Business & Economics thread

[sarang]

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Country's largest private sector lender ICICI Bank had sold its Rs 430-crore exposure to an arm of the Kolkata-based Srei Infrastructure Finance. The status on that exposure, which reportedly had the best of collaterals, is not immediately known.

It was between 5 and 10%, probably around 8%, reported in small print at that time.

 

[Vaagmi]

This may be useful to some of our members:

9 personal finance tips for a widow Smitha Hari The GettingYouRich

Losing your spouse is a highly challenging and stressful situation. It can be very difficult to cope with the emotional loss. However, dealing with the financial challenges which accompany this loss can compound the pain of the loss. A widow should understand her financial position, organize documentation, initiate claims, revisit her finance plan and take care of logistics in financial payments. It is important to take one step at a time instead of rushing into any financial decision. Women have a longer life expectancy when compared to men. As a result, in most cases, a woman loses her husband earlier than it being the other way around. When a woman loses her husband, it is not only emotionally stressful, but also becomes financially challenging. Especially if she has not been exposed to taking financial decisions. The involvement of most women in financial matters is restricted to deciding the household budget. As a result, when a crisis situation like death of the spouse arises, they are either not aware or scared to take charge of finances. Here are some things you should take care of, if you have been widowed recently. 1. Understand your financial position: Find out how much you have in assets and liabilities, that is, understand your financial position before you take any financial decision. It is important to know this first. Collect bank statements, mutual fund and stock statements, insurance policies and other investment documentation for this purpose. 2. Organize documentation: Organizing all financial documents and keeping them in one place becomes critical to take further steps. This becomes all the more essential if you have till now not been involved in financial decisions of the family. 3. Initiate claims: Has your husband left behind a Will? If there is a Will, things become much simpler. You can get the help of a lawyer and start the probate process. However, if there is no Will, things can become a bit complex. You will need to obtain the succession certificate in line with inheritance laws. You should seek the help of a qualified lawyer in this case as well. Thereafter, you should initiate claims from various institutions like life insurance companies, provident fund office etc. These things take time, but it is important to not delay action from your side. 4. Take one step at a time: Taking quick decisions is never advisable, especially when you are under stress in a situation like this. Do not take any major financial decisions, even if you are well versed with finances. It is always better to consider options and not rush into things. 5. Replacement of income loss: If your husband was working at the time of death, you must consider how to replace this income loss. You can think of taking a full time job if you were not working earlier. If you are already working, consider a freelancing or part time job during weekends to boost the family’s income. 6. Take care of payment logistics: If your husband was responsible for making all utility payments, investments etc, you may not know where to begin. Make a list of all the regular payments to be made and then decide how to manage the logistics of these payments. Automate payments wherever possible. 7. Management of Corpus: If your husband has left behind a corpus for you, it becomes important to invest this efficiently to fulfil your financial needs. Follow the principle of diversification and keep asset allocation in mind depending on your risk profile and goals. For example, say a 40 year old widow with a conservative risk profile is left behind with Rs. 50 lakhs. She can invest this in fixed deposits with monthly interest payment option. At an assumed post tax interest rate of 7% per annum, she will earn approximately Rs. 29,000 per month. If she uses Rs. 15,000 of this amount towards monthly expenses (assuming she has other sources of income as well), the surplus of Rs. 14,000 can be invested in 2 diversified equity mutual funds for the long term. Deciding how to invest and manage the corpus depends on your individual situation and risk profile. 8. Revisit your financial plan: After you have taken care of the initial To-Dos, you must revisit your financial plan. Find out if there is a sufficient emergency corpus. If the assets left behind by your husband in terms of corpus are insufficient, you are working and have dependents, then you should consider taking a sufficient life cover. Take a health insurance protection to cover the risk of rising medical costs. Map your goals to the investments you currently have. Goal based investments help in reducing financial stress. Understand the risk level of the portfolio left behind by your husband and align it if necessary. Also, make a Will for your assets. 9. Consider relocation, if necessary: Sometimes, relocation becomes necessary to a less expensive place or to save money. Although this is not an easy decision, especially if you have children who are studying, this can be considered if you are in a financial crunch. Dealing with the death of a loved one is difficult, very difficult. But taking one step at a time can help to ease financial stress. One can consider taking the help of a professional, if necessary. Women should actively participate in financial decisions and actions of the family and should be aware of the financial situation at all times, in order to be prepared for such unfortunate events in life. '

 

[Vaagmi]

How safe is the Safe Deposit Locker in a Bank? Read this please:

Bank Lockers: How much can you entrust them with your valuable deposits? Bindisha Sarang The Economic Times Published on October 31, 2014

Mumbai, October 30: Swiss banks may no longer be a safe haven for unaccounted money, but even wealth on which tax has been duly paid is not safe in a bank locker. This was reinforced earlier this week when unidentified men dug a tunnel into the locker room of a Punjab National Bank branch in Sonepat, prised open 89 lockers and decamped with the contents. According to the Reserve Bank of India guidelines, banks are not responsible for the contents of the lockers. A bank only needs to provide for protection of the lockers. "The relationship between the bank and the locker customer is that of a lessor and a lessee," said Narayan Raja, CEO, Banking Code and Standard Board of India (BCSBI). "Since the contents of the locker are never shared with the bank, it is not responsible for the contents." According to Section 152 of the Indian Contract Act, a bank is not responsible for any loss or damage to the contents of a locker. Even the valuables deposited in lockers are not insured. "A bank does not have the ownership or knowledge of the contents of the locker and hence does not have any insurable interest in the matter," said a spokesperson of Axis Bank. The law clearly appears loaded against the customer in this case. The customer is not only required to prove that the locker was robbed but also submit evidence of the extent of the loss. In the Sonepat incident, it won't be easy for the customers to provide evidence of the losses they claim even as there is clear evidence that the lockers were indeed robbed. However, customers can claim some compensation if they can prove that the loss or damage happened due to negligence on part of the bank. "If the negligence by the bank is proved, or a bank employee was involved (in the theft), it becomes a vicarious liability and the bank is liable to pay compensation," said Mumbai-based advocate VT Gokhale. But the compensation may not cover the full loss. In one case decided by the banking ombudsman, it was established that the locker had been broken into. However, the maximum compensation that the ombudsman could award was Rs 10 lakh although the customer had claimed a loss of Rs 23 lakh. Consumer courts have also come to the rescue of customers in cases where negligence is proved. In July 2007, the National Consumer Disputes Redressal Commission (NCDRC) awarded compensation to a customer after termites ate into currency notes and important papers kept in the bank locker. It ruled that "the bank was bound to ensure that the respondent's locker remained safe in all respects". There is not much that a customer can do to avoid such problems. Reading the terms and conditions of the locker agreement before hiring one is always a sensible precaution, though. Avoid entities that make customers sign a declaration saying that the bank will not be liable for loss of goods in the locker. Similarly, check that the locker is in good physical condition and is not placed in a basement. Don't take lockers in the lower rows and do make sure that the cash and documents are sealed in an airtight and watertight plastic pouch or bag.

 

[krish44]

Post#27 vaagmiji,

A must read for all ladies of this forum and spouses of males could also glance at it.

thanks vaagmiji for putting together this .

even educated ladies when widowed are not able to cope after the loss of spouse.

if the man dies young , wives find the going very tough.

most men do not either appraise their wives of their financial status nor leave a will behind

very well off spouses get stranded on death of husband and siblings,relatives move in to exploit their ignorance and

these ladies end up as destitutes. in some cases

paper management is poor in most households and most men do not care to add the benificierys names in bank account ,insurance policies

legal issues related to property can be taxing.

many do retirement planning but do not consider the living options after the death of husband or wife and costs

involved.

many old ladies who are widowed find it difficult to live on their own nor relish the idea of living with their children

for various reasons -not financial alone. having too much money after death of a husband also poses risks

sometimes..having not much money is a disaster of course.how much money is good for living -a tall question?

 

[Vaagmi]

This article makes interesting reading. It touches on the kind of policy level mistakes that the managers of our economy commit. It analyses two most important policies the labour welfare and the food security and how our policies have inbuilt flaws in them. Please read and discuss:


Subir Gokarn
The Business Standard
Published on November 3, 2014

A fundamental policy rule is that there must be
as many instruments as there are objectives

The economic parallel of the popular aphorism about the limitations of using one stone is the assignment rule, usually attributed to Jan Tinbergen, who was (along with Ragnar Frisch) the first Nobel laureate in economics in 1969. This essentially says that when multiple objectives are to be met and there are many instruments to do this with, it is efficient to assign a specific objective to each instrument.

This has a very significant policy implication: there must be at least as many instruments as there are objectives. For many governments, such matching is often difficult to achieve, so it is tempting and perhaps even a compulsion to piggyback multiple objectives on a single instrument. The rule predicts that the consequences of this can be adverse.

India's development narrative is replete with instances of this. Let me focus on two instances, all of which are situations in which the objective of social protection is overlaid on to the underlying transaction. Both these are central issues in the current policy debate and I think that looking at them from the perspective of the assignment rule might add some value to the thinking on how to design appropriate reforms.

The first is the issue of job security and the regulatory framework that has been built up around it. The government of Rajasthan has amended some critical elements of this framework, changes that are viewed by many observers, including myself, as being a breakthrough. But let's take a step back and look at the piggybacking aspect of the original arrangement. Essentially, by giving workers job security, the arrangement attempted to simultaneously achieve both job creation and unemployment insurance. In effect, the entire cost of unemployment insurance was borne by the employer, since he had to keep workers on the payroll even if business conditions did not justify this.

Well-intentioned, without a doubt. But what were the consequences? The overwhelming majority of employers were small and medium enterprises, who could not bear the implicit cost of unemployment insurance built into a formal employment contract. The two direct consequences of this were extreme fragmentation of enterprises and a complete informalisation of labour contracts, which, let alone job security, did not even provide workers any rights or protections. The first completely undermined the competitiveness of Indian manufacturing, which has resulted in a stagnation of its share of gross domestic product over the past two decades. The second has effectively denied the vast majority of the workforce the very unemployment insurance that was the intent of the piggybacking.

The second illustration of the hazards of violating the assignment rule is the procurement framework for rice and wheat. The original intent of the strategy was, unambiguously, to ensure adequate availability of these staples, with some control over prices. The role of the government as a procurer, a stocker and a distributor of these products seemed like a reasonable institutional innovation to achieve these objectives.

As the scheme evolved, though, a second objective was introduced. This was the preservation, perhaps even the enhancement, of farmers' incomes. The scheme effectively became a "double guarantee" model, in which the government offer to the farmers was that it would buy up the entire quantity that they wanted to sell at an assured price. Yes, this approach did allow the government to accumulate a large enough stock to guarantee food security. But there were unintended consequences.

Effectively, in the market for food, the government supplanted and displaced the consumer as a source of demand. The double guarantee induced farmers into producing more and more rice and wheat, completely insulated from the significant shifts that were taking place in aggregate Indian dietary patterns. Rising incomes were contributing to greater diversification, resulting in higher demand for proteins, vegetables and fruit. But since farmers were deriving their price signals from the government, their supply responses to these changes were muted. The seven-year long episode of high food inflation, which was for much of that period, driven by protein and vegetable prices, is testimony to this causal sequence.

In sum, a scheme that started out with the intention of providing food security, piggybacked livelihood security for farmers along the way and, as a consequence, introduced a significant distortion in the relative prices of different food groups. If food security is somewhat more broadly understood as nutrition security, accommodating farmers' needs has evidently come at the cost of meeting consumer needs. Proteins, vegetables and fruit have become less affordable and more out of reach for a larger number of consumers
What are the implications of the assignment rule for policy reform in both these domains? On the labour market front, we have to start with the premise that the objective of providing unemployment insurance is completely legitimate, but the financial load cannot be imposed entirely on to the employer. So even as job security regulations are being amended, which is a good thing, efforts need to be put into devising a financially viable unemployment insurance programme. This would require the cost being distributed between the employee (in the form of an insurance premium), the employer (as a tax) and the government (guarantees and gap funding).

Essentially, the labour market reform strategy must be framed in terms of two objectives - employment growth and viable safety nets - and two instruments - flexibility in hiring and firing, and an unemployment-insurance scheme with distributed funding.

On the food procurement issue, the reform strategy must be based on moving from the double guarantee to a single guarantee. Either the price is guaranteed, in which case the quantity procured is uncertain, or vice versa. The stocking level must be enough to ensure food security, but no more. The element of uncertainty that the transition from double to single guarantee introduces into the farmers' calculations will contribute to a greater diversification of cropping patterns, which will ultimately ease the price pressures on a whole range of agricultural products.

Bringing consumers back on centre stage is of the essence. Livelihood security for farmers is unquestionably a legitimate objective, but, like unemployment insurance, it needs a separate mechanism involving financial provisions and direct transfers.

To sum up, as the government charts out its reform strategy, its chances of success will increase if keeps the assignment rule firmly in mind. Either objectives need to be reduced, or instruments need to be increased.

 

[B.Krishnamurthy]

Sahara Groups top brass are in custody in Tihar Jail for non payment of huge amounts to investors.
After the Banks Nationalisation by former Prime Minister Madam Indira Gandhi,all the PSU Banks accumulated huge
Non Performing Assets(NPAS) over a period of time.
Mr.N.Vittal IAS (architect of development of Electronics in INDIA) was appointed (after retirement) as Chief Vigilance Commissioner by Government of India.
He suggested that names of al defaulters in PSU Banks be published in all Newspapers,the Govt of the day refused under Secrecy Clause.
The amount of total NPAS was in the order of 84,000 crores.
I wonder why the Supreme court of India did not evince interest as they have taken in the case of Sahara Group.

 

[auh]

Sensex Hits 28,000 for First Time: Five Things to Know About This Record Rally - NDTVProfit.com

Banking stocks have outperformed in this rally on hopes of earlier-than-expected rate cuts from the RBI. The banking shares index, Bank Nifty, gained nearly 11 per cent, in the past 12 sessions, outperforming the broader markets. The Royal Bank of Scotland on Monday said economic indicators like softening of inflation suggests that key interest rates could be slashed sooner than later by the Reserve Bank of India. "I think the indicators seem to suggest that rate cut would be sooner rather than later," said RBS country executive Brijesh Mehra

 

[mkrishna100]

Indian Financial Models - Lecture -1 by S Gurumurthy

https://www.youtube.com/watch?v=opr6Qn9aVmM

 

[Vaagmi]

Round Tripping an alternative to black money legislation?

The Business Line
Published on November 4, 2014


Recent events such as the Supreme Court forcing the Government to divulge the list of Swiss account-holders and the Prime Minister’s grandstanding that he intends to bring back every penny of black money is whipping up emotions, and calls to bring back the money stashed overseas are getting louder.

The ire against black money is justified as this is money that has evaded tax or was obtained in an illegal manner or is attempting to escape from a legitimate transfer to another entity. While some money that was taken overseas is still locked away in the secret Swiss vaults or other overseas assets, a large chunk of the money has already come back to the country through a process called round-tripping.

What is it?

The term ‘round-tripping’ is self-explanatory. It denotes a trip where a person or thing returns to the place from where the journey began. In the context of black money, it leaves the country through various channels such as inflated invoices, payments to shell companies overseas, the hawala route and so on. After cooling its heels overseas for a while, this money returns in a freshly laundered form; thus completing a round-trip.

This route is far from simple or straightforward. Those indulging in this game are past masters who make the money flow through multiple layers consisting of many entities and companies. How does the money return to India? It could be invested in offshore funds that in turn invest in Indian assets. The Global Depository Receipts (GDR) and Participatory Notes (P-Notes) are some of the other routes that have been used in the past.

Why is it important?

We need to take note of such fund movement since many listed companies appear to be involved in these activities. SEBI had recently issued a notice against listed firms including United Spirits, GMR, Unitech and Sterlite for investing in group companies through a foreign account held with UBS. The companies are alleged to have indulged in stock price manipulation and insider trading through this route. Another high-profile case in 2009 involved the Reliance ADAG group that was alleged to have manipulated the shares of Reliance Communication through a multi-layered transaction involving shell companies, P-Notes and prominent international investment banks.

Why should I care?

If a company is under the regulator’s radar for round-tripping allegations, it implies the possibility of poor corporate governance. You might want to think twice about putting your money into such stocks. A chunk of the foreign portfolio funds that flows in to stock markets is purported to be dressed-up black money. If a witch-hunt for black money and its sources ensues, it does not bode well for the ongoing rally, as much of it is driven by the liquidity generated from foreign portfolio investors.

The bottomline

It is alright to root for those trying to bring the black money back. The exchequer stands to gain by the tax that can finally be levied on this money and it might deter others who might be hatching similar plans. But in a lighter vein, the Government should perhaps encourage ‘round-tripping’; that appears to be a far easier way to get the money back. And it can save us from the rhetoric.

 

[Vaagmi]

RBI Governor Rajan’s speech The games played by Banks and Industrialist in India.

Mr. Rajan was delivering the Dr.Varghese Kurien Memorial Lecture at IRMA, Anand, Gujarat on Tuesday November 25. He was brutally frank about the way the assets of the banks in India are managed and the miserable failure of the debt contract in India. I listened to his entire talk on television. The highlights of his presentation was:

1.The amount written off by banks as bad debts in the last five years would have been enough to fund the education of 15 lakh of the poorest children in the top private universities of the country all expenses paid.

2. Only 30,590 crore of bad debts was recovered by banks through the debt recovery tribunals in FY 2014 from the Rs. 2,36,000 crore claimed even as cases keep piling up.

3.In India the sanctity of the debt contract has been continuously eroded in recent years not by the small borrowers but by the large borrowers. If we have find resources to finance the enormous infrastructure needs and industrial growth that this country aims to attain, this has to change.

4. In India too many large borrowers insist on their divine right to stay in control despite their unwillingness to put in new money (read fresh capital).

5. The firm, its many workers and past bank loan are held hostages in this game of chicken—the promoter threatening to run the enterprise into the ground unless the government, banks and regulators make the concessions that are necessary to keep the enterprise alive.

6. The banks have joined the borrowers in seeking relaxation in classifying some projects as NPA.

7. Today the market does not distinguish between non performing loans and restructured loans preferring to call them both stressed assets and discounting the bank’s value accordingly.

8. An NPA by any other name smells as bad.

9. So regulatory forbearance, a euphemism for regulators also collaborating with banks to hide problems and push them into the future is a bad idea.

10. Let us not lionize a willful defaulter businessman as the Captain of Industry etc., while what he really is is a parasite on the nations wealth.

I appreciate mr. Rajan for calling a spade a spade. But Indian business community is an animal with a thick hide. After listening to his lecture each one of them would have gone home laughing to plan how to make one more enterprise in their bag sick by diverting capital from it to buy a new unit for the son who is going to get married next month. LOL.

 

[SANDHYAV]

If there will be activity, one can be created

Just this thread is too complex. If a section is created, will simplify the sub-specialities....BTW, i got to quote the mod, yahoo,,