standards of Corporate Governance; (iii) Appointment of CMDs/EDs; (iv) Performance measurement, monitoring and discipline.Banks would be required to sign MOU with the Government for the above purpose.

Shri P. Chidambaram, Hon’ble Finance Minister (2nd from left) chaired the meeting. Shri Vinod Rai, Addl. Secretary,DEA (BD) [to his right] ; [to his left] Shri V. Leeladhar, DG, RBI; Shri A.K. Purwar, Chairman IBA and Chairman SBI;Shri V.P. Shetty, Chairman IDBI Ltd. and Shri S.C. Basu, CMD, Bank of Maharashtra.

Meeting in Progress


FAREWELL TO EX-MANAGING COMMITTEE MEMBERS

Shri A.K. Purwar Chairman, IBA presenting bouquets to Dr. Dalbir Singh (L) and Shri M.Y. Khan (R)

Shri V.P. Shetty, (right) Chairman, IDBI Ltd wishes Shri M.Y. Khan

22nd July, 2005 Mumbai

Shri K.V. Kamath, MD & CEO, ICICI Bank (right), felicitating Dr. Dalbir Singh

Standing ovation to Dr. Dalbir Singh and Shri M.Y. Khan by theManaging Committee Members / Chief Executives

IBA had arranged a felicitation function on July 22, 2005 at Mumbai

for Dr. Dalbir Singh, former CMD, Central Bank of India and

Shri M.Y. Khan, Ex-Chairman & CEO, Jammu and Kashmir Bank Ltd.,

who were also members of the Managing Committee of the

Association Dr. Dalbir Singh was also Chairman, IBA during 2001 to

2003. Many Chief Executives/Top Executives from the Member Banks/

Financial Institutions graced the occasion.

Dr. Dalbir Singh Mr. M. Y. Khan


As a part of leadership programme, the Association launched the Power Breakfast Series for CEOs/MDs/EDs/DMDs in which variousstrategic issues will be discussed. The first programme of the series was held on July 23, 2005 at Hotel Taj President, Mumbai. The topic ofthe programme was ” The Indian Bank CEO’s Agenda”. The thought speakers were David Rhodes, Senior Vice President & Director, CarlosTrascasa, Senior Vice President & Director and Andrew Dyer, Vice President & Director of The Boston Consulting Group.

Chief Executive/Top Executives from member banks/financial institutions had attended the programme.

23rd July, 2005 Mumbai

Speakers on the dias (L - R) Mr. Andrew Dyer (BCG), Mr. David Rhodes (BCG),

Mr. Janma Jaya Sinha (BCG), Mr. H. N. Sinor (IBA) and Mr. Carlos Trascasa (BCG)

Mr. Andrew DyerMr. Carlos TrascasaMr. David RhodesMr. Janma Jaya Sinha

SR. NO. DATE CENTRE ORGANISERS TOPIC

1. 19/8/05 Mumbai IBA - BCG Power Breakfast Series(Investor Communications andBoard Management)

2. 23/8/05 Mumbai IBA - KPMG Basel-II Norms3. 27/8/05 Mumbai IBA Annual General Meeting4. 30/8/05 Mumbai IBA - Logica CMG ANTI MONEY Laundering

IBA’s Forthcoming Events

Indian Banks’ Association

In Association WithTHE BOSTON CONSULTING GROUP

1. Banking and Money : All Scheduled Commercial Banks

(Rs. in crore)

Outstanding on % Variation over

June 24, June 25, Last Last End

2005 2004 Month Year March

(25-03-2005)

Aggregate Deposit 1789864 1559933 0.65 14.74 4.76

1. Demand 260112 212553 2.84 22.38 2.052. Time 1529751 1347380 0.28 13.54 5.23

Bank Credit 1161387 877408 1.52 32.37 6.35

1. Food 44804 43061 -2.02 4.05 7.82

2. Non-Food 1116583 834347 1.66 33.83 6.30

Cash in Hand 9730 8523 3.19 14.16 11.37Balance with RBI 95986 78388 7.12 22.45 -12.82

Investment 740078 717408 -1.34 3.16 2.49

Money Supply as on

M3 (a+b+c+d) 2359789 2076750 0.57 13.63 4.17

a. Currency with Public 375439 329836 -0.55 13.83 5.03

b. Dem. Dep. with Banks 295417 243425 3.15 21.36 0.08

c. Time Dep. with Banks 1684012 1499949 0.35 12.27 4.77d. Other Dep. with RBI 4920 3541 1373 38.94 -7.48

2. Price % Variation over

2005 2004 Month Year

WPI : 1993-94 =100 (June) 192.9 183.7 0.42 5.01

CPI : 1982 =100 (May) 527 508 -0.38 3.74

3. Bullion As on A year ago

(30-06-2005) (30-06-2004)

Standard Gold (Rs. per 10 gms.)* 6220 5985Silver (Rs. per Kg.)* 10755 9590* Closing price at Mumbai

4. Crude Oil (US $ per Barrel) As on A year ago

(30-06-2005) (30-06-2004)

North Sea Brent 55.80 33.32

5. Forex Reserves As on A year ago

(Including Gold & SDR) (24-06-2005) (25-06-2004)

Rs. in crore 605060 547939

US $ million 138890 119407

6. Bank Rate Per cent Effective

1. Bank Rate 6.00 29-04-2003

2. IDBI Minimum Term Lending Rate 10.25 30-01-2004

7. Deposit Rates

A. Term Deposits w.e.f. 01-11-2004

7 days and above deregulated

B. Saving w.e.f. 01-03-2003 3.5% per annum

8. Lending Rates per annum w.e.f. 29-04-1998

Amount Per cent

i) Upto Rs. 2,00,000/- Not exceeding PLR

ii) Over Rs. 2,00,000/- Banks to fix

9. Ratios Per cent

1. CRR 5.00 02-10-2004 @

2. SLR 25.00 22-10-1997 @

3. Cash Deposit Ratio 5.91 24-06-2005 #

4. Investment Deposit Ratio 41.35 24-06-2005 #

5. Credit Deposit Ratio 64.89 24-06-2005 #

(@) w.e.f.

(#) as on

10. Foreign Exchange Rates as on 24-06-2005

US$ Euro∈ 100¥ Stg‡

Buying 43.5550 52.3925 39.9450 79.1050

Selling 43.5650 52.4225 39.9650 79.1350

FEDAI Indicative Rates (spot) (Rs. per unit of foreign currency)

11. DFHI Rates as on

Discount/Rediscount Per cent p. a.

Rate for

Bid Offer

Treasury Bills – –

Commercial Bills – –

Certificate of Deposit – –

Commercial Paper – –

Call Money Rates as on 24-06-2005 5.70% to 5.90% –

12. Prime Lending Rates as on 26-06-2005 (% p. a.)

US CANADA ECB JAPAN SWISS BRITAIN HONGKONG

6.00 4.250 2.000 1.375 2.590 4.750 6.000

(As lending practices vary widely by location, these rates are not comparable).

Sources: 1, 5, 6, 9 - RBI Weekly Supplement.

2 - RBI Weekly Supplement, CMIE, Mumbai, 3, 4 & 11 The Economic Times.

7, 8, 10 - RBI.

12 - The Asian Wall Street Journal.

StatisticsR

egistered with the R

egistrar of New

spaper under Reg. N

o. RN

31661/78, Postal R

eg. No. Tech/47-1345/M

BI/2003-05,

Licenced To P

ost without pre-paym

ent under Licence N

o. 406 at Mum

bai Patrika C

hannel Sorting Office, M

umbai - 400 001 on 5th and 6th of every m

onth.

TOTAL DEPOSITS OF SCHEDULED COMMERCIAL BANKS -MARCH 2004

0

500000

1000000

1500000

2000000

All-

Ind

ia

Met

ro-

po

litan

Urb

an

Sem

i-U

rban

Rura

l13

8760

1950

81

1206

51

2682

16

9957

1 3302

95

9817

671

7679

4571

58

1511

273

No. of Accounts in Thousands

Amount in Rupees Crore

Source : RBI

Banking > IBA Aug Issue 1 File

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